JAKARTA Oct 30 Indonesia's top two banks
posted strong profit growth in the first nine months of the
year, despite tougher domestic conditions marked by a jump in
interest rates, slower economic growth and a sharply weaker
State-controlled Bank Mandiri said nine-month net
profit rose 15 percent from a year ago to 12.8 trillion rupiah
($1.2 billion), while Bank Central Asia (BCA), the
country's biggest bank by market value, said net profit rose 25
percent to 10.4 trillion rupiah.
"In a more challenging environment marked by slower economic
growth, higher inflation and (the) weaker rupiah, BCA has been
able to deliver a solid performance with a solid liquidity
position and strong capital," BCA chief Jahja Setiaatmadja said
"We are confident that amidst recent challenges in the
economy, prospects for the banking industry in Indonesia remain
Setiaatmadja added that non-performing loans were only
slightly higher at 0.5 percent against 0.4 percent last year,
while corporate lending was up 25.5 percent year-on-year.
The central bank's benchmark interest rate has gone up 150
basis points since June to a 4-1/2 year high of 7.25 percent.
Economic growth is expected to come in well under 6 percent this
year, compared with earlier forecasts of 6.2 percent or more,
while the rupiah has fallen about 14 percent this year.
Setiaatmadja said overheads had risen, cutting into profit
margins. "The central bank is already indicating that it expects
loan growth to slow down, at rate of 14 to 15 percent.
"One concern is if the banks are still pushing loan growth
at above 20 pct, it will trigger a rate war between banks and
will put pressure on our income margins."
Bank Mandiri Chief Executive Budi G. Sadikin also expected a
credit growth slowdown next year to between 15 and 20 percent.
Some analysts said declining net interest margins were
expected to continue, which coupled with a slowdown in mortgage
growth would force banks to cut costs.
"As banks have been adjusting their rates on both assets and
liabilities, we expect net interest margins to decline to 6.8
percent by the end of this year from 7.0 percent in the second
quarter," Jakarta-based Mandiri Sekuritas said in a note, added
it revised down earnings projections for 2013-14 by 9 and 10
"We anticipate total loan disbursements will start slowing
down in October as the rupiah is stabilising, banks are
adjusting their lending rates and the new rulings on mortgage
loan-to-value (LTV) and secondary reserve requirement are being
In August, Indonesia's central bank cut the ceiling on the
loan-to-deposit ratios (LDR) of commercial banks to 92 percent
and said it planned to increase the secondary minimum reserve
requirement for rupiah deposits to 4 percent.
However, the mortgage slowdown is seen as helping reduce
risk in the booming property sector.
"Although this new mortgage regulation may dampen future
housing demand, we think it would not only help to prevent but
also curb potentially higher loan defaults as have started being
seen in some banks' mortgage performance," said Teguh Hartanto,
a banking analyst at Bahana Securities.
Bank Mandiri and BCA shares closed 1.2 percent and 0.9
percent higher at 8,750 rupiah and 10,700 rupiah respectively.
The banking sector was 0.7 percent higher, while the
broader Jakarta Composite Index rose 0.3 percent.
($1 = 11,102.5 rupiah)
(Editing by Jonathan Thatcher and David Holmes)