UPDATE 1-Indonesia's Mandiri H1 net profit nearly triples

(Adds details)

By Nury Sybli

JAKARTA, July 26 (Reuters) - Indonesia's largest lender, PT Bank Mandiri Tbk (BMRI.JK), reported on Thursday its first half net profit nearly tripled, powered by improved net interest margins and lower bad debts.

The jump in earnings at the state bank, which has total assets of 265 trillion rupiah ($29.04 billion), came despite a weak 7.9 percent growth in loans, compared to double digit growth at rivals.

Mandiri, which has a market capitalisation of $8.5 billion, posted a net profit of 2.14 trillion rupiah in the January-June period, up from 815 billion a year ago.

Its net interest income rose to 6.69 trillion rupiah from 4.85 trillion, while its net interest margin improved to 6.0 percent from 4.4 percent at the end of June 2006.

Mandiri, which has outstanding loans of 116.3 trillion rupiah, was badly hurt by bad debt in 2005 but managed to improve its ratio of non-performing loans to 3.9 percent by the end of June from 5.9 percent at the end of last year and 13.9 percent a year ago.

Indonesia's banking sector had a tough year in 2006 due to bruisingly high interest rates amid soaring inflation, but a series of rate cuts has helped improve the outlook for the sector.

The central bank is forecasting 18 percent loan growth for the entire bank sector this year, while some analysts are looking at 20 percent rise, helped by government infrastructure projects.

In the past 14 months, the central bank has cut the benchmark rate, known as BI rate, 13 times, taking it down to 8.25 percent this month. Some analysts see the rate going as low as 7.50 percent by the end of the year.

Mandiri is planning to acquire some banks, insurance and multifinance companies over the next two years, as a part of its growth strategy after successfully dealing with its problematic debts, a newspaper reported on Thursday.

Bisnis Indonesia quoted a senior Mandiri official, Haryanto Budiman, as saying the lender was currently waiting for central bank approval before providing details on its plan.

"The banks that we would like to acquire are specialist banks, with a focus on a particular segment such as agriculture, plantations or housing, but the acquired banks will remain independent entities," Budiman said.

($1=9,125 rupiah)

((Writing by Harry Suhartono, editing by Ed Davies; harry.suhartono@reuters.com; Reuters Messaging: harry.suhartono.reuters.com@reuters.net; +62 21 384 6364 ext 905)) Keywords: MANDIRI INDONESIA/

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