Monetary and Banking Review

Transcription

1 Monetary and Banking Review Macroprudential Policy in Action Policy rates outcome Dec 2017 Jan 2018 Est. Cons. BI 7DRRR (%) Deposit facility rate (%) Lending facility ( rate) (%) Inflation & policy rate Source : BPS & Bank Indonesia Rupiah and Foreign Reserve Source : Bloomberg Imanuel Reinaldo ext. 820 reinaldoimanuel@ciptadana.com Erni Marsella Siahaan, CFA ext. 919 siahaanerni@ciptadana.com The policy rate maintained Bank Indonesia (BI) retained its policy rate at 4.25% in the beginning of The central bank also maintained deposit facility at 3.50% and lending facility at 5.00%. Current policy rate is believed to be sufficient to keep the inflation and CAD within target and also support domestic macroeconomic recovery. BI sees narrowing window for further rate cuts. New macroprudential policy to improve bank s intermediation BI decided to accelerate the implementation of new macroprudential policy after assessing weak domestic banking intermediation and procyclicality behavior. There are two main policies: 1) Macroprudential Intermediation Ratio (RIM) which is the new Financing to Funding Ratio - FFR (replace Loan to Funding Ratio) and 2) Macroprudential Liquidity Buffer (PLM) which is the required reserve ratio (GWM) averaging. The new FFR will include corporate bonds ownership to bank s financing position or the numerator of the ratio, and is capped at the same range with the old LFR at 80-92%. We expect the impact to big four banks is rather limited as we expect their FFR ratio is still within the desired range (see exhibit 3). However there are some banks with high LDR ratio like BNGA, BDMN, and BBTN, whose FFR could become higher than the current LFR level. Meanwhile the banks with plenty liquidity such as BBCA, could gain advantage as their FFR ratio should move higher and closer to 80% level. We believe the smaller banks in the BUKU I to BUKU II category should be more affected by the new FFR regulation as their loan to deposit is far lower compared to the BUKU III to BUKU IV banks (see exhibit 4). These small banks could be more flexible to increase the intermediation ratio not only through giving loans but also buying companies securities. The new GWM averaging actually has been implemented since July 2017 but BI gave another boost by cutting fixed required reserve ratio to 4.5% (from 5.0%) and increase averaging required reserve ratio to 2.0% (from 1.5%). More averaging ratio means more flexibility for banks to channel its liquidity and reduce interest rates volatility in money market. BI also expands the GWM averaging rule for sharia banks (3% fixed and 2% average) and foreign currency (6% fixed and 2% average). It is hoped that the new macroprudential policy will make banks behavior to be more countercyclical and increase the aggressiveness of banks in managing their liquidity to either loans or other financing instruments in order to help domestic economic recovery momentum. BI macro guidance There are some interesting guidances that central bank gave during the latest BoG meeting. BI stated that it prefers to let the Rupiah is fully determined by market with optional intervention if needed. The statement showed that there is less room for stronger Rupiah in this year and central bank will not significantly intervene if Rupiah does not deviate from its target at Rp13,400/USD to Rp 13,700/USD. Economic growth is seen stronger in 2018 at 5.1% - 5.5% from 5.1% in However, export growth is seen to be lower in 2018 bringing CAD to widen at 2.0% - 2.5% of GDP. Bank Indonesia also mentioned that higher inflation will not always be responded by policy rate increase, especially if the rising component is volatile food. Global monetary tightening pressure started in 1Q18, policy rate to be maintained We see that global monetary pressure will be started in the end of 1Q18 since the Fed will start to increase the FFR and also awakening expectation of ECB tightening trend. The Fed is widely predicted to increase FFR 3 ti mes even though some of its officials started to argue more than 3 hikes as the inflation has met 2% target. On the other side, ECB is predicted to stop its quantitative easing by 2H18 and will start to enter tightening trend by We see that global monetary tightening trend will give some pressures to Rupiah and Indonesia bonds market while high foreign reserve, stable domestic inflation and manageable CAD will maintain domestic stability. We maintain our assumption of average Rupiah in 2017 at around Rp 13,500/USD with tendency of depreciating to Rp 13,600/USD in the end of this year. We see central bank will maintain its policy rate at 4.25% in the rest of Please see analyst certification and other important disclosures at the back of this report 2

2 We expect policy rate will be on hold in 2018 Exhibit 1: Macroeconomic Indicator Year-end 31-Dec 14A 15A 16A 17E 18F Nominal GDP (Rp tn) 10,543 11,541 12,407 13,626 14,878 Nominal GDP (USD bn) ,010 1,102 GDP/capita (USD) - Nominal 3,530 3,377 3,605 3,911 4,158 Real GDP (%YoY) Private Consumption (%YoY) Government consumption (%YoY) Gross Fixed Capital Formation (%YoY Exports (%YoY) Imports (%YoY) Inflation rate (%YoY) - year end Core inflation rate (%YoY) - year end BI Rate BI 7 Days Reverse Repo Rate - year end Rupiah / US Dollar - average 11,878 13,398 13,473 13,350 13,500 Rupiah / US Dollar - year end 12,440 13,7 13,346 13,450 13,600 Current account as % of GDP Fiscal balance as % of GDP Source: BI, BPS, MoF and Ciptadana Estimates Exhibit 2: Old and New FFR Scheme Bank Type Old FFR New FFR Conventional Sharia Source: Bank Indonesia Exhibit 3: Comparison of LDR, LFR, and FFR % LDR (%) LFR (%) FFR (%) BBCA BMRI BBRI BBNI BNGA BBTN BNLI BDMN average Source: Companies and Ciptadana Sekuritas Asia Please see analyst certification and other important disclosures at the back of this report 3

3 Exhibit 4: LDR and bonds ownership by banking category Loan to Deposit (%) Bonds ownership as % of total assets (%) BUKU I BUKU II BUKU III BUKU IV Industry Source: OJK and Ciptadana Sekuritas Asia Exhibit 5: Old and New GWM Scheme Bank Type Old GWM New GWM Conventional Fixed: 5.0% Average: 1.5% Average: 2.0% Sharia 0.0% 0 Source: Bank Indonesia Please see analyst certification and other important disclosures at the back of this report 4

4 RESEARCH REPORT HEAD OF RESEARCH ANALYST ANALYST Arief Budiman Erni Marsella Siahaan, CFA Yasmin Soulisa Strategy, Automotive, Heavy Equipment, Banking Property, Plantations Construction, Shipping T ext 919 T ext 799 T ext 819 E siahaanerni@ciptadana.com E soulisayasmin@ciptadana.com E budimanarief@ciptadana.com JUNIOR ECONOMIST ANALYST ANALYST Imanuel Reinaldo Niko Margaronis Fahressi Fahalmesta T ext 820 Telecommunication, Tower, Healthcare Cement, Toll Road, Poultry E reinaldoimanuel@ciptadana.com T ext 734 T ext 735 E margaronisniko@ciptadana.com E fahalmestafahressi@ciptadana.com ANALYST ANALYST TECHNICAL ANALYST Stella Amelinda Fransisca Maharani Putri Trevor Gasman Consumer Media, Retail T ext 934 T ext 740 T ext 760 E gasmantrevor@ciptadana.com E amelindastella@ciptadana.com E putrifransisca@ciptadana.com RESEARCH ASSISTANT Sumarni T ext 920 E sumarni@ciptadana.com EQUITY SALES Co HEAD OF INSTITUTIONAL SALES Dadang Mulyana Plaza ASIA Office Park unit 2 Plaza ASIA Office Park unit 2 Jl. Jend. Sudirman Kav. 59 Jl. Jend. Sudirman Kav. 59 Jakarta Jakarta T ext 838 T ext 807 Co HEAD OF INSTITUTIONAL SALES The Fei Ming F F E mulyanadadang@ciptadana.com E thefeiming@ciptadana.com BRANCH OFFICES JAKARTA - MANGGA DUA JAKARTA - PURI KENCANA SURABAYA Komplek Harco Mangga Dua Perkantoran Puri Niaga III Intiland Tower Surabaya Rukan Blok C No.10 Jl. Puri Kencana Blok M8 No.2E Ground Floor Suite 5 & 6 Jl. Mangga Dua Raya Kembangan Jl. Panglima Sudirman Jakarta Jakarta Surabaya T T T F F F SEMARANG Gedung Menara Suara Merdeka 6th Floor Unit 02 Jl. Pandanaran No.30 Semarang Please see analyst certification and other important disclosures at the back of this report 5

5 Analyst Certification Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her personal views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her compensation. Disclaimer This report does not constitute an offer to buy or sell any security/instrument, invitation to offer or recommendation to enter into any transaction. Nor are we acting in any other capacity as a fiduciary to you. When making and investment decision, you should determine, without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these risks) as well as the legal, tax and accounting characterizations and consequences of any such transaction. In this regard, by accepting this report, you acknowledge that (a) we are not in the business of providing (and you are not relying on us for) legal, tax or accounting advice, (b) there may be legal, tax or accounting risks associated with any transaction, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) you should apprise senior management in your organization as to such legal, tax and accounting advice (and any risks associated with any transaction and our disclaimer as to these matters. The information contained in this report is based on material we believe to be reliable; however, we do not represent that it is accurate, current, complete, or error free. Assumptions, estimates and opinions contained in this report constitute our judgment as of the date of the document and are subject to change without notice. Any projections are based on a number of assumptions as to market conditions and there can be no guarantee that any projected results will be achieved. Past performance is not a guarantee of future results. PT CIPTADANA SECURITIES AND ITS AFFILIATES SPECIFICALLY DISCLAIMS ALL LIABILITY FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OR OTHER LOSSES OR DAMAGES INCLUDING LOSS OF PROFITS INCURRED BY YOU OR ANY THIRD PARTY THAT MAY ARISE FROM ANY RELIANCE ON THIS REPORT OR FOR THE RELIABILITY, ACCURACY, COMPLETENESS OR TIMELINESS THEREOF. Disclaimer: This document is not intended to be an offer, or a solicitation of an offer, to buy or sell relevant securities (i.e. securities mentioned herein or of the same issuer and options, warrants or rights to or interest in any such securities). The information and opinions contained in this document have been compiled from or arrived at in good faith from sources believed to be reliable. No representation or warranty, expressed or implied, is made by PT CIPTADANA SECURITIES or any other member of the Ciptadana Capital, including any other member of the Ciptadana Group of Companies from whom this document may be received, as to the accuracy or completeness of the information contained herein. All opinions and estimates in this report constitute our judgment as of this date and there can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. The information in this document is subject to change without notice; its accuracy is not guaranteed; and it may be incomplete or condensed. Please see analyst certification and other important disclosures at the back of this report 6