President director Pahala N. Mansury said on Thursday that the bank recorded Rp 1.12 trillion (US$76.25 million) in profit in the first nine months of the year, up 39.72 percent compared to the same period last year.

“We’re able to record a significant increase in profit because last year, we needed to set aside a huge amount of funds for a provision in the third and fourth quarters,” he explained during an online press briefing.

BTN had to increase its provision last year to comply with the latest accounting standard, PSAK 71, which requires banks to set aside a provision at the beginning of a loan period. As a result, its provision dropped by 26.5 percent year-on-year (yoy) as of September.

With the significant increase in profit, the bank is upbeat that it will exceed its profit target of Rp 1.1 trillion to Rp 1.2 trillion by the end of this year.

The pandemic, however, has hit other aspects of the bank’s performance this year as its net interest income contracted 3.03 percent yoy to Rp 6.73 trillion due to falling interest income from loans.

It also caused a deterioration in asset quality. Pahala said the bank’s non-performing loan ratio stood at 4.56 percent as of September, significantly higher than the 3.54 percent level recorded during the same period of 2019.

“However, our loan quality showed an improvement compared to the beginning of this year,” he said, referring to the bank’s bad loan ratio of 4.91 percent in the first quarter of 2020.

The coronavirus outbreak has disrupted business activity in the country, resulting in rising unemployment and weaker consumer demand and purchasing power.

Other than the rising non-performing loan, the pandemic has also battered BTN’s loan disbursements. The mortgage-focused bank recorded a 0.8 percent contraction in loan disbursements to Rp 254.92 trillion at the end of the third quarter.

The drop in disbursements was mainly caused by a significant fall in commercial loans, which had plummeted 29.7 percent yoy as of September.

“We remain optimistic that our loan growth can still grow positively at around 2 to 3 percent this year as our monthly loan disbursement trend in September has improved compared to April,” said Pahala.

The bank managed to disburse Rp 4.4 trillion in loans in September, higher than the disbursement figure in April of Rp 1.87 trillion, thanks to rising mortgage disbursements.

Should the bank reach its loan growth target this year, Pahala estimated that its loans could grow 5 to 7 percent in 2021 so long as the pandemic is contained and economic activity is back to normal.

Pahala said that regardless of the challenges, BTN was committed to improving its liquidity to support its loan expansion this year.

The bank’s third-party funds rose 18.7 percent yoy as of September, while its capital adequacy ratio stood at 18.95 percent and its ratio of liquid instruments to noncore deposits (AL/NCD) stood at 126.7 percent during the period.

Finance director Nixon Napitupulu said the bank was also committed to supporting the national economic recovery program by disbursing the government fund placement as loans and providing loan restructuring for debtors hit by the pandemic.

As of Oct. 16, BTN has disbursed a total of Rp 19.01 trillion in loans to 63,000 debtors with Rp 10 trillion of the government’s fund placed in the bank, he said.

“We remain upbeat that we can disburse up to Rp 30 trillion until the end of this year,” he said.

The bank had restructured Rp 52.8 trillion in loans from almost 300,000 debtors as of the end of September to comply with a Financial Services Authority (OJK) regulation on loan assessment relaxations amid the COVID-19 pandemic.

CGS CIMB analyst Laurensius Teiseran wrote in a research note that BTN’s high-profit growth exceeded expectations due to the bank’s ability to reduce credit costs.

“The management’s new credit cost guidance of less than 1 percent for this year implies stable credit cost in the fourth quarter,” he wrote.

The bank may maintain a low cost of funds by increasing its current account and savings account and increasing its sustainable fee income so that it can achieve its long-term return on equity target of 15 to 17 percent by 2025.

BTN’s shares, traded at the Indonesia Stock Exchange (IDX) under the code BBTN, slipped 0.35 percent to Rp 1,425 apiece on Monday morning. The stocks have lost around 33 percent of their value since the beginning of the year.