Competition among private banks will get fiercer next year
Competition among private banks will get fiercer next year
JAKARTA (JP): Analysts estimate that competition among private banks to raise funds from the public will be tighter next year, despite Bank Indonesia's warning which has called on them to slow down their lending growth rate.
Laksamana Sukardi, a noted banking analyst, said here yesterday that competition will be fiercer as private banks will need a great amount of funds to meet stronger demand for credits.
He said that the surge in the credit demand from private banks will be caused mainly by the flattening of lending activities in state-owned banks.
"The lending growth of the state banks will remain flat as consolidation measures to overcome bad debt problems are likely to continue overshadowing their operation," he said, adding that the excess in the lending demand in the state banks will, therefore, go to the private banks.
The share of the private banks in the lending market continued expanding from only 34.2 percent as of December 1992 to 40.7 percent as of December 1993 and to 44.9 percent as of September this year. The share of the state banks to the country's lending market, on the other hand, persistently dropped from as high as 55.2 percent as of December 1992 to 48.4 percent as of last December and to 44.3 percent as of September this year.
The outstanding loans of state banks, for example, reached Rp 76.48 trillion (US$35.57 billion) as of August, as compared to Rp 75.83 trillion provided by private commercial banks.
Riyanto Sastroatmodjo, another prominent analyst, said that state banks, which were previously dubbed the price market leaders, have lost their market foothold due to their over cautious operations.
He said that the sharp increase in the lending of the private banks has further widened the gap between bank funds and the outstanding loans in the country's banking system. The gap reached Rp 16.2 trillion in August this year.
"The gap between the funds and the credit outstanding are likely to widen further in the first semester of next year," Riyanto said. We added that the immediate impact of the large difference between the banks' funds and their credit outstanding would be an immediate surge in the demand for funds from the banking industry, especially private commercial banks.
Interest
Both analysts are of the same opinion that the stronger demand for credits would further fuel the rise in interest rates.
Laksamana estimated the interest rates of time deposits will likely reach as high as 22 percent per annum, while Riyanto put a more moderate estimate at between 16 and 18 percent.
Laksamana said that other factors, which could push up the interest rates from the present levels between 14 and 15 percent per annum, are the expected rise in the discount rates of Bank Indonesia's Certificates and another rise in the interest rates in the United States.
Bank Indonesia (the central bank) hinted Monday that it would slow down economic growth in order to curb the growing inflationary pressure by raising the interest rate of Bank Indonesia's Certificates, the central bank's short-term commercial paper used to squeeze the money in circulation.
Laksamana said that state banks have to follow the upward trend in the interest rates. Otherwise they could totally lose the market to the private banks.
State banks often offer interest rates at just one or two points above the country's projected inflation rate in line with their flat expansion strategy.
Laksamana said the state banks are able to survive only due to the privileges given by the government to hold accounts and savings of state-owned companies. (hen)