Rupiah forecast 13900 by December 2015

Eric Sugandi, Chief Economist at the Standard Chartered Bank, expects Indonesia’s rupiah to have depreciated to IDR 13,900 per US dollar by the end of the year from IDR 13,339 currently (29/06) due to the impact of the bullish US dollar ahead of monetary tightening in the USA and the looming Greek exit from the Eurozone. Actually, this is a conservative prognosis. In case Indonesia’s central bank does not raise its benchmark interest rate (BI rate), currently at 7.50 percent, pressures on the rupiah may increase in fact increase further

http://www.indonesia-investments.com/news/todays-headlines/eric-sugandi-indonesian-rupiah-may-touch-idr-13-900-per-us-dollar/item5689

Banking on Boat by BRI

The absence of cash machines on many of Indonesia’s Spice Islands, where cloves and nutmeg once made sultans and European explorers wealthy, means banking is often done on boats that can carry automated teller machines.

PT Bank Rakyat Indonesia (BBRI), the world’s largest microlender, is expanding to the edges of the archipelago’s 17,000 islands with over 500 new branches to develop local economies, President Director Sofyan Basir said in an interview. Bankers only reach some islands once a week in boats, he said.


State-controlled Rakyat plans to open 571 small and microlending sites, to add to its nearly 10,000 branches in the country. It expects 75 percent of total loans to come from micro finance to small and medium enterprises, Basir said.

Basir said the bank’s profit growth this year may match last year’s 14 percent.

He shrugged off growing competition in the microcredit industry from lenders such as PT Bank Danamon Indonesia (BDMN) and PT Bank Mandiri (BMRI), saying Rakyat operated with smaller loans that can be as low as a million rupiah ($80) for a day.

(Business Week)

Number of credit cards in Indonesia to reach 290 million by 2017

Key Highlights of a report by Market Research (Market Research)

- The Indonesian card payments channel registered significant growth during the review period (2008–2012), recording a compound annual growth rate (CAGR) of 21.26% to reach 113.2 million cards in circulation by the end of 2012. It is anticipated to grow at a projected CAGR of 20.36% over the forecast period (2013–2017), to reach 289.9 million cards in 2017.

- Growth in the Indonesian cards payments channel is expected to be driven by increasing demand for prepaid cards, a better regulatory framework, a growing market for online and mobile commerce, and a positive economic outlook.

- Indonesia's central bank, Bank Indonesia (BI), enforced new regulations for the credit card category in January 2013, placing a cap on interest rates charged by banks on credit cards. BI also set the minimum monthly income requirement at IDR3 million (US$32), and the maximum available credit limit at three times this rate. Credit card users must be at least 21 years old.

- The popular payment channels in Indonesia are credit transfers, checks and cards. The payments channel structure has changed significantly in the past decade and new channels with paperless transactions have gained popularity. Most transactions, however, are still made with cash.

- In terms of transaction value, the channel grew at a CAGR of 19.68% from IDR846.7 trillion (US$87.3 billion) in 2008 to IDR1.7 quadrillion (US$185.2 billion) in 2012.

- Debit and credit card transactions remained the key growth drivers, followed by prepaid cards which registered increased demand from Indonesian consumers.

- Over the forecast period, the total card transaction value is expected to grow at a CAGR of 12.52%, to reach IDR3.3 quadrillion (US$328.8 billion) by the end of 2017.

Target is lower the lending growth

Bank of Indonesia has called for lower lending growth, which is above 20 per cent. BI has asked the banks to target between 15 to 17 per cent. This call has been positively taken by most of the banks (http://www.thejakartaglobe.com/business/banks-side-with-bi-governor-on-need-to-lower-lending-growth/). Though this is a prudent and proactive move to avoid overheating specially in the property sector, BI has to be careful to not dampen the demand. 

Online Banking in Indonesia is quite low relative to Asian counterparts

Online banking is increasing all over Asia and has already surpassed branch banking in 2012. Some countries such as China are much ahead where already 60% of total transactions are registered online. Whereas, some countries such as Indonesia, Vietnam, and Philippines are behind.

In Indonesia of the 55 million Internet users, about 25% of the population, only 7% of these internet users actually do online banking, which indicates online banking is still relatively underdeveloped in Indonesia. Enhancements in the mobile online banking platforms including better security and ease of use, may help the industry attract more users and increase market penetration.

(Source: Finextra)

Banks: Overall Indonesian Banks have moderate foreign exchange exposure

Following is from Fitch Ratings Report

''Fitch Ratings believes the credit profiles of most major Indonesian banks will be resilient to rising pressures on the rupiah and a more challenging operating environment, as reflected in their Stable rating Outlooks.

The banks' resilience is mainly due to the modest proportion of foreign-currency loans and low net open foreign-currency exposure at the banking system level, strong standalone loss-absorption cushions, and - in some cases - firm backing from highly rated foreign parents.

The major Indonesian banks have generally become more selective in extending foreign-currency loans over the years, focusing on borrowers that generate income in matching foreign currencies. In response to the potential decline in asset quality amid more challenging economic conditions, the banks have taken measures to identify vulnerable borrowers, step up monitoring, and explore restructuring solutions for viable businesses. The banking system's foreign-currency loans form 15.5% of total loans as at end-June 2013, around its historical low.

Foreign-currency loans have been funded predominantly by matching foreign-currency deposits, with the loans/deposit ratio of the banking sector remaining below 100%. The foreign-currency net open position exposure of the banking sector has been at an average 2% of capital over H113, well below Bank Indonesia's limit of 20%. This helps protect against impairments stemming from a sharp depreciation of the rupiah, which has fallen more than many other Asian currencies over mid-2013.

Fitch expects the loss-absorption cushions of most Indonesian banks to remain strong. Their core operating profitability is strong and the average Tier-1 capital adequacy ratio is around 16%. Many major foreign-owned banks tend to have lower core capital buffers than that, but Fitch believes they are likely to benefit from extraordinary support from their highly rated parent banks.''

Banking Sector: Excellent year but consensus on slowdown in next year

Increase in Net profit by 15-25 per cent

Bank Mandiri (State controlled, largest bank in terms of assets of around USD 60 bn, currently trading at price to book of 2.6x) - profit increased by 15 per cent y-o-y to 12.8 trillion rupiah ($1.2 billion)

BCA (Privately owned, largest bank in terms of market cap of around USD 24 bn, total assets of around USD 45 bn, trading at a price to book of 4.5x) - net profit increased by 25 per cent y-o-y to Rp 10.4 trillion ($1 billion). 

PT Bank Permata (privately owned by Indonesian conglomerate Astra International (44.5%) and Standard Chartered Bank (44.5%), with total assets of around USD 13 billion, trading at a price to book of 1.14x) - third-quarter net profit rose 21 percent to 1.32 trillion rupiah ($118 million).

(Reuters)

Slowdown expectations

The central bank is already indicating that it expects loan growth to slow down, at rate of 14 to 15 percent

Bank Mandiri: also expected a credit growth slowdown next year to between 15 and 20 percent. It also expects net interest margin to decline to 6.8 percent by the end of this year from 7.0 percent in the second quarter.

Banking: M-banking outpacing I-banking in Indonesia

Most of the banks have recorded increased fee income derived from M-banking, which is growing faster than Internet banking. Examples include:

BCA: 30-40 per cent growth of m-banking volume and value (Total 4.3 million m-banking users generating transactions worth IDR 90 trillion ~ $ 9 billion) 

Bank Permata: 30 per cent growth in value and volume

Bank Mandiri: 50-60 per cent growth in value and volume (Total 700,000 users of m-banking as compared to 600,000 users of Internet banking) 

BRI: Expects 50 per cent growth in m-banking next year. (Total 4.28 million users of SMS banking as compared to 640,000 Internet banking users) 

(Source: Jakarta Post)

Forecast: Lending growth to slowdown in 2014

Lending has been growing at around 22%+ over the last three years in Indonesia vis-a-vis around 13% growth in the deposits. This has led to an increase in the average Loan to Deposit ratio, which is a cause of worry for the banks in Indonesia. Lending growth is expected to result in an excellent year for the banks as can be seen from the 9 months results. BRI's nine-month earnings rose by 17 per cent in spite of marginal drop in the Net Interest Margin (NIM) from 8.43 to 8.25 per cent mainly due to the growth in lending (The Jakarta Globe).

However, as per Bank of Indonesia (BI) the lending growth is expected to slow down significantly in 2014 to 15.3 to 16.6 per cent on the back of slowing economy and recent hike in the interest rate (Reuters).