TheJakartaPost
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Banking industry fundamentally in good shape amid challenges
Yet banks still face many challenges, especially from the economic impacts of stricter social restrictions to curb the spread of the more infectious COVID-19 variant, the Delta.
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Funds at your fingertips: A teller for state-owned Bank Mandiri explains to a customer about a productive microcredit program that can be accessed via a mobile app the bank launched in June 2020. (Antara/Nova Wahyudi)
D
uring the second quarter of this year, Indonesian banks delivered a very good income performance. The combined net profit of the largest six banks in Indonesia reached Rp 46.7 trillion (US$3.27 billion), increasing significantly by 19.7 percent from the year before, driven by rising net interest income that also rose by almost 20 percent to Rp 129.9 trillion. Improving banks' profitability came after the national economy experienced a strong recovery out of a recession during the second quarter.
Yet banks still face many challenges, especially from the economic impacts of stricter social restrictions to curb the spread of the more infectious COVID-19 variant, the Delta.
There are signs of slowing loan growth and weakening asset quality. Loan growth in July slowed to 0.5 percent on a yearly basis from 0.6 percent in June. And at the same time, the ratio of troubled assets increased to 3.4 percent from 3.2 percent.
Banks' performance will continue to improve this year, though they may be affected by a slowdown in economic recovery in the third quarter amid the second wave of the COVID-19 pandemic. Many macro indicators have shown a significant downturn since multitiered public activity restrictions (PPKM) were implemented on Java and Bali Islands.
Consumer confidence decreased quite significantly to 80.2 in July from 107.4 in June.
The Purchasing Managers’ Index (PMI) at the same time dropped to 40.1 from 53.5. In August, the index improved slightly to 43.7 but still showed a contraction in the manufacturing industry.
Both output and new orders for industry products fell for two months straight as pandemic restrictions weighed on production and demand.
