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Indonesian banks scale down targets due to slow economic growth

Publication Date : 05-08-2014

 

Major Indonesian banks have decided to tone down their full-year targets — even lower than the guideline set by financial regulators — as the domestic economy continues to suffer from deceleration.

Publicly listed lender Bank Permata, for example, is now looking at 12 to 14 per cent credit growth for 2014, down from its original target of 15 per cent.

Permata acting president director Roy Arman Arfandy said on Monday the revision was attributed to the current domestic economy, which had not fully recovered from the slowdown.

Its first-half performance reflected the situation and also drove the bank — which is equally owned by diversified conglomerate Astra International and Standard Chartered Bank — to carry out the change.

According to Permata’s latest financial report, its outstanding loans grew at a pace of 19.4 per cent year-on-year to 126.7 trillion rupiah (US$10.78 billion) in January to June.

Despite the double-digit growth in the first half, it was much lower than the 26.8 per cent rate Permata booked a year earlier.

“We are especially feeling the pinch in our corporate and consumer loan segments,” Roy said on Monday during a gathering at the Financial Services Authority’s (OJK) headquarters.

Roy said that in corporate banking, the lending sector that had been significantly impacted was mining, while in consumer, all sectors were affected, including credit cards and mortgages.

With slower credit growth, Permata expects smaller net interest margin (NIM) by year-end, lower than the 4.22 per cent recorded in 2013.

CIMB Niaga — now the fifth-largest lender by assets in Indonesia — has forecast lower achievement as well this year.

CIMB president director Arwin Rasyid said the bank, a subsidiary of Malaysia’s CIMB Group, would probably not see its outstanding loans rise above 11 per cent.

“The slowdown is happening everywhere, including in the national banking industry. At the same time, costs of funds are rising due to high interest rates in time deposits.

One way to cope with that is to boost credit, but it will be burdensome for businesspeople,” he said, adding that the bank previously set its growth target at 15 to 17 per cent.

The overall growth of domestic banking is slowing as shown by OJK statistics. As of May, lending growth stood at 17.9 per cent, whereas the rate revolved around 20 to 22 per cent in previous years.

As previously reported, the OJK and Bank Indonesia have called on domestic lenders to put the brakes on their business targets to prevent excessive economic growth.

Both regulators say that they want to see credit rise within the 15 to 17 per cent range.

Bank Central Asia (BCA) and Bank Internasional Indonesia (BII) are also among the top 10 lenders that have been forced to scale down their targets.

BCA president director Jahja Setiaatmadja said during a recent media briefing that BCA, the country’s biggest private lender, would most likely miss its 2014 lending-growth target.

“We will probably achieve only 8 to 10 per cent loan growth,” he said.

BII president director Taswin Zakaria, on the other hand, said the bank — part of another Malaysian banking group, Maybank — would hold internal meetings to decide on its new target.

He declined to reveal his forecast, but said that the revised target would be below its 2013 achievement. Last year, BII posted 16 per cent overall lending growth.

Meanwhile, in contrast with its peers, state lenders Bank Mandiri and Bank Negara Indonesia (BNI) confirmed that no change would occur in its lending targets. Both Mandiri and BNI have set their sights on 15 to 17 per cent lending growth by year-end.

“The target is already a conservative one. So far, we are on track,” BNI finance director Yap Tjay Soen said.


 

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