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span class="caption" style="width: 398px;">Money matters: Bank Mandiri president director Zulkifli Zaini (third right) chats with other members of the board of directors before giving a press statement on the bank’s 2011 financial report in Jakarta on Thursday.Antara/PatrizkiSubsidiaries of the nation’s largest lender Bank Mandiri (BMRI) helped lift the bank’s consolidated net profits significantly last year—a trend that the bank expects to persist in the years to come.

Mandiri president director Zulkifli Zaini said on Thursday the bank’s subsidiary business units booked a combined net profit of Rp 1.56 trillion (US$170 million) in 2011, contributing 12.73 percent to the group’s overall bottom line.

The subsidiaries have more than doubled their share in the group’s net profits in the past two years from Rp 401 billion in 2009, he said. Mandiri’s subsidiary business units comprise sharia lender Bank Syariah Mandiri, insurer AXA-Mandiri Financial Services, Bali-focused lender Bank Sinar Harapan Bali, investment bank Mandiri Sekuritas, and financing firm Mandiri Tunas Finance.

“We expect that this year our subsidiaries’ contribution will reach about Rp 2 trillion,” Zulkifli told a press briefing, in reference to an expected 28.2 percent increase in the subsidiaries’ combined net profit growth.

Mandiri’s consolidated net profits soared 32.8 percent to Rp 12.25 trillion last year thanks to a 27.7 percent increase in lending to Rp 314.4 trillion.

“The [net profit growth] is mainly supported by a surge in fee-based income,” Zulkifli said, citing a 37.1 percent surge in fee-based income to Rp 12 trillion last year.

AXA-Mandiri’s 228 percent surge in premium income to Rp 1.82 trillion helped boost the group’s
consolidated net interest income (NII) by 11.6 percent to Rp 21.78 trillion. Bank Indonesia’s (BI) unaudited financial report on Mandiri shows that the bank’s NII, excluding its subsidiaries, grew only 6.04 percent to Rp 19.15 trillion last year.

“That stems from a decline in our government recapitalization bond yield, lower lending rates also contributed to the slight increase in NII,” Mandiri chief financial officer (CFO) Pahala N. Mansury said.

BI’s lowest ever benchmark interest rate and its attempt to bring down bank lending rates have prompted competition in the lending market, with major banks cutting interest rates on their loans to tap the rising demand for credit against a backdrop of stable economic growth of more than 6 percent over the past two years.

“Almost all of Bank Mandiri’s credit lines grew more than 20 percent,” Pahala said.

Corporate loans grew 24.5 percent to Rp 106 trillion, commercial loans 26.5 percent to Rp 80.7 trillion, while lending by the business banking division increased 33 percent to Rp 30.2 trillion. Micro loans surged 62 percent to Rp 11.7 trillion and consumer financing grew 27 percent to Rp 39 trillion.

“The loan growth was productive because investment and working capital loans account for 85.8 percent of our overall loans,” Pahala added. Working capital loans grew 28.5 percent while investment loans grew 22.4 percent, led by the manufacturing industry, infrastructure and electricity sectors.

Mandiri’s shares jumped 2.34 percent to Rp 6,550 on Thursday before the earnings announcement, pushing up the broader Jakarta Composite Index (JCI) by 0.64 percent to close the day at 3,967.

The bank had a market value of more than Rp 153 trillion, among the top ten biggest listed companies on the stock exchange.