State banks' mart share likely to decline further
State banks' mart share likely to decline further
JAKARTA (JP): The market share of state-owned banks is likely
to continue to decline next year, partly as a result the banks'
slackness in meeting market demand, according to one prominent
banking analyst.
Laksamana Sukardi, an associate director of the Economic,
Industrial and Trade (Econit) advisory group, said yesterday that
the market share of state-owned banks will fall further from the
present level of 40 percent.
In 1978, state-owned banks controlled over 80 percent of
assets, funds and credits in Indonesia's banking system.
The state-owned banks are Bank Rakyat Indonesia, Bank Bumi
Daya, Bank Pembangunan Indonesia (Bapindo), Bank Expor Impor
Indonesia, Bank Negara Indonesia (BNI) and Bank Tabungan Negara.
Speaking during a presentation of Econit's 1996 economic
outlook, Laksamana said that the drop in the state-owned banks'
market share was the result, not only of their moderate credit
expansion, but also of their failure to adjust to the rapid
changes taking place in the market.
"The state-owned banks' setback has also been caused by the
World Bank's agenda," he added.
In 1993, the Ministry of Finance applied an equity loan of
US$300 million from the World Bank to help the state-owned banks
resolve their bad debts. The World Bank approved the loan
application on the condition that the state-owned banks limit
their credit expansion to a maximum of 15 percent over a certain
period of time.
"Bapindo, most affected by the debt problem, was given a zero
expansion requirement," he said.
Bank Bumi Daya was allowed to expand by no more than 10
percent, and Bank Expor Impor and BNI were allowed credit
expansion of only 15 percent, he added.
Laksamana said he anticipated that state-owned banks would
decline in importance in the Indonesian banking sector unless a
breakthrough was made in strengthening their capital structures.
Regarding the country's banking industry generally, Laksamana
said that the increase in the amount of bad debts and a lack of
capital would remain major problems for most banks next year.
He said that bad debts are likely to continue to increase,
given the fact that most commercial banks are still weak in their
risk management.
Their over-exposure to the property sector and textile
industry could further worsen the position of their bad debts, he
added.
"The slowdown in the growth of the property sector and the
decrease in the country's garment exports could pose a problem
for the banks," he said.
He added that the banking industry would also see a sharp
change in loan contributions from corporate to retail borrowers
as the result of the change in the government's lending policy
and the diversification of business groups' financial sources.
The change in the loan concentration would not only affect the
business of state-owned banks, Laksamana said, but also major
private banks, which at present still direct a large part of
their loan portfolio to large business groups.
On the other hand, multi-finance companies, whose lending
procedures are relatively less restrictive, will be able to
better tap the market, meaning another blow to the banking
system, he said.
Besides the challenges from the domestic market, the country's
banking industry will also face stronger competition from
overseas banks, Laksamana said.
Overseas banks are now strengthening their market foothold in
Asian countries, including Indonesia, in anticipation of the
regulatory liberalization in the financial sector, he said.
"It means that Indonesian banks should not only have larger
capital but also more overseas offices," Laksamana said. (hen)