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BCA lowers loan growth target to 5%-7% over virus, market concerns
Indonesia’s biggest private lender by market value has lowered its loan growth target for this year, arguing that the coronavirus and stock market scandals may affect its customers.
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Singapore Airlines and Bank Central Asia (BCA) travel fair (kompas.com/Mentari)
B
ank Central Asia (BCA), Indonesia’s biggest private lender by market value, has lowered its loan growth target for this year, arguing that the coronavirus outbreak and stock market “scandals” may affect the bank’s customers.
BCA president director Jahja Setiaatmdja said on Thursday that he sees the bank’s loan growth at 5 to 7 percent this year, down from an initial projection of 8 to 10 percent.
He added that lending in the overall banking industry was likely to grow at a similar rate, although the Financial Services Authority (OJK) expects 11 percent loan growth this year.
“With the current conditions, we are bracing for the impact on our customers,” Jahja told a press briefing on Thursday.
Jahja explained that the 2019 novel coronavirus (COVID-19) outbreak had prompted the Chinese government to limit the country’s economic activities, including factories, to contain the virus. This could limit raw material demand from various industries, which could in turn disrupt business operations of Indonesian companies.
The outbreak has also resulted in travel restrictions to and from China, which would affect the tourism-related industries and businesspeople in Indonesia. More than 40,000 hotel bookings in Indonesia’s top tourism destination of Bali had been canceled.
Adding to downside risks, Jahja continued, were capital market “scandals” that had led to insurance companies failing to pay out customers and to the closure or suspension of mutual fund products.
“Moreover, there have been many problems in the capital market, mutual funds, insurance. We need to prepare for the impact on our customers,” Jahja said.
The Attorney General’s Office (AGO) has ordered the suspension of 800 securities accounts related to Jiwasraya as part of its ongoing investigation into alleged corruption at the ailing insurer that resulted in its failure to repay policyholders to the tune of Rp 16 trillion (US$ 1.17 billion) as of January.
Several mutual fund products also defaulted on payouts, with some asset managers, including Nareda Aset Manajemen and Minna Padi Aset Manajemen, being prohibited from selling products.
For BCA, these capital market problems could pose a risk to the consumer bank’s business, but the lender remains optimistic that, as it lowers loan growth projection, bad debt would remain steady at a nonperforming loans (NPL) ratio of 1.3 percent, which would be similar to last year’s achievement.
“We will keep a close eye on new credit to not turn into bad credit,” Jahja said.
BCA director Rudy Santoso also said the company would try to restructure loans it considered at risk and write off some of its bad loans to keep the ratio at a healthy level.
Commercial banks around the country are struggling with rising bad loans as a global and domestic economic slowdown created an unfavorable business climate.
Against that backdrop, publicly listed BCA recorded outstanding loan growth of 9.5 percent to Rp 603.74 trillion (US$43.7 billion) in 2019, supported by double-digit growth from the corporate segment and the commercial and small and medium enterprises (SMEs) segment. That compares with 6.08 percent growth in overall commercial banking last year.
BCA booked Rp 28.5 trillion in profit last year, up 10.5 percent from 2018, as its operating income grew by 13.6 percent to Rp 71.62 trillion.
