Bad loans are spiking at Bank Mandiri, Indonesia's largest lender by assets, due to its high commodity exposure but the bank says it has a plan in place to mitigate any financial damage.
Non-performing loans (NPLs) hit a six-year high at 2.6 percent of total loans in 2015, up from 2.1 percent in 2014, the bank said in its full-year earnings report after Tuesday's market close.
Net profit meanwhile climbed 2 percent on-year to $1.5 billion but despite beating analyst forecasts, that was still the slowest pace of growth in a decade, according to Reuters.
Following the earnings announcement, Mandiri said it will avoid exposure to mining as well as oil and gas since China's economic slowdown has dented commodity demand.
"We've done a series of stress testing on our exposure to commodity sectors, including coal, oil and gas. While we're still going to see downgrades related to the value chain in those sectors, this has been projected in our stress testing and we've built sound provisional coverage," chief financial officer Kartika Wirjoatmodjo told CNBC on Wednesday.
The state-controlled lender sees NPLs averaging between 2.5 to 3 percent of total loans this year.
Strong growth in revenues, operating profit and healthy contributions from the bank's retail and consumer businesses will help absorb the impact on the balance sheet, Wirjoatmodjo added.
As the bank's focus on resources fades, he anticipates loan growth to come from infrastructure and consumer industries instead.
Bank Mandiri shares gained more than 1 percent in early Wednesday trade.
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