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Rising cost of funds bites into profitability of major Indonesian banks
Analysts forecast that the situation will remain the same in the first semester this year, as Bank Indonesia (BI) is only expected to cut its interest rate in the second half.
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A bank employee counts rupiah bills on Jan. 6 at a Bank Mandiri branch in Jakarta. (JP/Nurhayati)
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ajor Indonesian banks have reported an increase in the cost of securing public funds to be channeled as loans to customers, also known as cost of funds (COF), amid a high interest rate environment, and some lenders have seen the trend bring down their profitability.
State-owned lender PT Bank Rakyat Indonesia (BRI) saw its COF rise to 3 percent last year, marking a 0.94 percentage-point hike compared to the previous year.
PT Bank Negara Indonesia (BNI) and Bank Mandiri saw hikes of 0.7 and 0.5 percentage points, respectively, causing their COF to hover at 2.2 and 1.75 percent during the same period.
This is in line with overall COF for time deposits in the banking industry, which also increased to 4.4 percent as of October last year from 3.9 percent and 2.9 percent recorded in the previous two years.
Major banks also saw their current account and savings account (CASA) – also known as a ratio for cheap funds – diminish, with BRI experiencing a decline to 64.3 percent last year from 66.7 percent in the previous year, and BNI dropping to 72.4 percent from 71.2 percent during the same period.
The country’s largest private lender Bank Central Asia (BCA) also saw its CASA dip to 80.3 percent last year from 81.6 percent in the previous year. However, Bank Mandiri saw an increase to 81.6 percent from 80.3 percent in the same period.
Read also: Major RI banks see cost of funds hike amid high interest rate environment
