ASEAN KEY DESTINATIONS
Banks set moderate targets for 2017 as loan growth falls
Indonesia:Big banks are setting moderate growth targets for next year as they remain cautious after loan growth dropped to its lowest level in seven years.
Most commercial banks are targeting loan growth similar to the rates forecast by financial authorities, between 9 and 12 percent in 2017, or similar to the target range set for this year.
Up until October, lending has grown 6.5 percent year-on-year (yoy), the weakest level since 2009, as banks are frazzled by weak demand for credit and high bad loans after the country’s economic growth slowed to a six-year low level in 2015.
The country’s largest private lender, Bank Central Asia (BCA), will work its resources to reach a loan disbursement target of 9 to 10 percent on an annual basis next year, although it continues to see weak demand for loans so far this year. It also expected third-party funds to grow by to 8 percent.
BCA president director Jahja Setiaatmadja said although BCA had jot down its loan growth target at around 10 to 11 percent in next year’s bank business plan — which is required to be submitted to financial authorities before year-end — the bank remains cautious of future developments.
“If loan demand in June [mid-year] is strong, we can keep the target. But if it’s weak, loan growth can be lower than that,” Jahja said recently.
Up until September, publicly-listed BCA booked 5.8 percent yoy loan growth to an outstanding value of Rp 386.1 trillion (US$28.5 billion), as Jahja acknowledged his firm continued to see sluggish demand that was relatively slower than last year. He still hopes BCA sees 7 percent lending growth by the end of this year.
Meanwhile, state-owned lender Bank Mandiri expects to see loan disbursement expand by 11 to 13 percent and third-party funds by 9 to 11 percent in 2017, said Pahala Mansury, the lender’s finance and treasury director.
The performance of the country’s largest lender by consolidated assets is hurt by rising bad debts during the January to September period, forcing the bank to increase its loanloss provision and let its net profit plunge 17.6 percent.
“We hope to start reducing the provision allocation next year and target a normal profit growth,” Bank Mandiri president director Kartika “Tiko” Wirjoatmodjo said.
State-owned Bank Rakyat Indonesia (BRI), the nation’s most profitable lender, expects to grow moderately, in line with the central bank’s projection by keeping its focus on the micro segment and put loan quality first.
It has yet to set a target as the bank business plan is in an ongoing discussion, BRI finance director Haru Koesmahargyo said.
“The challenges going forward are keeping our asset quality in check as economic growth will remain low. The second challenge is keeping our liquidity, which is related to the expected Fed Fund Rate hike that will affect interest rates in rupiah,” he added, banking hope on rapid infrastructure construction and micro, small and medium enterprises (MSMEs) to stoke demand for credit.
BRI’s loan growth outperformed its peers in September, having grown 16.3 percent yoy to Rp 603.5 trillion in outstanding loans, already higher than its 15 percent target for this year.
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