UPDATE 1-Indonesia's BNI says Q1 net profit down over 60 pct

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JAKARTA, April 28 (Reuters) - Indonesia's fourth largest lender, PT Bank Negara Indonesia Tbk (BNI) (BBNI.JK), reported on Monday a 62 percent fall in its first-quarter net profit, due to a sharp increase in its provision for bad debts.

The state-controlled bank said its net profit in the January-March period plunged to 153 billion rupiah ($16.56 million) from 400 billion rupiah in the year-ago period, despite a 46.1 percent jump in net interest income to 2.23 trillion.

The sharp fall in the bank's net profit came despite a 29 percent rise in its outstanding loans to 89.17 trillion rupiah ($9.65 billion) as of the end of March.

The bank said its total assets declined by 7.3 percent year on year to 162.27 trillion rupiah without elaborating. So far this year, its assets have dropped by over 21 trillion rupiah.

Its net interest margin climbed to 6 percent as of the end of March from 4.12 percent in the year-ago period, and net non-performing loans declined to 3.2 percent from 6.6 percent.

Before the announcement of the first-quarter results, analysts had expected BNI, which has a market capitalisation of nearly $2 billion, to post a net profit of 2.44 trillion rupiah in 2008, up from 897.93 billion rupiah last year.

Indonesia's banks have been lending aggressively to businesses and consumers, with industry loan growth increasing to 25.5 percent last year, from 14 percent in 2006.

Demand for loans has picked up as the central bank steadily cut its benchmark interest rate to 8 percent from 12.75 percent in early 2006, in response to lower inflation.

BNI's share price has declined by 39 percent since the start of the year, compared to a 19 percent fall in the Indonesia composite index .JKSE and a 20 percent drop in the financial sub-index. ($1 = 9,239 rupiah) (Reporting by Nury Sybli, writing by Harry Suhartono, editing by Sugita Katyal)