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Indonesian banks hope interest income will pick up in second half
Most of Indonesia’s major banks’ NIMs fell during the first half due to a series of increases in Bank Indonesia’s bench mark rate.
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A Bank Jatim teller serves a customer. Indonsia's major banks suffered a decline in their net interest margin (NIM) in the first half. (Antara/Rosa Panggabean)
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ndonesia’s major banks expect net interest income will pick up this year as the downward trend in the lending rate will enable them to increase the level of their net interest margin (NIM).
Throughout the first half, most of Indonesia’s major banks’ NIMs fell because of a series of increases in Bank Indonesia’s bench mark rate during the six-month period. The increase in the rate led to the fall in their NIMs, the difference between net interest income and the amount of interest paid out to depositors and other funders.
Bank Rakyat Indonesia (BRI) was one of the banks that felt the blow from the series of rate hikes last year. The country’s most profitable bank’s NIM dropped to 7.02 percent in the first half from 7.64 percent in the same period of 2018.
“The decline was natural because we’ve adjusted our deposit rate, but we didn’t immediately adjust the lending rate following the rate hikes,” the state lender’s finance director, Haru Koesmahargyo, said on Monday, adding that the bank’s decision led to a shrinking NIM during the period.
State-owned lender Bank Negara Indonesia (BNI) also recorded a lower NIM during the first half, during which it fell to 4.87 percent as of June from 5.45 percent in the same period of last year. Meanwhile, state lender Bank Mandiri’s NIM declined to 5.58 percent during the same period from 5.72 percent last year.
BNI risk management director Bob Tyasika Ananta cited a similar reason as Haru, saying that the rise in the deposit interest rate was more aggressive than that of the lending rate.
State lender Bank Tabungan Negara (BTN) recorded the biggest decline out of all state-owned banks in the January to June period. During the first half, the country’s leading mortgage financing firm’s NIM dropped by 64 percent to 3.53 percent.
