Banks 'continue to show positive results'<\/p>\n
JAKARTA (JP): The country's 150 commercial banks continued to
\ndemonstrate a healthy performance in July with most of their
\ninterest margins showing positive growth, according to Bank
\nIndonesia's report.<\/p>\n
Bank Indonesia director for banking research and supervision
\nDjoko Sarwono said that the net interest margin (NIM) in July
\nincreased to Rp 2.5 trillion (US$297.62 million) from Rp 2.3
\ntrillion in June.<\/p>\n
\"The condition of our banks in general is okay,\" Djoko told a
\npress weekly gathering.<\/p>\n
NIM is the difference between the total interest revenue
\nreceived by a bank and the total interest paid by the bank.<\/p>\n
Djoko said that the NIM last year was negative and had only
\nstarted to become positive since January.<\/p>\n
He also said that interest spread, which is the difference
\nbetween the interest paid by the bank to its depositors and the
\ninterest received by the bank from its lending activity, had been
\nencouraging although it had declined from 12.3 percent in June to
\n9.7 percent in July.<\/p>\n
\"Despite the decline, the spread is still positive. There's no
\nlonger a 'negative' tag on our banks ... There should be no more
\nflights to safety or to greater quality,\" he said.<\/p>\n
Confidence in the country's banking sector plunged in 1998 and
\n1999 as the industry was badly hit by the financial crisis which
\nstarted in the middle of 1997. As a result, many depositors
\nturned to foreign banks to ensure the safety of their money.<\/p>\n
Djoko said that operational profit in July jumped to Rp 4.9
\ntrillion from Rp 1 trillion in June.<\/p>\n
He admitted, however, that the jump was aided by the interest
\nrevenue enjoyed by banks which had been recapitalized by the
\ngovernment.<\/p>\n
The government injected bonds to help finance the
\nrecapitalization of the country's banking sector.<\/p>\n
Djoko also said that the capital condition of the banks had
\nalready turned positive starting in June at Rp 6 trillion, and
\nsoaring to Rp 30.4 trillion in July compared to minus Rp 37.9
\ntrillion in May.<\/p>\n
He said that once the bank recapitalization was fully
\ncompleted next month, the capital condition would further
\nimprove.<\/p>\n
\"We have nearly settled the problem of capital in our banks.
\nWe only need to boost the banks' performance,\" he said.<\/p>\n
Djoko explained that one crucial factor in boosting the banks
\nperformance was to immediately resolve the huge bank non-
\nperforming loans (NPLs).<\/p>\n
He said that the level of NPLs in the banking sector declined
\nto 29.3 percent in July from 30 percent in June.<\/p>\n
\"Several months ago, the NPLs were still at more than 32
\npercent. So we're doing okay especially when compared to Thailand
\nwhose level of NPLs is still at around 32 percent,\" he said.<\/p>\n
\"If the current positive macroeconomic environment is
\nmaintained, I believe that the target to have a level of NPLs
\nbelow five percent by the end of next year could be achieved,\" he
\nsaid, adding that the level was expected to drop to between 20-25
\npercent by the end of this year.<\/p>\n
Djoko said that the resolution of the NPLs and the
\nrestructuring of the corporate sector was crucial to encourage
\nbanks to resume lending.<\/p>\n
But he said that the banks had already started to provide new
\nlending, albeit on a small scale.<\/p>\n
He said that new bank lending in July was around Rp 10
\ntrillion, compared to only at Rp 2 trillion in June.<\/p>\n
\"This figure is encouraging. Although Rp 10 trillion is small
\ncompared to a total lending portfolio of around Rp 283 trillion,
\nit shows that the direction is positive,\" he said.<\/p>\n
He said that most of the new lending was channeled as working
\ncapital particularly to the retail and export industries.<\/p>\n
He added that the new lending included a Rp 2.5 trillion
\nincrease in rupiah loans and Rp 5.5 trillion jump in foreign
\nexchange loans. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/banks-continue-to-show-positive-results-1447893297",
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