'Infobank' and 'SWA' ratings put bankers at odds

JAKARTA (JP): Infobank and SWA business magazines have put bankers at odds over their recent ratings on the country's 240 commercial banks.

Their different criteria and formulas in judging performance made the rating results quite different, and left bank clients guessing which banks were really the best.

In its rating, Infobank divided banks into three categories -- the first category included banks with assets of over Rp 1 trillion; the second included those with assets of between Rp 500 to Rp 1 trillion; and the third included banks with assets of below Rp 500 billion.

SWA also split the country's 240 banks into three categories -- the first with assets of above Rp 10 trillion; the second with assets of between Rp 1 trillion and Rp 10 trillion; and the third with assets of below Rp 1 trillion.

The two magazines used different criteria in measuring the soundness of the banks, with Infobank focusing on their capital asset ratios, net interest margins, returns on assets, returns on equity and loan to deposit ratios.

Unlike Infobank, which set its criteria close to Bank Indonesia's prudential standards, SWA judged the soundness of banks' operations based on their performances in returns on risk assets, net revenue from funds, fee-based incomes, capital adequacy ratios, and loan to core deposit ratios.

Banks' compliance to meet existing requirements on legal lending limit, which was one of Infobank's important criteria in measuring the banks' health, was not included in SWA's rating standards.

The difference in the yardsticks in measuring the quality of banks' operations made the rating results quite unmatched.

For example, state-owned Bank Negara Indonesia -- the largest bank in the country in terms of assets -- which won SWA's fourth slot in the category of banks with assets of above Rp 10 trillion, was ranked far lower, at 32rd place, in the category of banks with assets of over Rp 1 trillion in the rating version of Infobank.

Bank Internasional Indonesia won the first rank in SWA's rating for banks with assets of above Rp 10 trillion but it was ranked only in the 11th in Infobank's version.

Both magazines claimed their formula as the best in assessing the performances of banks in cooperation with experts.

The SWA magazine, for example, cooperated with noted banking analyst Laksamana Sukardi, former executive director of Lippo Bank, in its rating activities to ensure that the rating results reflected the actual performances of the banks under review.

Sujatmaka, a SWA editor who was in charge of the rating process, said that the magazine preferred using its own criteria so that the results would not only reflect the quantity of the bank performances but also possible risks that might encounter banks in the future.

Neither Infobank or SWA included the management aspect in their assessments.

Analysts mostly hailed the two magazines' rating activities, describing them as a breakthrough in giving more information to the public about the country's banking industry.

But many bankers narrowed their eyes, saying that the rating results did not really reflect the real condition of the banks assessed by the two magazines. Most of their objections were on the way the two magazines classified the banks.

Rosmiati Solihin of Panin Bank said that the classification would be better based on the market segments rather than on the size of their assets.

She cited that foreign joint-venture banks, which have different market segments with purely local banks, should not be placed in the same category as domestic banks.

Other bankers said that placing banks owned by provincial administrations in the same group with ordinary banks was also inappropriate.

Unlike ordinary banks, banks owned by provincial administrations, such as Bank DKI, mostly have cheaper funding sources due to the fact that most of them often act as the treasurer of provincial administrations. (hen)