Lending to slow, bad loans to show: Banks

Aditya Suharmoko, The Jakarta Post, Jakarta | Fri, 12/12/2008 10:41 AM  

Bank lending will probably grow more slowly next year, while the proportion of bad loans may rise, as the global financial crisis hits Indonesia's real sector, thus reducing business expansion and debt repayment capacity. 

Bank Mandiri chief economist Mirza Adityaswara forecast Thursday national bank loans would grow by an estimated 15 percent in 2009, below the 22 percent growth forecast by the central bank. 

"Banks will be more careful in channeling loans by tightening loan requirements. A 22 percent growth rate is too optimistic," Mirza told a press conference. 

According to the central bank, lending grew by 30 percent as of November this year from a year earlier. 

Mandiri, the country's largest lender by assets, has said lending next year will grow less than the 18 percent expected in 2008. As of the end of September, the bank recorded a 33.7 percent growth in lending to Rp 162.8 trillion (US$14.77 billion) from a year earlier. 

Bank Negara Indonesia (BNI) president director Gatot M. Suwondo said BNI lending would likely grow by 17 percent in 2009, down from the 28 percent growth expected this year, as the country's economic growth might fall to between 4 percent and 4.5 percent. 

The World Bank predicted Indonesia's economy may grow by 4.4 percent in 2009, while Finance Minister Sri Mulyani Indrawati agreed that economic growth might fall as low as 4.5 percent. However the 2009 state budget still assumes growth at 6 percent. 

By the end of September, BNI posted a 34.4 percent growth in lending to Rp 106.85 trillion from a year earlier. 

"We will prioritize lending to small and medium sized enterprises," Gatot told a press briefing. 

He also said BNI's bad loans could rise to 6 percent next year as business debt repayment capacity might fall. As of September, the bank's rate of gross non-performing loans (NPLs) stood at 6.5 percent, with BNI expecting the rate to drop to 5 percent by the year's end. 

BNI's bad loans are mostly coming from the telecommunications sector, amounting to Rp 2.96 trillion out of a total of Rp 13.83 trillion in bad loans. 

PT Semen Bosowa Maros, led by Erwin Aksa, a nephew of Vice President Jusuf Kalla, is BNI's largest debtor, owing Rp 578 billion. Semen Bosowa's debt came from a loan syndication involving Mandiri, BNI and Bank BTN, with participations of 60 percent, 36 percent and 4 percent, respectively. 

Mirza said the rate of gross national NPLs would likely rise by 2 percent next year. By the end of October, NPLs stood at 3.9 percent, the central bank said. 

"Judging from the situations in 2005 and 2006, loans on motorcycles, and other consumer loans, will be hit (triggering bad loans)," he said. 

If the real sector is hit by the economic slowdown, the financial sector will be affected, the central bank has said, suggesting the government speed up spending to stimulate the economy. 

Also on Thursday, international ratings agency Fitch affirmed BNI's long-term foreign and local currency issuer default ratings at "BB", reflecting the bank's improved NPLs, which should provide some cushion against the economic downturn in 2009.