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Citibank net profits plunge 38%
Despite recording double-digit loan growth, Citi Indonesia, the wholly owned subsidiary of United States-based Citigroup Inc
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espite recording double-digit loan growth, Citi Indonesia, the wholly owned subsidiary of United States-based Citigroup Inc., saw its net income plunge in the first half of 2018 as a result of an increase in its bad loan provision.
Citi Indonesia posted first half net profits of Rp 835 billion (US$57.04 million), down 38 percent from Rp 1.35 trillion in the same period last year, according to its financial statement released on Monday.
The lender’s credit impairment increased to Rp 543.32 billion as of June 2018, from Rp 207.67 billion in the same period last year.
“[The profits were down] because there was a credit impairment reversal in the first quarter last year, in relation to asset sales in our commercial banking sector,” Citi Indonesia CEO Batara Sianturi told reporters in a media briefing in Jakarta.
So far, Citi Indonesia is still setting aside loan loss provisions in anticipation of an increase in its non-performing loan (NPL) ratio.
Citi Indonesia’s gross NPL ratio has risen to 2.34 percent in the first six months of 2018, compared with 2.26 percent in the same period last year. Moreover, its net NPL ratio at the end of June was 0.92 percent, up from 0.78 percent, year-on-year (yoy).
Meanwhile, the lender’s net interest margin (NIM) was also down to 5.87 percent in the first half of 2018, from 6.69 percent, partly affected by the gradual increase in Bank Indonesia’s (BI) reference rate this year, which forced the bank to raise deposit rates for the consumer banking sector.
“This was because of the pressure of interest expense. The benchmark rate went up, deposit rates increased, while not all lending rates could be increased. For instance, for the credit card business, there is a cap. Therefore, the impact on the NIM of the credit card business was real,” he said.
The central bank increased the reference rate by 100 basis points between May-June in an effort to defend the rupiah. The seven-day reverse repo rate was held at 5.25 percent.
On Monday, Nanang Hendarsah, BI’s head of monetary management, said the regulator had intervened in the foreign exchange market to defend the rupiah amid the Turkish lira fallout.
Gradually, BI has raised the benchmark rate in anticipation of the US Federal Reserve’s plan to hike rates. Some banks in Indonesia have seen their NIM squeezed.
In terms of loan growth, Citi Indonesia said its first-half realization exceeded its initial target set in the beginning of the year, which was 8 percent.
