ICRA Indonesia: 2013 Loan Growth Likely to Continue Mild Decline; Credit Quality to Stay Strong | INSIDER OUTLOOK
(Insider Stories)-Investor information and credit rating agency ICRA Indonesia expects the credit quality of Indonesian banks to stay strong in 2013 but says loan growth likely will extend last year’s slight decline. It expects loan growth to fall to 20%-22% this year from 23.1% last year, in due to the slow pace of global economic recovery, the threat of inflation from factors such as higher wages and electricity tariffs as well as food supply and price issues, and subdued commodity prices. It also notes banks need to adapt to new regulations that signal a tradeoff between industry expansion and prudence.
The agency, indirectly owned by Moody’s Investors Service, notes 2012 growth in bank loans of 23.1% to 2,708 trillion ($278 billion) rupiah was in line with its estimate of 20%-23% but below 24.6% growth in 2011, due among others to a sharp decrease in foreign currency loan growth. It says obstacles banks faced last year included the slow global economic recovery and unprecedented weakness in commodity prices, reflected in lower-than-expected GDP growth, while minimum down payment regulations for vehicle and housing purchases imposed mid-year also slowed credit disbursements, particularly in the consumer segment.
It expects strong overall credit quality of banks to stay intact and notes this was reflected in 2012 in a higher capital adequacy ratio of 17.4%, a lower non-performing loan ratio of 1.9% and stable net interest margins of 5.5%, with more conservative lending approaches likely to mitigate the potential unfavorable macro conditions.
ICRA Indonesia is 99%-owned by India’s ICRA Ltd., previously Investment Information and Credit Rating Agency of India Ltd., which is majority owned by Moody’s.
Full commentary: http://icraindonesia.com/uploaded/ICRA%20Indonesia%20Commentary_200313.pdf
