PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004 and 2003, and April 30, 2003 Expressed in millions of Rupiah, unless otherwise stated
49
10. DERIVATIVE RECEIVABLES AND PAYABLES
As of December 31, 2004, a summary of derivative transactions is as follows:
Notional Amount Fair Value
Derivative Derivative
Transactions Contract
Note 2k Receivables
Payables Third parties
Cross Currency: 1. Forward - buy
US Dollar 623,717
625,424 3,424
1,717 Others
114,801 120,566
5,765 -
2. Forward - sell US Dollar
171,520 173,681
240 2,401
Others 103,076
108,747 -
5,671 3. Swap-buy
US Dollar 2,184,989
2,205,520 23,593
3,062 Others
253,335 253,696
361 -
4. Swap - sell US Dollar
4,897,836 4,698,206
229,195 29,565
5. Option Option - buy
US Dollar -
- 6
127 Others
- -
273 -
6. Option - sell US Dollar
- -
- 210
Others -
- 229
- Others
Interest rate swaps US Dollar
25,051 24,215
Total 288,137
66,968 Less: Allowance for possible losses
2,881 -
285,256 66,968
Interest Rate Swaps On April 17, 2003 Bank Mandiri entered into interest rate swap agreements with Standard Chartered
Bank, London and ABN Amro Bank, London with nominal values amounting to US125 million full amount and US175 million full amount, respectively. The underlying transaction is the Bank’s
US300 million full amount fixed interest rate Medium-Term Note MTN issued in April 2003 Note 24. Under this transaction, the Bank receives semi-annual fixed interest at the rate of 7.00
per annum and pays semi-annual floating interest at the rate of Libor 6 months + 3.37 per annum until the maturity of the Note on April 22, 2008. The Libor 6 months interest is stated in arrears. These
transactions qualify as hedging for accounting purposes.
The background and purpose of the issuance of the hedging instruments are related to interest rate risk management, whereby the Bank’s positive foreign currency interest rate gap position is exposed
to downward trends in interest rates in the following five years. The Bank decided to convert its MTN’s fixed interest rate into floating interest rates in order to mitigate the risks of a decrease in net
interest margin. The Bank uses the Discounted Cash Flows approach to calculate the fair value of the hedging instruments, while the short-cut method is used to determine their hedging effectiveness. As
of December 31, 2004 and 2003, and April 30, 2003, lossesgains amounting to Rp24,215, Rp4,538 and Rp25,970 as a result of the hedging fair value calculation has been offset against the
gainslosses from decreaseincrease of the MTNs, a hedged item, based on the fair value calculation Note 24.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004 and 2003, and April 30, 2003 Expressed in millions of Rupiah, unless otherwise stated
50
10. DERIVATIVE RECEIVABLES AND PAYABLES continued
Interest Rate Swaps continued Bank Mandiri entered into an interest rate swap agreement with a notional amount of US125 million
with Standard Chartered Bank, Singapore in August 2002. The underlying transaction is the Bank’s US125 million fixed interest rate Subordinated Note issued in 2002 Note 29. Under the transaction,
the Bank receives semi-annual fixed interest at the rate of 10.625 per annum and pays semi- annual floating interest at the rate of Libor 6 months + 6.19 per annum for a 5-year period. The
Libor 6 months interest is stated in arrears. While the transaction is for the purpose of hedging the fixed rate coupon payments of the Subordinated Note with floating coupon payments, it does not
qualify as a hedging transaction for accounting purposes.
Cross Currency Swaps Bank Mandiri has entered into cross currency swap contracts, which are associated with the securities
sale and repurchase agreements with several counterparty banks. The contract were initiated when Bank Mandiri sold its Government Recapitalization Bonds to the counterparty banks and received
Rupiah funds. These funds were used to settle the spot leg of the cross currency swaps and Bank Mandiri will then receive US Dollar funds. On the settlement date, the Bank will receive Rupiah funds
and pay US Dollar funds to the counterparty banks. Bank Mandiri is then obliged to use the Rupiah funds to repurchase the Government Recapitalization Bonds it previously sold to counterparty banks
Notes 7 and 22.
A summary of the cross currency swap contracts is as follows: Bank
Effective Maturity
Type of Sale
Buy counterpart
Date Date
Transactions full amount
full amount Standard Chartered
June 4, 2003 June 6, 2005 Spot
US100 million Rp1,037,500 million
Bank, Jakarta Forward
Rp1,037,500 million US100 million HSBC Bank,
Nov 3, 2004 Nov 3, 2009
Spot US25 million
Rp285,060 million Jakarta
Forward Rp285,060 million
US25 million Standard Chartered
Nov 4, 2004 Nov 4, 2009
Spot US25 million
Rp284,062 million Bank, Jakarta
Forward Rp284,062 million
US25 million As of December 31, 2003 a summary of derivative transactions is as follows:
Notional Amount Fair Value
Derivative Derivative
Transactions Contract
Note 2k Recievables
Payables Third Parties
Cross currency: 1. Forward - buy
US Dollar 156,024
154,543 1
1,482 Others
170,500 178,074
8,178 604
2. Forward - sell US Dollar
45,149 44,561
589 1
Others 31,602
32,194 518
1,110 3. Swap - buy
US Dollar 2,187,949
2,172,894 -
15,055 Others
52,125 51,952
- 173
4. Swap - sell US Dollar
4,879,016 3,888,550
990,466 -
Others 345,921
343,080 3,655
814 Others
Interest rate swap US Dollar
46,727 4,538
Total 1,050,134
23,777 Less: Allowance for possible losses
10,343 -
1,039,791 23,777