BCA warns of worse slowdown in lending

JAKARTA. PT Bank Central Asia (BCA), the nation’s biggest private lender by assets, expects that nationwide loan growth will slow more sharply than policymakers’ expectations this year due to tighter cash supply and slower economic growth.

BCA president director Jahja Setiaatmadja said on Tuesday that nationwide, bank lending might grow by less than the 15 percent to 17 percent level expected by Bank Indonesia (BI) and the Financial Services Authority (OJK).

“We can see the [availability] of liquid [assets]. If we tried to boost lending, interest rates would be difficult to control. At this stage everything has been pretty stable,” he told reporters during a breaking-of-the-fast event in Jakarta.

Cash supply in Southeast Asia’s largest economy has been tight recently, as indicated by the banks’ competition for third-party funds in the market.

Nationwide bank lending grew 3.29 percent so far this year through May, Jahja said.

On a year-on-year basis, loans have slowed to 17.4 percent as of May compared to 21 percent in the same period last year, according to BI data compiled by Bloomberg.

Jahja said BCA’s loan growth would be similar to that of other banks this year, which he indicated would be lower than 15 percent.

“We can’t talk about targets [considering] the situation is still in wait-and-see mode,” he added.

He was referring to the nation’s presidential election this year, which has subdued business expansion, such as in the construction and property sectors.

Investors would prefer a peaceful and smooth election process to find a new leader who will push for reforms and growth in the country, but recent developments have resulted in a disputed victory claimed by both presidential candidates’ camps.

“We cannot forecast [loan growth] because the situation is not normal due to the recent festival of democracy, the results of which remain uncertain,” said Suwignyo Budiman, BCA’s director for retail and commercial business.

Loan growth in the banking sector could be forecast more clearly in October, when the new president had been permanently installed, he added.

Suwignyo also cited liquidity issues that had hindered local banks in expanding their lending portfolios, but understood that such conditions were supported by BI.

“Liquidity is also tight at present [...] We will see that until the middle of this year, [loan growth] has slowed as expected by Bank Indonesia,” he said.

BI increased its benchmark interest rate by 175 basis points last year as the country’s current-account deficit widened to a record level in the second quarter last year.

“[Indonesia’s economy] can’t grow above 6 percent as in previous years since that caused huge imports,” Jahja said in a recent interview with Bloomberg, estimating a realistic economic growth rate of between 4.5 percent and 5.2 percent.

“Growing at that level will help to guard liquidity in the market,” he added.

That compares with the government’s, and BI’s, target of economic growth of 5.5 percent this year, which Jahja said would face challenges from the current-account deficit problems that limit room for growth.

Shares in BCA, traded on the Indonesia Stock Exchange under the code BBCA, closed in Tuesday’s trading at Rp 11,400 (98 US cemts), taking it up 18 percent this year to make it the most expensive Indonesian bank on a forward earnings basis. (ask)