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Big RI banks look to further growth amid global tempest
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ajor Indonesian banks expect 2023 to be a challenging year given the global risks of inflation, recession and foreign exchange volatility, yet they look to continued expansion, emboldened by strong third-quarter reports and a resilient domestic economy.
Loan disbursement by the country’s three largest banks – state-owned lenders Mandiri and BNI as well as private lender BCA – increased between 9 and 14 percent annually in the third quarter, in line with the overall industry’s growth of 11 percent year on year (yoy).
Credit issuance across the board, including corporate, commercial and consumer loans, continued to grow significantly, supported by increased demand and an easing of pandemic-related mobility restrictions early this year.
When compared to a year earlier, borrowers in the third quarter were better at keeping up with repayments, as reflected in nonperforming loan (NPL) ratios at the three banks falling by between 0.2 and 0.8 percentage points yoy, while the loans at risk (LAR) ratio was down around 6 percentage points yoy.
In the first nine months of 2022, BCA’s net profit rose 12.6 percent yoy to Rp 28.95 trillion, while Mandiri and BNI recorded even stronger annual gains of 59.4 percent to Rp 30.7 trillion and 76.8 percent to Rp 13.69 trillion, respectively.
“This solid performance in the third quarter will help strengthen our foundation in facing global economic challenges in the future,” BNI CEO Royke Tumilaar said in a statement on Tuesday.
Read also: BCA to keep lending rate unchanged
Recent projections from the IMF, World Bank and OECD point to weakening economic growth, while inflation is at multi-decade highs in many countries.
Fast monetary tightening by many central banks is creating its own risks for Indonesia, where the central bank is under pressure to follow suit or see the local currency depreciate further against the US dollar.
Executives from BNI, Mandiri and BCA said all of these challenges would have a certain impact on their borrowers, thereby increasing risks to disbursed loans, as some borrowers would struggle to cope with prolonged high input costs or have trouble selling goods abroad due to weakened global demand, while others might have cashflow issues.
However, executives of the three banks vowed to do what they could to maintain their business performance next year, while expressing hope that Indonesia’s economic growth would remain strong next year.
Of the three, only BNI revealed its guidance for next year, with loan disbursement growth targeted at 9 percent, slightly lower than this year’s target of 10 percent, which the lender described as a rather conservative strategy amid the global economic turbulence.
BCA CEO Jahja Setiaatmadja said on Oct. 20 that the bank remained optimistic that next year’s loan disbursement could be as high as this year’s targeted 12 percent.
“That’s our hope. But again, it’s all assuming there is no new COVID-19 variant or any other strange things happening next year. For now, we remain optimistic, yet careful,” Jahja told reporters during the company’s quarterly briefing.
Meanwhile, Mandiri CEO Darmawan Junaidi said on Wednesday that the lender would remain aggressive but prudent by targeting key sectors with strong growth and resilience, such as telecommunications, food and beverages as well as commodities, among others.
Ahmad Siddik Badruddin, chief risk officer at Mandiri, said stress tests had shown that even GDP growth falling to 2 percent, along with adverse effects from benchmark rate hikes and a significantly weakened rupiah, would not throw the bank off balance.
Its loan portfolio would remain healthy, while liquidity and the NPL ratio would remain above authorities’ safety threshold, he added.
“We have contingency plans if all of those risks were indeed happening,” Siddik said.
Read also: G20 finance chiefs agree to help debt-distressed countries
M. Doddy Ariefianto, associate head of the finance program at Binus University, cautioned that next year would be a difficult one for the banking industry, given the high degree of global economic uncertainty.
If Indonesia could maintain economic growth at 4 or 5 percent, that would already be very good, he said, which he thought would involve significant stimulus as well. Therefore, he said, banks would be unable to push their targets too far, as they were tied to the course of the domestic economy.
