President director Pahala N. Mansury expressed his optimism on Monday that the publicly listed bank could book more profit than its initial projection of Rp 1.1 trillion (US$75.36 million) by the end of this year, supported by easing liquidity competition.

“There is plenty of liquidity in the market right now as interest rates decline and loan demand slows, making competition for liquidity less fierce and helping us to improve our liquidity,” he said, adding that the bank’s cost of funding had decreased by 80 basis points during the first six months of the year from the same period last year.

Bank Indonesia (BI) has cut its benchmark interest rate four times by 25 basis points (bps) each so far this year in its effort to help the government cushion the adverse impact of the COVID-19 outbreak on the economy. At the same time, cooling economic activity has slowed loan demand and growth.

Indonesian banks’ loan growth slumped to 1.49 percent year-on-year (yoy) in June from 3.09 percent in May. Meanwhile, third party funds grew 7.95 percent annually in June, slightly lower than 8.89 percent in May.

The slowing loan demand helped improve BTN’s liquidity as its loan-to-deposit ratio (LDR) stood at 111.27 percent in the first half of this year, lower than 114.24 percent in the corresponding period of 2019. Its liquidity-to-coverage ratio (LCR), which measures a bank’s short-term liquidity resilience, rose to 132.22 percent in the first half of this year from 105.5 percent the year before.

A lack of appetite for new loans, however,  resulted in the bank only recording 0.32 percent growth in loan disbursement as of June. The figure was far lower than the 18.78 percent recorded in the same period a year before.

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