TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

BCA cautious ahead of possible Fed rate hikes

The country’s biggest private lender, Bank Central Asia (BCA), maintained its loan growth target this year as its conservative outlook on credit demand remained unchanged amid possible Fed rate hikes

Winny Tang (The Jakarta Post)
Jakarta
Thu, July 12, 2018

Share This Article

Change Size

BCA cautious ahead of possible Fed rate hikes

The country’s biggest private lender, Bank Central Asia (BCA), maintained its loan growth target this year as its conservative outlook on credit demand remained unchanged amid possible Fed rate hikes.

BCA president director Jahja Setiaatmadja said the bank’s loans grew 12 percent in the first half, above its target of 10 percent for this year.

“It’s hard to predict loan growth toward the end of the year as we do not know how many times the [United States Federal Reserve] will increase its rate,” he said in Jakarta recently. “Thus, we will keep our loan growth projection in our corporate business plan unchanged at 10 percent.”

The lender’s credit growth in the first half was supported by loan demand in all sectors, particularly corporate and consumer.

From January to June, corporate loans surged 12 to 13 percent year-on-year (yoy), while the consumer segment grew 8 to 10 percent.

“Consumer credit demand is price sensitive. If we can keep interest rates low, credit demand will increase. But this is a challenging task because if the Fed keeps raising interest rates, we have to raise it too,” Jahja said.

Jahja said growth in consumer loans would remain challenging, especially because of the possibility of the Fed raising its fund rate two more times in September and December, and possibly by two to three times again next year.

To match the surge in the Fed’s rate, Jahja said Bank Indonesia (BI) would also need to make adjustments by raising its benchmark interest rate — the seven-day reverse repo rate — to minimize pressure on the rupiah.

In June, the central bank raised its key rate by 50 basis points to 5.25 percent.

“[BI] has to adjust with the Fed rate, because if not, the rupiah will be pressured. Many raw materials are imported; if the cost of goods sold rises, inflation could surge as well, which will then reduce consumer purchasing power,” he explained.

In a situation like this, BCA plans to maintain its interest rates for home mortgages to maintain consumer credit demand.

BCA said BI’s recent effort to introduce a relaxation policy on the loan-to-value ratio for mortgages would help boost housing loans.

On funding, however, BCA director Vera Eve Lim previously told The Jakarta Post that the bank had gradually adjusted its deposit rates.

“The Fed rate hike plan has been expected since last year. Globally, central banks including BI have made adjustments accordingly,” she said.

In terms of credit quality, BCA said its non-performing loan ratio in the first half was stable at between 1.4 and 1.5 percent. Meanwhile, its loan-to-deposit ratio stood at 75 percent.

According to its financial report, BCA’s outstanding loans increased 13.37 percent to Rp 486.5 trillion (US$33.87 million) up to May, from Rp 429.12 trillion in the same period last year.

In line with credit growth, BCA’s total assets grew 10.37 percent to Rp 765.38 trillion as of May. Its third party funds, meanwhile, increased 9.03 percent to Rp 603.66 trillion yoy.

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.