RI banks in better shape than Thai: S&P<\/p>\n
JAKARTA (JP): Indonesian banks are in better shape than their
\nThai peers despite recent currency woes and high prevailing
\ninterest rates, a Standard & Poor's analyst said here yesterday.<\/p>\n
But S&P Asia-Pacific associate director for Financial
\nInstitutions Ratings Terence E.H. Chan warned that Indonesian
\nbanks were still at risk from a domino effect if the current
\ntight monetary policy and high interest rates forced corporate
\ncustomers to default.<\/p>\n
Speaking to journalists after a seminar here, Chan said
\nIndonesian banks were in better shape because their external
\ndebts were better restructured.<\/p>\n
\"Basically, we don't see Indonesian banking as another
\nThailand because the banks and the customers are not leveraged in
\nterms of short-term external debts,\" Chan told journalists.<\/p>\n
\"That's important because it affects liquidity. If foreign
\ninvestors stop lending when your foreign debts mature, then you
\nhave liquidity crises,\" he added.<\/p>\n
In Indonesia, he said, the level of leveraging was less than
\nthat in Thailand, in terms of short-term external debts. There
\nwere external debts, but they were better structured as they had
\nlonger maturity.<\/p>\n
Another strength of Indonesian banks, Chan said, was their
\ntraditional long position on the U.S. dollar because of the
\ngovernment's stated plan on the rupiah's depreciation against the
\ndollar.<\/p>\n
\"When the dollar appreciates, you gain,\" he said, adding that
\nin his discussion with executives of many local banks, he learned
\nthat most major players had not lost money in the currency
\nturmoil.<\/p>\n
The banks were also protected by traditional lending at one to
\nthree month repricing rather than fixed interest rates.
\nTherefore, they could quickly adjust up lending rates when
\ndeposit rates soared to over 30 percent.<\/p>\n
\"So, if I have to pay deposits 30 percent, I would charge the
\nborrowers 35 percent. This way, they could cover their interest
\nrate risks,\" he said.<\/p>\n
But Chan warned the danger to Indonesian banks now came from a
\nsecondhand effect as borrowers were under pressure from high
\ninterest rates and the bank's asset quality deteriorated.<\/p>\n
\"The banks are all right, but what about the customers and
\nborrowers? If borrowers are unhedged or cannot pay high interest
\nrates, then they can go default, asset quality drops and it will
\naffect the banks profitability,\" Chan said.<\/p>\n
Chan said local bankers had told him they could handle three
\nto four months of high interest rates. Banks were still able to
\nbalance high borrowing rates with high lending rates.<\/p>\n
\"But if this drags on, their customers will face problems
\nservicing the loans and that will have an effect on banks,\" he
\nwarned.<\/p>\n
S&P last month affirmed its ratings on Bank Negara Indonesia
\n(BNI), Bank Danamon, Bank Umum Nasional and Bank Niaga but
\nrevised the outlook on these ratings to negative from stable.<\/p>\n
But the agency put Bank Niaga on its credit watch following
\nthe acquisition of the bank from the Tahija family to Hashim
\nDjojohadikusumo.<\/p>\n
Head of S&P's Melbourne office, Graeme Lee, said the revision
\non the outlook was predominantly associated with the currency
\nproblem the region was experiencing.<\/p>\n
He said the region could go into a period of lower economic
\ngrowth, which would have implications for companies the banks had
\nlent money to. If they went bankrupt, it would also burn the
\nbanks.<\/p>\n
\"If there is slower economic growth and softening of the
\nproperty sector, it will create high problem loans which could
\nweaken the banking sector,\" Lee said. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ri-banks-in-better-shape-than-thai-sp-1447893297",
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