Market share of state banks continues sliding

Market share of state banks continues sliding

JAKARTA (JP): The market share of the country's seven state-
owned commercial banks is likely to continue to decline unless
immediate measures are taken to consolidate their operations.

The president of state-owned Bank Negara Indonesia (BNI),
Winarto Sumarto, said yesterday that immediate steps were needed
to revitalize the banks' operations

The state-owned banks, which until recently dominated the
banking industry, were now weak, he said, not only in services
but also in marketing.

"The operations of state-owned banks are now in an alarming
condition but, unfortunately, my colleagues in the other state-
owned banks are not really aware of the threat," he said during a
seminar on the development of state-owned companies.

The two-day seminar, sponsored by the Ministry of Finance's
Directorate General for State Enterprises, was attended by
executives of state-owned companies operating in both financial
services and manufacturing.

Winarto said Indonesia's rapidly-growing private banks were
likely to continue to win customers as a result of their improved
services.

In addition, he said, foreign banks, whose operations are
currently limited to the country's major cities, are becoming
more aggressive in anticipation of the advent of the free market
era in Indonesia.

Decline

The country's seven state-owned banks -- Bank BNI, Bank Rakyat
Indonesia, Bank Pembangunan Indonesia (Bapindo), Bank Dagang
Negara, Bank Ekspor dan Impor Indonesia and Bank Tabungan Negara
-- have been watching their market shares decline since 1992.

The loss of market share is, partly, a result of consolidation
measures introduced in 1991 to cope with the banks' high level of
bad debts.

As of the end of 1994 the state-owned banks' bad debts were
estimated to be five percent of their outstanding loans.

According to data from the central bank, the share of the
seven state-owned banks in the country's lending market dropped
to 55 percent in 1992 from over of 60 percent in previous years.
Its lending market share continued to decline, falling to only 48
percent by the end of 1993.

According to the central bank's latest data, the lending
market of the state-owned banks further dropped to 41 percent in
March this year.

The lending market share of the private domestic banks, on the
other hand, has grown rapidly, from 41 percent in March 1994 to
47 percent in March this year.

Deposits

The state-owned banks are also being edged out in terms of
funds raised from the public. Their share in the rupiah deposit
and savings markets dropped to 38 percent in March, down from 42
percent in the same month of 1994.

Over the same period the deposit and savings market share of
the private domestic banks rose from 49 percent to 53 percent.

Winarto said that the state-owned banks, apart from being weak
in service, were frequently subject to unfair restrictions in
entering large-scale projects.

"Bank BNI, for example, has several times tried to participate
in the financing of the procurement of Garuda Indonesia's new
airplanes. But we failed," he said, adding that most of the
financing of the national flag carrier's new jets had been
entrusted to foreign banks.

Winarto said that domestic banks also faced problems in
entering large foreign-funded projects, such as the Paiton power
plant in East Java.

"Foreign banks prevented Bank BNI from participating in the
financing of the Paiton power project in an unfair manner," he
said.(hen)