The Jakarta Post
Publicly listed Bank OCBC NISP has cut its loan disbursement target this year as the COVID-19 pandemic hits credit demand amid slowing business activity.
“At first, we targeted our loan growth to reach around 7 percent to 9 percent this year but given the current situation, loans will probably grow around zero percent to 5 percent,” the bank’s president director, Parwati Surjaudaja, said during a virtual press briefing over the weekend.
As of the first quarter of this year, OCBC NISP booked 5.4 percent year-on-year (yoy) growth in loan disbursement to Rp 123.87 trillion (US$8.31 billion).
Parwati attributed the lower projection to slowing loan demand due to cooling economic activity as a result of the pandemic.
The pandemic has disrupted businesses in the country, as the government’s large-scale social restrictions require people to stay at home to curb the spread of the virus. Statistics Indonesia (BPS) data show the country’s economy grew just 2.97 percent annually in the first quarter, the lowest since 2001 as household spending and investment growth plunged to 2.84 percent and 1.7 percent respectively.
Despite the potentially slumping loan demand, the local arm of Singapore-based OCBC Bank would continue to focus on disbursing its loans to businesses that still recorded gains amid the pandemic.
“We believe that there are sectors that have continued to grow amid this pandemic that still need working capital for their businesses,” she said.
Stocks of OCBC NISP, traded at the Indonesia Stock Exchange (IDX) under the code NISP, rose 0.71 percent as of 12:31 p.m. Jakarta time on Monday as the main gauge Jakarta Composite Index (JCI) jumped 0.91 percent. The bank's stocks have lost almost 20 percent of their value in the last year, Bloomberg data showed.
OCBC NISP also sought other ways to maintain its performance amid the challenging time by boosting its non-interest income, including fee-based income, managing director Hartati said.
“We aim to increase our fee-based income by 10 percent this year to offset the possible slower net interest income from the slumping loan,” she said.
Parwati expressed optimism that OCBC NISP third-party fund collection would still grow at around 8 to 10 percent this year as the bank planned to boost low-cost funding to help maintain its liquidity.
The bank’s third-party funds had grown 5.2 percent yoy to Rp 137.37 trillion as of March. It also recorded a loan-to-deposit ratio (LDR) of 89.9 percent, below the lower threshold of 94 percent, while its loan-to-funding ratio (LFR) of 87.3 percent was well below the 100 percent threshold.
The banking industry is expected to face headwinds this year, leading to some banks’ hesitation over channeling loans given the economic uncertainty.
“I think loan growth will be around 4 percent and new loan disbursement will begin to return to normal in March 2021. The banks are hesitant to channel loans as demand will remain low until December,” Institute for Development of Economics and Finance (INDEF) senior economist Aviliani said during an online discussion recently.
Financial Services Authority (OJK) data revealed Monday that loan growth reached 7.95 percent yoy in the first quarter, higher than the 6.08 percent recorded at the end of last year. However, no new loan demand was recorded in the period as the growth came from the disbursement of existing credit facilities, OJK chairman Wimboh Santoso said.
The OJK and Bank Indonesia previously set a loan growth target of around 11 percent this year. The central bank recently slashed its projection to between 6 and 8 percent.