Indonesia’s biggest bank cuts loan growth forecast

BCAJakarta — PT Bank Central Asia, Indonesia’s biggest lender by market value, has cut its loan growth forecast for this year to 18-20 per cent, from 22-25 per cent, its chief executive said, as the domestic economy loses steam.

Concerns about Southeast Asia’s biggest economy have mounted as it recorded its first annual trade deficit ever in 2012 while rising fuel subsidies put heavy pressure on its currency and trade balance.

“I’m optimistic but cautious,” Jahja Setiaatmadja, the bank’s president director, said in an interview with Reuters.

“Our current account turned negative, exports dropped,” he added. “This is a fundamental problem. If we can’t handle it quickly, it could lead to higher inflation and affect interest rates and the foreign exchange market.” The rupiah slipped last week to its lowest since 2009.

Indonesia recorded a December trade deficit of $150 million with declines in both imports and exports, although most analysts remained optimistic that the Indonesian economy is on track for another year of robust growth.

At the same time, they have warned that ballooning fuel subsidies, which last year cost the government 211 trillion Indonesian rupiah ($21.67 billion), or 54 per cent more than the budgeted amount, could further boost fuel imports and undermine the economy.

The bank’s previous forecast for loan growth of 22 to 25 per cent was made late last year. Loan growth was 27 per cent in 2012, above the industry average of 20 per cent, Setiaatmadja said.

Bond Business

Setiaatmadja said the bank planned to expand its brokerage unit BCA Sekuritas to focus on underwriting Indonesian corporate bonds as companies show greater interest in issuing debt denominated in the local currency, where fund-raising costs are less than for dollar-denominated bonds.

“We’re planning to make them a bond underwriter to complement the services for our existing corporate clients,”said Setiaatmadja, who has been with the bank for more than 20 years.

Bank Central Asia will be taking on dominant players in the local bond market such as state-run brokerages PT Mandiri Sekuritas, PT Bahana Securities and PT Danareksa Securities, to increase its fee-based income.

Setiaatmadja said BCA, which with $24.8 billion in market capitalisation is one of Indonesia’s most valuable non-state companies, also plans to set up a life insurance business, to complement its wealth management services.

But with valuations high, he said he had no intention to make acquisitions in the life insurance sector, and gave no further details on the bank’s plans.

Shares in BCA, which is controlled by the Hartono family, Indonesia’s wealthiest, rose 1.5 per cent versus a Jakarta index up 0.05 per cent on Monday.

The stock climbed 14 per cent in 2012, slightly above the index’s 13 per cent gain but underperforming rival state lender PT Bank Mandiri’s 21 per cent rise.[]

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