Panin aims to boost retail loans: Senior executive
The Jakarta Post Jakarta
Bank Panin is among the few banks in the country that survived the banking crisis in the late 1990s without the government's costly bail-out scheme, called the bank recapitalization program. Roosniati Salihin, the bank's deputy president, shared her thoughts with The Jakarta Post's Dadan Wijaksana in a recent interview on the country's banking sector in general, as well as Panin's business plans for the future. The following is an excerpt of the interview:
Question (Q): The restructuring process of the banking sector has been going on for almost six years now. In your opinion, what progress has been made over these years and what are the challenges the sector is currently facing?
Answer (A): In line with the improvement in our macroeconomic indicators, I'd say the banking sector has also shown signs of recovery. You can say that we now have much more breathing space than we did previously.
We have now a capital adequacy ratio (CAR) of about 20 percent on average, much better than the minus 15 percent back during the crisis. The non-performing loan (NPL) ratios are also improving. Those are the basic measures to determine a bank's financial health. So overall, I'd say the current conditions are encouraging.
Q: The challenges?
A: There are still plenty of them. Next year, we're going to have to implement the Basel accord principles, and then there will also the so-called Indonesian banking architecture -- which will determine the benchmark of a bank's performance -- to be issued by the central bank.
But, of course, the biggest challenge of all is our private sector, which has been slow in its restructuring process. The condition of the private sector is improving, but slowly. This is why at the moment banks are giving out more consumer loans than loans to the private sector.
Q: What about the demand? Is there really demand for loans from the private sector?
A: It's beginning to improve, but not that significantly. While most old players are still restructuring their debts inherited from the crisis, we do not see new players developing.
But demand is there. The problem is, I think, most players are still considered "unbankable" because the risk remains too high. The challenge for the banking sector is how to make more loans other than consumer loans, like to manufacturers and other lines of business.
Q: What is Panin's lending composition currently?
A: Today, lending to consumers and small and medium-sized enterprises (SMEs) represents about 30 percent of our total credits, and we have set a target of increasing that figure to 50 percent in the next three to five years.
Most of the credits are for houses and cars.
These consumer credits are considered attractive by banks because of their high returns. At our bank for instance, the NPL for consumer credits stands at less than 1 percent.
Q: Can you elaborate more on the Basel accord II?
A: Actually, the central bank has been communicating this periodically to us since last year.
From the banking sector, we fully support the policy as it would turn us into better bankers, as the principles were first meant to.
In principle, the implementation of this policy aims to make banks more sensitive to market risks, to operational risks and credit risks.
Q: Going back to the crisis, Panin managed to survive. Can you tell us why?
A: Well, the bank has been known as a conservative one, not just now but for a long time. Our management, even before the crisis when most other banks were generously extending huge amounts of loans, Panin set conservative growth targets. We never hurry in anything that we do, not without sound calculations. This was helpful. Had we done things differently, I do not think things would have been the same.
Also, we have this policy of trying to surpass everything that the regulator requires us to do in running our business. With the CAR, for instance, we always try to double whatever the minimum figure that Bank Indonesia has set.
And our top level management, or directors, during the crisis were mostly professional people who had been working together at the bank for between 10 and 15 years. So, I guess, the directors, and the staff, of course, were very used to working as a team.
We were included among the country's top 10 banks when the crisis struck. And we were the only bank in that group that managed to survive without the recapitalization program, which is quite an achievement.
Aside from all that, we also had support from the ANZ Banking Group to help us get through all the problems. In 1999, ANZ bought a some 10 percent stake in Panin. They were giving us technical assistance, and also sent a director here in a transfer of knowledge process. They have now raised their ownership in the bank to about 29 percent.
Panin's financial statements
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2003* 2002 ------------------------------------------------------------ CAR (%) 34.6 32.9 NPLs Gross (%) 15.6 16.4 NPLs Net (%) 0.0 6.9 LDR (%) 71.6 41.4 Profit (Rp) 196 billion 16.8 billion --------------------------------------------------- * As of June CAR : Capital Adequacy Ratio NPLs: Non-performing loans LDR : Loan to deposit ratio
Source: Panin Bank