Deposit
rate will continue to rise in second
half
Bank Indonesia (BI) and rating agency Moody’s Investors
Service predict that banks will continue to raise time deposit rates in the
second half of this year as they compete for customers’ funds against the backdrop
of a tight liquidity environment. “These banks are still chasing credit growth.
To do that, they need to secure funds by raising the deposit rate that will
hopefully attract customers’ [funds],” BI Deputy Governor Halim Alamsyah, who
is also an ex-officio member of the Financial Services Authority (OJK), said
Friday.
BI has told banks to put the brakes on lending to avoid
consumption growing too fast. The central bank embarked on the most aggressive
tightening cycle in the past eight years by raising its benchmark interest rate
by 175 basis points last year to 7.5 percent. Since then, banks have competed
to grab third-party funds at the cost of their net interest margin (NIM) being
squeezed. NIM, the difference between the credit rate charged to customers and
deposit rate owed to customers, is an indicator of profitability for a bank.
According to central bank observations, the deposit rate
increase is specifically aimed at big clients with large funds, such as those
with funds of over Rp 25 billion (US$2.1 million) per person. Halim said that
BI would be watchful of the situation, adding that banks should comply with the
credit growth guideline set by financial regulators late last year. Both BI and
the OJK set this year’s credit growth at 15 to 17 percent, lower than the 20 to
22 percent recorded in previous years. The third-party funds growth is also set
at an almost similar rate, which is 14 to 15 percent.
“We do not want to see banks pursuing excessive credit
growth and set a much higher interest rate because it will potentially raise
their NPL [non-performing loans] ratio,” he said, adding that it would also
affect their NIMs. Indonesian banks are among the most profitable lenders in
the world as they are still able to charge relatively high interest rates to
banking customers. That translates to high NIM and high profitability. However,
the banking industry has seen its average NIM slowly decline since BI decided
to jack up its benchmark interest rate gradually between June and November
2013.
The latest data from the OJK showed that the average NIM
stood at 4.3 percent in April, down from 5.4 percent a year ago. Meanwhile,
Moody’s confirmed BI’s conviction in its latest report, saying that competition
for deposits would remain intense over the 12 to 18 months, seen by the
significant increase in rates offered on deposits. “We expect competition for
deposits to remain intense over the next 12-18 months, given the high system
average loan-to-deposit ratio of about 90 percent on March 31, 2014, which was
only slightly lower than the regulatory limit of 92 percent,” Moody’s assistant
vice president and analyst, Alka Anbarasu, said.
In the year to March 31, according to Moody’s, the rates
offered on new one-month, three-month and six-month deposits rose 248 basis
points (bps), 273 bps and 218 bps, respectively. The increases reflected higher
policy rates, but were significantly higher than the increases in the policy
rates between June and November, it said. “System-wide net interest margins, on
the other hand, fell to 4.3 percent at end-March 2014 from an average of 5.4
percent between 2012 and 2013,” Moody’s added. However, despite the NIM
contraction, Moody’s upheld its optimism that Indonesian banks would remain
among the most profitable globally. (sumber : http://www.thejakartapost.com/)
Opini : Indonesia's economic
growth rate should be further enhanced to mention especially in the world of
banking and policy made by the BI should be able to benefit both parties.
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