Bank interest rates fall, but negative spread remains<\/p>\n
JAKARTA (JP): The country's commercial banks slashed their
\ndeposit interest rates by as much as five percentage points this
\nweek, but they still suffer from negative spread, paying higher
\ninterest rates on deposits than they are paid for lendings.<\/p>\n
Most commercial banks are offering one-month deposit interest
\nrates at 46 percent -- 3 percent lower than the maximum 49
\npercent that Bank Indonesia will guarantee.<\/p>\n
Publicly listed Bank Bali, for instance, cut its one-month
\ninterest rate to 35 percent from 40 percent last week, the three-
\nmonth rate to 30 percent from 35 percent, the six-month rate to
\n30 percent from 32 percent and maintained its one-year rate at 30
\npercent.<\/p>\n
Publicly listed state Bank Negara Indonesia now offers a 45
\npercent interest rate for one-month deposits, down from 49
\npercent last week. It offers 40 percent for three-month deposits,
\n32 percent for six-month deposits and 30 percent for one-year
\ndeposits.<\/p>\n
State Bank Rakyat Indonesia cut its one-month and three-month
\ndeposit interest rates to 45 percent and 40 percent respectively,
\ndown from 50 percent and 48 percent last week.<\/p>\n
The country's biggest private bank, Bank Central Asia, lowered
\nits one-month interest rate to 46 percent from 49 percent last
\nweek.<\/p>\n
Bank Panin also cut its one-month deposit interest rates to 37
\npercent from 48 percent last week. Bank Bira has set its one-
\nmonth deposit interest rates at 44 percent, and Bank NISP has
\nlowered its one-month interest rate to 40 percent.<\/p>\n
Over-the-counter<\/p>\n
All these rates are over-the-counter rates. People with larger
\namounts of money will still be able to demand higher returns, and
\nmost banks will be willing to entertain such demands, according
\nto a money market dealer at a local private bank.<\/p>\n
Bank Indonesia has vowed to continue cutting its benchmark
\nrates in a bid to turn around the current negative spread in the
\nbanking industry.<\/p>\n
Benchmark interest rates on Bank Indonesia's one-month
\npromissory notes (SBIs) fell to 46.42 percent at last week's
\nauction from 49.66 percent the previous week, and the 70 percent
\nlevel in early September.<\/p>\n
The benchmark rates are expected to fall further this week in
\nline with the central bank's plan to bring its one-month SBI
\nrates to 40 percent by the end of this month and 30 percent by
\nMarch.<\/p>\n
When the benchmark rates reach 30 percent, it is expected that
\nbanks will start to enjoy positive spread from interest rates.<\/p>\n
However, banking analyst Rijanto Sastrosatomo was a bit
\nskeptical about the central bank's ability to reverse the current
\nnegative spread by March.<\/p>\n
When benchmark rates stand at 30 percent, he said, lending
\nrate would stay at least at 40 percent per annum. "No single
\ncompany can yet afford that."<\/p>\n
Rijanto, a commissioner at a number of private banks, revealed
\nthat as of September, state banks suffered negative spread of 26
\npercent per annum, and private banks 15 percent. Only foreign
\nbanks enjoyed positive spread.<\/p>\n
Rijanto said that his data was collected from Bank Indonesia's
\nmonthly reports.<\/p>\n
He predicted that negative spread at state banks would drop to
\n15 percent by the end of the year, while at domestic private
\nbanks negative spread would fall to 10 percent.<\/p>\n
In addition to negative spread, banks also suffer from
\nballooning bad loans, which have also eaten away their capital.
\nNonperforming loans stood at 49 percent at state banks and 63
\npercent at private banks. These numbers could increase if the
\neconomic situation worsens.<\/p>\n
Overall, the negative spread situation and increasing
\nnonperforming loans have practically dried up capital in the
\nbanking industry.<\/p>\n
As of September, the seven state banks booked a combined
\ncapital of only Rp 1.04 trillion (US$140 million), down from Rp
\n17.4 trillion in January 1998. Cumulative capital at some 200
\ndomestic private banks also shrank drastically to only Rp 2.4
\ntrillion in September from Rp 27.5 trillion in January.<\/p>\n
"This situation makes bank recapitalization very costly. I
\nwould say by year-end, it will take at least Rp 60 trillion to
\nrecapitalize the banking industry," he said. (gis\/rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bank-interest-rates-fall-but-negative-spread-remains-1447893297",
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