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Banks reluctant to go full throttle despite shrinking loans at risk
Indonesian lenders remain cautious in managing their balance sheets, as external factors could significantly rattle the banking system.
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Customers walk out of a Bank Central Asia (BCA) branch office in Jakarta. (JP/Nurhayati )
T
he share of loans at risk (LAR) in major local banks, including loans restructured in response to pandemic-induced financial problems, contributed to the economic downtrend in the second quarter of this year.
However, lenders keep the thick buffers they introduced in 2020 to tackle bad loans, pushing their LAR coverage ratio higher.
Analysts say Indonesian banks tend to be relatively cautious in managing their balance sheets, as the pandemic showed that external factors could significantly rattle the worldwide banking system.
State-owned lender Bank Negara Indonesia (BNI) saw its number of LAR drop to 16.1 percent of total loans at the end of June, compared to 19.6 percent one year earlier. On the other hand, its LAR coverage ratio increased from 42.3 percent to 47.1 percent.
The firm also increased loan coverage for construction state-owned enterprises (SOEs), which are considered bad loans because the SOEs have trouble repaying their loans. A report from Samuel Sekuritas found that the buffer was hiked to 53.5 percent from 46.6 percent at the end of last year. Sixty percent of the total is earmarked for PT Waskita Karya and another 30 percent for PT Wijaya Karya.
In its report, the local brokerage stated that the buffer BNI spared for those struggling SOEs was sufficient.
Bank Central Asia (BCA), the country's largest private bank in terms of assets, said its LAR ratio had dropped to 8.7 percent at the end of June from 12.3 percent at the same time last year. During that period, its coverage ratio for those risky loans rose from 47.9 percent to 61.6 percent.
