Credit Growth in Indonesia's Banking Sector Back on Track in 2017?
Credit growth in Indonesia's banking sector is estimated to have, finally, touched double-digit figures in the first half of 2017, while growth should further accelerate in the remainder of the year. Some Indonesian banks saw their credit growth figures touch 20 percent (y/y) so far this year, a marked improvement from the situation one year ago. Lets zoom in on the performance of two big Indonesian banks.
First, Bank Rakyat Indonesia (BRI) recorded a 16.9 percent year-on-year (y/y) credit growth pace in the first half of 2017. Suprajarto, General Director of BRI said the company in fact had to - slightly - curtail credit disbursement in the corporate sector as targets had already been achieved and therefore its focus was redirected to other sectors as well as the safeguarding of the quality of loans.
In terms of credit composition, BRI targets to keep corporate credit at 28 percent of the bank's total credit disbursement. As this target had been achieved, it somewhat put the brakes on further corporate credit growth in the first semester of 2017. Suprajarto added BRI focuses on credit for the nation's micro, small and medium-sized entrepreneurs. These segments are a bit more risky compared to big companies and therefore BRI also needs to safeguard a healthy level of non-performing loans (NPL).
Shares of BRI have surged so far this year. The bank, majority-owned by the government (57 percent) but listed on the Indonesia Stock Exchange, has seen its shares climb nearly 35 percent since the start of the year. BRI is one of Indonesia's blue-chip stocks and ranks among the country's largest companies in terms of market capitalization on the Indonesia Stock Exchange.
Stock Quote Bank Rakyat Indonesia - BBRI:
Meanwhile, Bank Tabungan Negara (BTN) recorded credit growth in the range of 18 - 20 percent (y/y) in the first half of 2017, while its level of third-party funds rose accordingly at a healthy level (providing the source for credit disbursement). BTN Finance Director Iman Nugroho Soeko said the bank's NPL ratio remained at 3.2 percent, which is a bit higher than the average in Indonesia's banking system but still constitutes a safe level.
BTN particularly focuses on house ownership credit (in Indonesian: Kredit Pemilikan Rumah, abbreviated as KPR). However, it is also eager to boost household and consumer credit disbursement in order to achieve its ambition of becoming among Indonesia's top five banks. BTN targets to see third-party funds rise in the range of 22-24 percent (y/y) in 2017. By 2020 it wants to have become a bank that is categorized under BUKU 4 (meaning it has a core capital that exceeds IDR 30 trillion).
BUKU System in Indonesia's Banking Sector:
| Category | Core Capital |
| BUKU I | < IDR 1 trillion |
| BUKU II | IDR 1 trillion - IDR 5 trillion |
| BUKU III | IDR 5 trillion - IDR 30 trillion |
| BUKU IV | > IDR 30 trillion |
Shares of BTN, also government-controlled (62 percent) yet listed on the Indonesia Stock Exchange, have surged about 55 percent so far this year. It is another sign that investors have regained their trust in the performance of Indonesian banks after several years of relatively weak growth.
Stock Quote Bank Tabungan Negara - BBTN: