|Title:||Indonesia annual commercial banks' outstanding loans in rupiah and percent change for 2006 to 2011|
|Source:||Indonesian Commercial Newsletter|
Start of full article - but without data
Commercial Bank Credits
Year Credits Growth (%)
2006 XXX,XXX -- 2007 X,XXX,XXX XX.X 2008 X,XXX,XXX XX.X 2009 X,XXX,XXX XX.X 2010 X,XXX,XXX XX.X 2011 X,XXX,XXX XX.X
A fairly strong growth has been recorded for Indonesia's banking industry in the past several years. Big banks have continued to chalk up an increase in profit. In 2011, the country's banking industry reported an aggregate of RpXX.XX trillion in net profit or an increase of XX.X percent from the previous year's record of RpXX.Xl trillion. The growth was higher than 2010's level of XX.X percent. Despite the high growth, the country's banking industry still needs to improve efficiency and its intermediacy role.
Greater efficiency and intermediacy role are still needed as the growth of the country's banking industry is lacking in quality. The growth is attributable more to monetary policy that allows bank to maintain high lending rates, rather than to operational efficiency. The interest margins between the deposit and loan interest rates in the country are relatively wide compared with in other countries.
Banks are not easily cut their lending rates although Bank Indonesia has continued to cut its key rate, the interest rate on Bank Indonesia Certificate (SBI) which serves as the reference interest rate for banks.
Credit expansion is also attributable more to consumer credits. Consumer credit contributes to driving economic growth but on the other hand it could bring the economy to facing greater risk of default.
Consumer sector has been one of the main drivers of the country's economic growth in the past several years. Banks, therefore, are encouraged to increase credit distribution to the people, but the central bank has signaled it would tighten its monetary policy to minimize the risk and improve banking efficiency and intermediacy role.
The central bank in 2012 will adopt a tighter monetary policy to forestall an increase in nonperforming loans. It has raised the down payment for consumer credits especially motor vehicle and housing credits.
Another important issue is growing foreign domination of the country's banking industry. Bank Indonesia plans to revise the regulation on foreign ownership in banks in the country.
Expansion Marked With Growing Number of Bank Offices
Banking expansion in 2011 was marked with the fast growing number of bank branches that shot up to more than X,XXX offices. Micro banks lead in the expansion.
Medium cities outside Java are the target of expansion. Competition is less sharp in medium cities compared with in big cities.
A number of banks plan to increase the number of their branches in 2012. Bank Mandiri, the country's largest lender in assets plans to open X new micro branches in Jambi to add to XX units of branches already in operation in that province. The additional X branches have been included in its Bank Business Plan (RBB) for 2012 awaiting approval from Bank Indonesia.
Other banks also seeking to increase the number of their bank offices include Bank BJB, a bank owned by the West Java and Banten provincial administrations. Bank BJB has opened new branches in Banjarmasin, Palembang, and Lampung, bringing the total number of its offices to XX units all over the country.
PT Bank Bumi Artha Tbk plans to increase the number of its branches by XX units in 2012 to add to XXX units it already had by the end of 2011. It would buy or rent buildings to house its new offices. The cost of buying a new building is around RpX billion-RpX billion.
SBI Rate Cut To Press Down Lending Rates
The country's economic condition has been fairly good in the past three years amid the global financial crisis. The country's economy has been stable growing by X-X percent per year.
Strong and big domestic market has helped offset a decline in demand from crisis hit Europe and the United States that the global economic slowdown has little effects on the country's real sector. The markets of Indonesia's commodities are diversified and are less dependent on the country's traditional export market Europe and the United States. The ASEAN markets have grown and are getting more important for the country's commodities.
Meanwhile, the country has managed to keep its inflation in control allowing the central bank to cut its key rate SBI. The interest on SBI has increased several times but in general the trend is declining. The interest cut is expected to bring down the lending rates of banks to boost demand for bank credits.
The condition is quite convenient and safe for banks to continue growth. In 2012, the country's economy is forecast to expand X-X.X percent with inflation slightly lower at X.X percent.
The relatively low inflation rate allows more cut in bank lending rates to boost credit growth.
Banks Slow in Cutting Lending Rates
The cut in SBI rate by Bank Indonesia is aimed at encouraging banks to cut lending rates. However, banks are not immediately prompted to follow. The lending rates remain high despite repeated slashing of SBI rate by the central bank.
The interest rate on working capital credits in the past four years has been cut only by X percentage points.
Banking Assets Growing
The country's banking industry has continued to chalk up an increase in assets. The growth was sharp in 2010 and 2011. In 2010, the banking assets grew XX.X percent to RpX,XXX trillion and in 2011 the growth rate was higher at XX.X percent to RpX,XXX trillion .
The trend continued in 2012. By February, 2012, the banking assets grew X.X percent. The trend is forecast to continue throughout the year with the country's economic and financial sectors continuing to grow.
Credit expansion and increase in third party funds held contribute to the increase in assets. The expansion of bank offices is expected to boost inflows of third party funds and credit distribution.
Bank Ranking in Assets Changes
Bank Mandiri is the country's largest bank in assets. The state bank had assets valued at RpXXX.X trillion in 2001. The second largest is Bank Rakyat Indonesia (BRI) with assets valued at RpXXX.X trillion .
BRI has recorded an impressive growth over the past several years climbing to the second place putting behind BCA, which was earlier the second largest .
Other banks recording an increase in ranking include CIMB Niaga, which by the end of 2011 climbed to the fifth putting behind Bank Danamon. Bank CIMB recorded assets valued at RpXXX.X trillion in 2011 larger than Bank Danamon's assets of RpXXX trillion.
The assets are relatively small compared to the assets of top banks in neighboring countries including Singapore, Malaysia, and Thailand. Big banks in those countries have assets three times larger than the assets of Indonesia's largest banks. In Brazil, the assets of the largest bank is XX times largest the assets of the country's largest bank.
Profit has been the main contributor to the increase in bank capital as paid up capital did not change much from year to year. In the coming years with the economy to continue to grow , banking capital is expected to continue to grow.
In 2011, the capital of banks in Indonesia was recorded at RpXXX.X trillion or an increase of XX.X percent from the previous year. The growing trend continued until February 2012 when banking capital reached RpXXX trillion or an increase of XX percent in two months.
Banking Capital Growing
The government in February issued a new policy reducing risks in calculating risk weighted assets (ATMR). The circulation of the Central Bank No. XX/X/DPNP on Guidelines for the calculation of risk weighted assets for Credit Risks through Standard Approach on XX February 2011, cut the risks on a number of credits..
The types of loans provided with ATMR incentive include house ownership credit (KPR) with loan to value ratio of not more than XX percent to have risk burden of XX percent, down from XX percent earlier; and business credits : micro, small and medium business credits, were given risk burden of XX percent down from XX percent earlier. The policy is to reduce provision for risks allowing banks to strengthen capital.
ATMR in February dropped to RpX,XXX.X trillion from RpX,XXX.XX trillion in December 2011. The decline was recorded when banks recorded credit expansion. In the first two months of 2012, credit expansion by banks totaled. In the first two months of 2012, credit by banks expanded by RpX.XX trillion to RpX,XXX trillion.
Bank of India Indonesia Tbk recorded an increase of XXX basis points in Capital Adequacy Ratio (CAR) in the first three months of 2012 thanks to cut in ATMR. In March 2012, the CAR of the Indian bank was recorded at XX.X percent up from XX.XX percent in December 2011.
Profit Pushes Up CAR Safe Above Minimum Limit
Increase in capital will result in an increase in capital adequacy ratio (CAR). In February 2012, CAR averaged XX.X percent, much higher than X percent. The CAR was much higher than X percent, the minimum limit set by Bank Indonesia. The Indonesian banking CAR was higher than the CAR in a number of other countries. In Singapore the CAR was XX.X percent, Thailand XX.X percent, Malaysia XX.X percent.
Based on the Indonesian Banking Statistics (SPI) issued by Bank Indonesia (BI), paid up capital has little contribution to the increase in CAR. In two months period, there was almost no injection in paid up capital. Paid up capital in February was recorded at RpXXX.XX trillion up from RpXXX.XX trillion by the end of 2011.
Meanwhile, last year's net profit that was added to capital was quite high. Last year banking profit totaled RpXX.XX trillion.