Banks expect strong loan growth next year

Berni K. Moestafa, The Jakarta Post, Jakarta

Major banks predicted for next year continued brisk growth of new loans to the private and consumer sectors, as they expected parts of the local economy to remain unscathed from the economic gloom that has befallen much of the world.

The country's largest bank, state-owned Bank Mandiri, and the largest privately-owned one, Bank Central Asia (BCA), forecast a credit growth of up to 25 percent and 30 percent respectively.

"Based on our experience, our loans will grow by between 20 percent to 25 percent," Bank Mandiri president director E.C.W. Neloe told reporters on the sidelines of a post-Idul Fitri holiday gathering on Wednesday.

Bank Mandiri's loans which were channeled to third parties, totaled Rp 40 trillion (about US$3.95 billion) as of Sept. 30, 2001.

Neloe said many of the new loans would be restructured non- performing loans (NPLs), which Bank Mandiri inherited from the 1997 financial crisis.

NPLs are loans on which interest rate payments are overdue by more than 90 days. Restructuring them allows indebted companies to restart payments on the loans under new conditions.

There are concerns, however, that recovery in the real sector is going too slow and that it may stall debt restructuring talks.

These concerns partly stem from a sluggish global economy that has undermined export sales and has cut into companies' earnings.

"It's going to be difficult next year, but there is one thing that remains strong; it's consumption and we must take advantage of this," Neloe said.

His statement concurs with the government's forecast of a strong local market driving next year's economic growth.

BCA president director Setijoso also shared the optimism, saying the bank would channel about one-third of its new loans next year to the retail sector, meaning to consumers.

"I think it (credit growth) can reach about 30 percent," he said. The other two-thirds of new loans would be channeled evenly between large corporate clients and small and midsize companies.

The bank has loans to third parties amounting to some Rp 11.6 trillion as of Sept. 30, 2001.

PT Lippo Bank president director Ian B. Clyne also expected the local economy to maintain its drive on the bank's new loans.

"Some sectors have not been affected by the global economy, the general feeling is that this will continue in 2002," he told The Jakarta Post.

Because of this, he saw no need to change the bank's lending strategy for next year.

As it did this year, Bank Lippo would extend 40 percent of its new loans to small and medium enterprises, and another 40 percent to corporate clients. The remainder would go to the retail sector, he explained.

Bank Lippo approved new loans worth Rp 1.1 trillion this year, and Clyne expected the figure to hit Rp 2 trillion in the next.

Expectations, despite the slump in export sales, that new loans may grow at about the same rate as they did this year, point to the presence of a strong local market.

As loans to exporters would likely remain weak, many of the new loans would go to industries catering to the local market.

Analysts predicted the global economy to remain in the doldrums for most of next year, putting a damper on export- oriented loans.

As there is no clear sign when the global economy will bottom out, questions remain on whether the local economy could count on an upswing in export sales next year to give it a late boost.

Much will rest on the timing of a recovery in the U.S. economy, whose local market absorbed most of the export goods generated in countries like Indonesia.

Usually a time-lag of about six months exists before Indonesia can feel the impact of a rise or slump in the U.S. economy.

Some said the U.S. Federal Reserve's gradual interest rate cuts since early this year had begun to pay off, albeit muted by the Sept. 11 terrorist attacks which had shaken consumer confidence.