Nov 16, 2016 12:21:45

Indonesian banking: Sept-16 data - improvement in asset quality

- Here is some details on the banking data:

- Loan growth:
1) +6.5% y-y (+3.8% ytd; +1.6% m-m) in September compared to +6.8% y-y (+2.2% ytd; +0.4% m-m) in August.
2) Adjusted for rupiah appreciation, total loan growth was +8.4% y-y, compared to +7.7% y-y in August. Rupiah loans were +10.5% y-y (+10.7% y-y in August) while FX loans in USD term is at -1.7% y-y vs. -6.9% y-y in August.
3) Based on bank classification, strongest loan growth came from BUKU IV banks at +13.5% y-y, followed by BUKU II banks at +3.9% y-y and BUKU III banks at +2.9%y-y. Meanwhile, BUKU I banks recorded a decline in loan growth at -45.1% y-y as a number of banks have been upgraded from BUKU I to BUKU II.
4) In terms of usage, investment loans still has the highest growth rate of 9.1% y-y, down from 9.4% y-y in August, followed by consumption at 8.0% y-y from 8.2%y-y in August and working capital loans at 4.2% y-y vs. 4.7% y-y in August.
5) Of the large sectors with >5% loan exposure: agriculture (6.5% exposure) +14.7% y-y vs. +15.7% y-y in August, manufacturing (17.7% exposure) at -0.1% y-y vs. +2.9% y-y, wholesale and trade (19.7%) at +7.1% y-y vs. +6.1% y-y, and home ownership (8.1% exposure) at +7.2% y-y, up from 6.8% in August.
6) Regionally, all areas showed declining y-y loan growth except Sumatera at +6.1% y-y in September from +5.5%y-y in August.

- Deposit growth:
1) +3.1% y-y (+4.3% ytd; -0.1% m-m).
2) Adjusted for the currency movement, deposit grew +5.2% y-y in September vs. +6.4%y-y in August. Rupiah deposits grew +7.1% y-y vs. +9.9% in August and foreign currency deposits contracted by 14.5% y-y. In USD terms, FX deposits contracted by 3.6% y-y.
3) Based on bank classification deposits in BUKU IV banks +8.0% y-y, BUKU III +3.8% y-y while in BUKU II -5.6%y-y and BUKU I -48.4%y-y.
4) Based on type, CASA deposits was +5.0% y-y vs. +8.8% y-y in August (CA at -2.7% y-y and savings at +11.5% y-y) while time deposits growth remains weak at +1.1% y-y. - Liquidity: the weak deposit growth increased the industry LDR to 91.5% in September from 89.9% in August. Increase in LDR was seen across all bank classifications, with the highest increase coming from BUKU II banks to 92.5% in September (from 89.0% in August) and BUKU III banks to 97.6% in September (from 94.3% in August).

- Asset quality:
1) NPL declined to 3.10% in September from 3.22% in August while special mention loans (category 2) also declined to
5.44% in September from 5.52% in August. In terms of absolute amount, total NPL increased 21.9% y-y (+29.5% ytd; -2.1% m-m).
2) Improvement in NPL was seen across all banks, with exception of BUKU I banks in which NPL increased to 2.02% in September from 1.98% in August.
3) In terms of segment, NPL in investment loans improved to 3.46% from 3.53% in August, in consumer loans to 1.71% from 1.79% and in working capital to 3.73% from 3.91%.
4) Industry with >4% NPL level: mining at 6.38% (7.22% in August), construction at 4.26% (4.92% in August), wholesale & retail at 4.42%( 4.33%), and transportation at 4.77% (5.61%). Meanwhile, NPL in manufacturing sector declined to 3.88% from 3.92% in August, in household to 1.80% from 1.88%, in apartment 2.32% from 2.44% and in shop houses to 4.16% from 4.18%.
5) Location wise, all areas saw improvement in loan quality with the highest improvement was seen in Sumatera to 3.18% from 3.38% in August and Kalimantan to 4.92% from 5.07%.

- Profitability:
1) Industry NIM improved to 5.65% from 5.59% in August thanks to continuing reduction in time deposits rates.
2) NIM in state banks increased to 6.40% from 6.24% while NIM of forex commercial banks remains stable at 5.31%.
3) NIM in BUKU IV banks increased to 6.59% (from 6.46% in August) while BUKU III NIM remained relatively stable.

- Capital: average CAR declined to 22.6% in September from 23.3% in August. Decline in CAR was seen across all bank classifications with the highest decline coming from BUKU IV banks to 20.7% (from 21.8% in August).