T

he largest private lender, Bank Central Asia (BCA), will cut its time deposit interest rate by 50 basis points (bps) in an effort to lower funding costs, the bank'€™s senior executive says.

BCA president director Jahja Setiaatmadja said on Thursday that the rate cut would be carried out in September, the second time after it lowered the rate by 25 bps early August.

'€œAt present, we have quite a lot of high-cost funds and they make up for 24 to 25 percent of our total funding portfolio,'€ he said on the sidelines of the 2014 Indonesian Banking Expo (IBEX).

BCA data shows that the rate currently stands at 9 percent for 1-month and 3-month rupiah time deposits, with minimum funds of Rp 25 billion (US$2.14 million). The new 8.5 percent rate will be introduced on Sept. 1.

By reducing the rate, BCA expects to see time deposits account for about 20 percent of its third-party funds (DPK), Jahja said. '€œHopefully other banks will follow suit. A high time deposit rate is pressure on the banking industry,'€ he added.

BCA '€” along with major lenders Bank Mandiri, Bank Rakyat Indonesia (BRI) and Bank Negara Indonesia (BNI) '€” has often been set as a benchmark by other commercial lenders in terms of rates, including in time deposits.

According to banking statistics published by the Financial Services Authority (OJK) and Bank Indonesia (BI), the average rates for 1-month and 3-month rupiah time deposits among commercial banks reached 8.34 percent and 9.28 percent, respectively.

The rates have climbed 279 bps and 339 bps ever since BI increases its benchmark interest rate by 175 bps to 7.5 percent last year. BCA boosted its time deposit rate by more than 1 percent following BI'€™s increases.

Jahja also said that the lender saw its loan-to-deposit ratio (LDR) fall to 73 percent from 75 percent recently. '€œSo it is time to give a chance to other lenders to collect funds,'€ he said.

Meanwhile, as previously reported, BCA estimates that its lending achievement will probably be lower than the initial target due to a slowdown in the economy. At first, BCA set the target at 15 to 17 percent, similar to the guideline laid out by financial regulators.

'€œHowever, we will probably achieve between 8 and 10 percent growth in loans,'€ Jahja added.

The bank also forecasts a decline in its net interest margin (NIM) by the end of the year, lower than the 6.2 percent posted in 2013.

BCA'€™s latest financial report, dated June 2014, reveals that it has total assets of Rp 522.71 trillion. Its outstanding loans reached Rp 321.28 trillion and its DPK amounted to Rp 421.19 trillion.

From January to June operations, the lender booked Rp 15.43 trillion in net interest income, which eventually led to BCA reaping Rp 7.8 trillion in net profits.

With these results, BCA maintains its position as the third-largest bank by assets in Indonesia. Its shares '€” offered on the Indonesia Stock Exchange under the '€œBBCA'€ code '€” closed at Rp 11,850 apiece, unchanged from a day before.