Panin cuts lending targets due to rising borrowing costs

Ika Krismantari ,  The Jakarta Post ,  Jakarta   |  Wed, 09/10/2008 11:02 AM  |  Business

Publicly-listed Panin Bank, the nation's sixth largest lender, revised down its lending growth target for this year on slower demand following the central bank's recent decision to raise its benchmark interest rate.

Amid increasing borrowing costs, the bank chose to slash its lending growth target to 25 percent this year from the original 30 percent, Panin vice president director Roosniati Solihin said late Monday.

She said the bank targeted outstanding loans to reach Rp 36.87 trillion (US$3.97 billion) by the year's end compared to Rp 29.5 trillion a year earlier.

The bank had previously set a year target of securing Rp 38.35 trillion worth of channeled loans.

Roosniati said looming inflation and rising interest rates had encouraged the bank to cut the target.

"We are seeing a slowdown in the market because the interest rate is also rising. It will be hard for the consumers, especially retail (consumers) to seek loans," she said.

Retail consumers account for 70 percent of Panin's loan disbursement, while corporations account for 30 percent.

Accelerating inflation in August forced Bank Indonesia (BI) to raise its rate by 25 basis points to 9.25 percent this month for the fifth consecutive month.

The BI rate is used as a benchmark by other banks to determine their interest rates.

During the first half of this year, Panin's loan disbursement jumped 16.5 percent to Rp 34.42 trillion, of which around 69 percent went to retail consumers and the remainder to corporate sectors.

The company posted Rp 478 billion in net profit during the period.

Last year, the company's loan disbursement surged 55 percent to Rp 29.5 trillion on the back of strong economic growth.

In a bid to encourage growth, Roosniati said Panin planned to open a shariah banking unit early next year, and added that the company was in the process of securing a permit for the project from relevant authorities.

Under the plan, Panin will convert Bank Harfa, which was acquired by Panin last year, into a sharia bank.

Panin has injected Rp 70 billion into the bank as capital to meet the central bank regulation requiring a bank to have a minimum capital of Rp 100 billion.

Bank Harfa now has approximately Rp 118 billion in capital, Panin investor relation director Susanto said.

Panin also plans to expand Bank Harfa's operations to Jakarta from its current base in Surabaya, East Java.

ANZ Banking Group of Australia owns a 30 percent stake in Panin, while 45 percent is owned by Panin Life and 25 percent by the public.

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