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)