UPDATE 1-Indonesia's Mandiri Q2 net profit up 9.7 pct

(Recasts with second-quarter results)

JAKARTA, July 28 (Reuters) - Indonesia's top lender, PT Bank Mandiri Tbk (BMRI.JK), showed a 9.7 percent rise in second-quarter net profit, based on Reuters calculations, with profit growth slowing as the central bank hiked interest rates.

Mandiri's president director, Agus Martowardojo, told a news conference that rising interest rates and the increase in prices had prompted Mandiri to lower its loan growth target for 2008 to 18 percent, from 22 percent.

"With rising interest rates and the impact of higher oil and electricity prices, which will affect purchasing power, we are revising down our (loan growth) target from 22 percent to 18 percent," Martowardojo said.

State-owned Mandiri's net profit rose to 1.22 trillion rupiah ($133.8 million) in the April-June period, from 1.11 trillion rupiah in the same quarter a year ago, calculated from the bank's reported first-half and first-quarter results.

Mandiri said on Monday that first-half net profit rose 22 percent to 2.61 trillion rupiah, from 2.14 trillion rupiah in the same period last year.

Net interest income in the second quarter rose 25 percent to 3.62 trillion rupiah, from 2.89 trillion a year earlier, according to Reuters calculations.

Mandiri reported a 35 percent rise in outstanding loans during the first half of 2008.

Indonesia's $220 billion banking sector has seen strong demand as interest rates bottomed, although a pick-up in inflation has prompted the central bank to raise its benchmark rate by a total of 75 basis points in the last three months to 8.75 percent.

Mandiri's loans jumped to 149.6 trillion rupiah, from 116.3 trillion a year earlier, pushing the bank's loan-to-deposit ratio to 59.53 percent from 53.64 percent.

Mandiri said its net interest margin was largely unchanged at 5.25 percent as of the end of June.

Consumer lending has been a key driver of Indonesia's banking sector in the past two years, as the benchmark interest rate steadily declined from 12.75 percent in early 2006 to 8 percent at the end of last year.

Although indicators such as sales of cement, cars and motorcycles remain robust, some analysts expect rising interest rates to slow down loan growth in the coming months.

Indonesia's consumer price inflation topped 11 percent in June, after the government raised subsidised fuel prices by around 30 percent in May.

Analysts expect Mandiri, which has a market capitalisation of $6.58 billion, to post a net profit of 5.56 trillion rupiah in 2008, up from 4.35 trillion rupiah last year. ($1=9,115 rupiah) (Reporting by Harry Suhartono, Andreas Ismar, and Tyagita Sikla, editing by Sara Webb)