Indonesia Banking Industry Report - 2016

January 30, 2016

This report profiles Indonesia’s banking industry, discussing market trends through 2015 and outlook for 2016. The report also highlights leading players in the sector including PT Bank Mandiri (Persero) Tbk (BMRI), PT Bank Rakyat Indonesia (Persero) Tbk (BRI) and PT Bank CIMB Niaga Tbk (BCN).

Indonesian banks were the most profitable banks amongst the top 20 global economies in terms of return on assets as of 2013. High credit growth coupled with high net interest margins enabled the country’s commercial banks to reap enormous profits. However, the good times witnessed by the Indonesian banking sector in the last few years finally came to a halt in 2013-14. Trade deficit, spike in consumer price inflation and announcement of the U.S. Federal reserve stimulus tapering-off, combined to create a hostile environment for the country’s banking sector. The trouble started with massive depreciation in the value of IDR, which eventually led to a huge surge in consumer price inflation. As a result, Bank Indonesia had to raise benchmark policy rates by 200bps between May 2013 and November 2014. By January 2015, the benchmark rate stood at 7.75%, but decreased to 7.3% a year later.

The banks have started feeling the heat. The cost of sourcing funds has risen and rate sensitive sectors are beginning to report increased non-performing loans (NPLs). As a result, banks have become more cautious in disbursing credit which has negatively affected the phenomenal credit growth in the last few years. Consequently, profit growth of banks has also slowed down. Nevertheless, local banks have continued to maintain strong capital levels.

Toward the end of 2015, the economy and banking sector exhibited signs of improvements. However, the risk for global economic slowdown still exists in 2016, and banks may continue to remain cautious in credit disbursements, especially for industries that are still affected by the currency depreciation.

Key Points:

• Commercial banks led the country’s banking sector in terms of asset size as of August 2015, accounting for 95% of total assets. Rural banks only accounted for 1.5% of total assets. Within the commercial banking industry, state owned banks (SOB) accounted for 36% of total assets.

• The asset base of commercial banks in Indonesia grew at a CAGR of 16.2% during 2006-14.

• Total IDR deposits of commercial banks grew at a CAGR of 15% during 2006-14. Meanwhile, foreign exchange deposits grew at a CAGR of 17% during the same period. In August 2015, IDR deposits grew by 13% y/y while foreign exchange deposits grew by 25% y/y.

• Total credit disbursed by commercial banks grew at a CAGR of 21% y/y during 2006-14. In August 2015, it grew by only 11% y/y, much less than its historic growth rate. Lower economic growth led to a lower credit growth in 2014 and 2015 compared to previous years.

To Purchase This Report - Click Here

Related Reports

Iran Country Report Nov19 - November, 2019

Iran on November 4 announced a 10-fold increase in its enriched uranium production. The move, declared on the 40th anniversary of the seizure of the US embassy in Tehran which sparked the Iran ... more

Turkey Country Report Nov19 - November, 2019

Erdogan’s Syria attraction has ended. He invaded some parts of Syria and he is talking about building some cities there for Syrian immigrants although that sounds like a dream. His latest military ... more

Ukraine Country Report Nov19 - November, 2019

Ukraine’s economy is coming on very nicely. Growth is still sub-par but the economy is growing at about 3% andits still early days as the government is only two months into the job. But before ... more