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Banks target growth of more than 24%
Business plans submitted to Bank Indonesia (BI) showed banks had set targets to grow their lending business by more than 24 percent this year, higher than the central bank’s target of 20 to 23 percent, a senior official says
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usiness plans submitted to Bank Indonesia (BI) showed banks had set targets to grow their lending business by more than 24 percent this year, higher than the central bank’s target of 20 to 23 percent, a senior official says.
BI deputy governor Muliaman D. Hadad said Friday the expectation for faster loan growth was due to optimism in Indonesia’s projected economic growth this year.
“Lending is driven by economic growth. Faster economic growth means more need for lending to fund expansion,” he said, adding that the overall business plans reflected optimism in the banking industry.
With loan growth targets of more than 24 percent, banks would have to disburse at least Rp 423.8 trillion (US$47.77 billion) in loans this year according to the 2010 year-end outstanding loans figure of Rp 1,765.84 trillion, the central bank said.
BI has set an official loan growth target of 20 percent to 23 percent this year, but BI Governor Darmin Nasution said surging inflationary pressure may lower credit expansion to between 19 percent and 21 percent.
Muliaman said loan growth must surpass last year’s 22.8 percent to achieve the higher economic growth target of 6.4 percent set by the government for 2011.
Despite the aggressive 24 percent loan growth target, Muliaman said that according to the banks’ business plans, third party funds growth would be lower at more than 15 percent. “The appetite to disburse loans is high, but third party funds growth remains relatively low.
“I suppose banks still have plenty of liquidity so [funding for loans] should be covered. Third party funds would only be needed as aback up.”
In 2010, third party funds grew 18.53 percent to Rp 2,338.82 trillion, meaning Indonesians would need to pour at least Rp 350.82 trillion into their savings, deposits or current accounts this year.
Muliaman said faster loan growth compared with the “relatively low” growth of third party funds would make banks’ loan-to-deposit ratio (LDR) surge to 80 percent from 75 percent at the close of 2010.
“We would conduct stress tests to figure out if [the targets] are supported by sufficient indicators. The numbers should be backed by strong capitalization,” he said.
BI plans to increase banks’ minimum capital requirement from the current Rp 100 billion so their expansion could be more prudent.
Indonesian banks’ capitalization, Muliaman said, was the highest among ASEAN member states.
On the other hand, Darmin said the country’s banking efficiency lagged behind ASEAN rivals, with higher net interest margin (NIM) that translated into high lending rates.
“Efficiency is very important, supported by transparency and competition,” Muliaman said, in reference to the central bank’s new regulation that required banks to announce their base lending rate, and the plans to maximize banking transparency through detailed reports of its main business indicators to BI.
