JAKARTA (TheInsiderStories) – Bank Indonesia (BI) survey showed the national bank’ loan growth slower in the first quarter (1Q) of 2019. The weighted net balance of new loan demand also dropped to 50 percent from the previous quarter at 71.7 percent.
In that survey, BI stated that the slowdown has been seen since the beginning of this year. Mainly occurred in working capital and investment loans, while consumption loan growth was recorded an increase.
The weighted net balance of demand for working capital loans was recorded declined 8.8 points to 68.2 percent and investment loan fell 8.4 points to 74.4 percent. But, the consumer loans increased 2.4 points to 30.4 percent which was driven by motor vehicle lending.
By sector, the slowing down of the new loan demand happened in almost all economic sectors. The slowdown was mainly in the transportation, warehousing and communication sectors with a decrease in weighted net balance of 57.4 points from the previous quarter to 1.4 percent.
Followed by the wholesale and retail trade sector with a decrease of 56.2 points to 12.3 percent and the sector of providing accommodation and food to drink with a decrease of 55.8 points to 3.8 percent.
However, the central bank estimated that demand for new loan will increase in the second quarter. The increase was driven by growing of the economy, a low risk of lending, an increasing of capital adequacy ratio, and adequate liquidity. New lending in the second quarter was mainly in working capital loans, followed by investment loans and consumption loans.
Based on type, the consumption loan, home or apartment ownership loans are still in top priority and are followed by multipurpose loans and motor vehicle loans. Inline with this, lending standards are predicted to be looser in the second quarter.
This is reflected in the forecast of the standard lending index of 12.4 percent, lower than 13.6 percent in the previous quarter. The easing of lending standards will mainly be carried out for types of consumption loans, with more lenient aspects of credit approval and credit terms.
This year, the survey results indicate that respondents remain optimistic about loan growth with prediction at 11.6 percent. This optimism was driven by forecasts of economic growth which remained good in 2019 and the risk of relatively low lending.
Meanwhile, some of banking player estimated the loan growth will grow lower in this year, influenced by the effects of the global economy also domestic conditions. Some bankers rated global economic conditions are estimated to remain uncertain in 2019.
Finance Director of PT Bank Mandiri Tbk (IDX: BMRI) Panji Irawan said, there are still significant challenges, namely the trend of rising interest rates, tightening liquidity conditions, and volatility in the Rupiah exchange rate.
Taking this into account, Bank Mandiri has set a target for this year’ loan growth of 11.5 percent, lower than this year target at 13 percent. Other state-owned lender, PT Bank Tabungan Negara Tbk (IDX: BBTN) is optimistic loan will grow 15 percent in 2019, supporting from housing sector, said the President Director Maryono.
Other state-owned lender, PT Bank Negara Indonesia (Persero) Tbk (IDX:BBNI)’ credit could grow up to 15 percent this year.Then, President Director of PT Bank OCBC NISP Tbk (IDX: NISP) Parwati Surjaudaja said, the loan growth for this year will hold steady from las year which was in 10 percent to 15 percent, caused by challenging domestic and international conditions.
Furthermore, President Director of PT Bank Central Asia Tbk (IDX: BBCA) Jahja Setiaatmadja is forecasting that infrastructure and corporate sectors will be prospective for this next year and support the bank loan growth to 10 percent in 2019.
Previously, Financial Service Authority’ chairman Wimboh Santoso stated that loan growth in 2019 would indeed be slightly corrected due to the impact of the escalating trade wars. He expected loan growth to reach 12 percent in 2019.
Indonesia’s central bank has issued a new regulation on reserve requirements, which aim to stimulate lenders to pump liquidity into the market and disburse more loans.
The governor Perry Warjiyo said commercial lenders having excess liquidity will get zero interest rate when they put the money on the central bank. Banks now get 2.5 per cent interest for the funds they park at BI that is above the required level.
The new rule is expected to encourage banks to put excess liquidity into the financial markets. This is also hoped to reducing the volatility in the overnight money market.
Loan growth in Indonesia has fallen to below 10 percent pace since 2016, compared with more than 20 percent during the commodity boom years before that. Indonesian president has made the call given the fact that the banking loan growth has been slow, despite easing policies applied by the central bank by reducing BI’ benchmark rate.
The other reason for slow loan growth is that the source of funding is not only from the banking sector. Companies have also in the past two years or so have increasingly utilized the capital market to find fresh funds through issuing bonds, rights issue as well as medium-term notes due to favorable lending rates.
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