BANKING SURVEY Quarter I-2007 Target of new credit in quarter II-2007 and whole 2007 was predicted to increase There are about 34,0% of respondents stated that new credit realization in Quarter I-2007 was under their target The cost of fund and guarantee interest rate have driven banks in determining interest rate The deposit and credit interest rate in quarter I-2007 had a decrease and predicted to be continued until quarter II-2007 Condition of Quarter I-2007 Demand for New Credits The new credits demand in quarter I-2007 had an increase The banking survey in quarter I-2007 showed the demand for new credits at the banks had an increase with net balance increased from 42.0% to 57.6%. The more customers demand on business financing and lower credits rate had primarily attributed the demand for new credits at the banks. This increase was chiefly occured on working capital credit, while based on sectoral, it was occured on trade sector and manufacturing industry. Based on consumption credit, it was mainly occured on property/housing and vehicle. There are about 11.5% disallowed applications by bank, decreased than previous quarter (14.0%). In the mean time, allowed new credit applications were majority co ntributed by old customer group. Graph 1 Demands for New Credit s (%) 100 80 60 40 20 0-20 -40 I II III IV I II III IV I 2005 2006 2007 All Bank Large bank Medium Bank Small Bank Methodology The Banking survey is a quarterly survey conducte d since Quarter III-1999. The survey covers about 45 banks in Jakarta. Those respondents are selected based on purposive sampling method. Questionaire are sent by mail, faksimile and email. Data are processed by net balance method, calculating the difference between percentage of respondents who respond increase and percentage of the respondents who respond decrease. 1
Table 1 Priority of New Credits in Quarter I-2007 No. Type of Credits Details of Credits Priority a. Type of Usage Credits Working Credits 1 Investment Credits 2 Consumption Credits 3 b. Consumption Credits Housing/ Property 1 Motor Vehicles Credits 2 Multi Purphose Credits 3 c. Economic Sectors Trade, Hotel and Restaurant 1 Agriculture, Hunting and Agriculture Tools 2 Business Services 3 d. Type of Nominal Credits Middle Credits (> Rp 500 million up to Rp 5 billion) 1 Small Credits (Rp 50 million up to Rp 500 million) 2 Credits above Rp 5 billion 3 e. Credits Orientations by Credits for Non Export 1 Usage Credits for Export 2 Note : 1=first priority ; 2=second priority ; 3= third priority New Credits Realization Parts of respondents had a deviation in new credits allocating compared to determined target In quarter I-2007, there are 34.0% respondents stated that their new credit realization was under determined target (with deviation above 5%). The deviation of new credits approval was mainly driven by the uncondussive economic condition. Table 2 Deviation of Credits Realization in Quarter I-2007 No. Type of Credits Details of Credits (% resp.) Q. IV-2006 Q. I-2007 a. Type of Usage Credits Working Credits 37.5 42.6 Investment Credits 37.5 25.5 Consumption Credits 37.5 34.0 b. Consumption Credits Housing/ Property 33.3 38.3 Motor Vehicles Credits 35.4 27.7 c. Economic Sectors Trade, Hotel and Restaurant 25.0 27.7 Manufacturing Industry 21.0 19.1 Transportation, Warehouse and Communication - 19.1 Agriculture, Hunting and Agriculture Tools 25.0 19.1 d. Type of Nominal Credits Small Credits (Rp 50 million up to Rp 500 million) 44.0 40.4 Middle Credits (> Rp 500 million up to Rp 5 billion) 38.0 31.9 e. Credits Orientations by Credits for Non Export 31.3 29.8 Usage Credits for Export 18.8 19.1 Construction sector, manufacturing industry and agriculture were the most avoided sector by banks in allocating credit In the mean time, there are some economic sectors that bank avoided in allocating credits in quarter I -2007, in example: Manufacturing industry sector, especially textile/garment. It was assumed that this sector has low competitiveness than import goods, in the other side, uncondussive economic condition was also contributing in lower textile industry growth. Construction sector (mall construction) with the idea that mall construction has been over supplied and has high risk. Mining sector, with assumption of credit issue period for this sector was too long. 2
Investment Credits Most of respondents stated that approval of investment credits in quarter I- 2007 started to have an upgrading, indicated by increasing net balance, from 17.3% to 32.8%. Expectations of Quarter II-2007 New Credit s Target Target of new credits approval in quarter II-2007 was predicted to increase Most of entire respondents stated that the approval of new credits in quarter II-2007 was predicted to increase, with increasing net balance (62.4% to 96.6%). The increase of banking liquidity, the accomplishment of ratio sufficiency and lower risk in allocating credit issue are internal factors which pushed the increasing target of new credits approval. Meanwhile, Bank Indonesia policy to decrease the interest rate and the better economic and monetary prospects were claimed to be the main external factors which also contributing the increase of new credits approval. Graph 2 Target of Approval of New Credits in Quarter II-2007 (%) 120 100 80 60 40 20 0-20 -40 I II III IV I II III IV I II* (preliminary figures) 2005 2006 2007 All Bank Large bank Medium Bank Small Bank The main priority in credit allocating in quarter II-2007 was predicted to be working capital credit The main priority in allocating credit in quarter II-2007 was predicted to be dominated by working capital credits, while based on sectoral, it was predicted to be dominated by trade, hotel and restaurant, and business service sector. 3
Table 3 Priority of Target of New Credits Approval Priority No. Type of Credits Details of Credits Q II-2007 2007 a. Type of Usage Credits Working Credits 1 1 Investment Credits 2 2 Consumption Credits 3 3 b. Consumption Credits Housing/ Property 1 1 Motor Vehicles Credits 2 2 Multi Purphose Credits 3 3 c. Economic Sectors Trade, Hotel and Restaurant 1 1 Manufacturing Industry 2 2 Business Services 3 3 d. Type of Nominal Credits Credits above Rp 5 billion 1 1 Middle Credits (> Rp 500 million up to Rp 5 billion) 2 2 Small Credits (Rp 50 million up to Rp 500 million) 3 3 e. Credits Orientations by Credits for Non Export 1 1 Usage Credits for Export 2 2 Note : 1=first priority ; 2=second priority ; 3=third priority In Quarter II-2007, approval of investment credits is predicted to increase with net balance was as 92.1% compared to those in previous quarter (74.3%). In the mean time, construction sector (subsector property) and manufacturing industry sector (textile/garment industry) were still to be the most avoided credit issue by bank. Source and Funds Allocation The third party fund was still predicted to increase The Bank Indonesia Certificate was still be the bank main choice when over liquidity occured Majority respondents predicted that the third party fund in quarter II-2007 would have an increase, but with lower net balance compared to those in previous quarter (86.6% to 66.7%). Competitive interest rate, incentive beyond interest rate, and increasing banking service to the customer have led the increase of third party fund in banking. This increase was predicted to be occured on all sources of funds, especially time deposits. The Bank Indonesia Certificate is still going to be the main choice of fund placement for banks when over liquidity occurred (75.6% of respondents). Interbank call money, other monetary instruments (FASBI) would also be the next priority for banks in placing over fund. No. Table 4 Priority of Bank Funds Placement Instrument Priority Q II-2007 2007 1 Bank Indonesia Certificates 1 1 2 Interbank Call Money 2 2 3 Other Monetary Instrument (FASBI) 3 3 4 Goverment Obligation 4 4 5 Other Securities 5 5 6 Activa in Foreign Exchange 6 6 7 Participation 7 7 Note : 1=first priority ; 2=second priority ; 3=third priority 4
Interest Rate of Deposit s and Credits Interest rate determination was influenced by third party fund interest rate and guarantee interest rate Along with the decrease of Bank Indonesia certificate interest rate, deposit interest rate and credit interest rate were also showing a decrease and predicted to be continu ed until quarter II-2007. The third party cost of fund interest rate and guarantee interest rate (Depository Guarantee Institution) were predicted to be the main factor which influenced deposits and credits interest rate determination. Table 5 Interest Rate of Funds (Rupiah and Foreign Exchange) FUNDS INTEREST RATES Q. IV-2006 Q. I-2007 Expectation Q. II-2007 Average Range Average Range Average Range 1. Cost of funds 8.74% 6.85% - 10.64% 7.79% 5.79% - 9.79% 7.55% 5.64% - 9.45% 2. Cost of Loanable funds 11.26% 9.10% - 13.41% 9.75% 7.00% - 12.50% 9.48% 6.73% - 12.24% 1. Cost of funds 3.43% 2.30% - 4.57% 3.55% 2.14% - 4.97% 3.58% 2.16% - 5.00% 2. Cost of Loanable funds 4.46% 2.88% - 6.10% 4.34% 2.63% - 6.05% 4.34% 2.64% - 6.03% Table 6 Interest Rate of Credit s (Rupiah and Foreign Exchange) TYPE OF CREDITS Q. IV-2006 Q. I-2007 Expectation Q. II-2007 Average Range Average Range Average Range 1. Working Capital Credits 15.67% 13.04% - 18.30% 14.54% 11.76% - 17.33% 14.17% 11.45% - 16.89% 2. Investment Credits 16.15% 13.65% - 18.66% 14.98% 12.37% - 17.59% 14.66% 12.05% - 17.28% 3. Consumption Credits 17.17% 14.83% - 19.52% 15.92% 10.14% - 21.70% 15.82% 10.16% - 21.47% 1. Working Capital Credits 7.74% 6.02% - 9.46% 7.58% 5.81% - 9.35% 7.66% 5.82% - 9.50% 2. Investment Credits 8.15% 6.47% - 9.83% 8.13% 6.50% - 9.75% 7.99% 6.34% - 9.65% 3. Consumption Credits 8.06% 5.76% - 10.36% 7.67% 5.34% - 10.00% 7.73% 5.55% - 9.92% Expectation 2007 New Credit s Target In 2007, target of new credits approval to increase Majority respondents predicted that the new credit approval target in 2007 would increase, shown by net balance as 95.1%. This increase was occurred in almost entire type of credits, especially working capital credit. Better capital sufficiency ratio which followed by high bank liquidity would be the main internal reasons which influenced the increase. Bank Indonesia policies trend in determining Bank Indonesia Certificate interest rate and business competition 5
stage from other banks had been the main external reasons which pushed credit issuing increase. Investment credit allocating in 2007 was predicted to increase Investment credit issuing in 2007 was predicted to increase, with net balance as 89.7%. In the mean time, manufacturing industry sector (textile/garment industry) and construction sector (subsector property) were still to be the most avoided economic sector by banks in allocating the credit. Source and Funds Placement In 2007, the third party source of fund was predicted to increase with net balance as 84.1%, lower than quarter IV-2006 survey (90.6%). Competitive interest rate followed by incentive beyond interest rate have driven the third party fund increase. In the mean time, most of respondents (74.4%) assumed that the Bank Indonesia Certificate would still be the main choice of fund placement when over liquidity occured in 2007, followed by interbank call money, and other monetary instruments (FASBI ). Interest Rate of Deposit s and Credits Funds and credits interest rate in 2007 was still predicted to decrease In 2007, deposits and credits interest rate was predicted to have a decrease. For foreign exchange interest rate, the decrease of interest rate was occured on working capital credit and consumption, while investment credit interest rate was still showing an increase. Table 7. Funds Interest Rate in 2007 FUNDS INTEREST RATES Expectation 2007 Q. IV-2006 Survey Q. I-2007 Survey Average Range Average Range 1. Cost of funds 8.01% 6.13% - 9.90% 7.35% 5.42% - 9.28% 2. Cost of Loanable funds 10.40% 8.05% - 12.76% 9.32% 6.43% - 12.13% 1. Cost of funds 3.20% 2.07% - 4.33% 3.50% 2.08% - 4.92% 2. Cost of Loanable funds 4.30% 2.74% - 5.85% 4.27% 2.60% - 5.95% Table 8. Credit s Interest Rate in 2007 TYPE OF CREDITS Expectation 2007 Q. IV-2006 Survey Q. I-2007 Survey Average Range Average Range 1. Working Capital Loans 14.66% 12.27% - 16.99% 13.91% 11.22% - 16.59% 2. Investment Loans 15.16% 12.95% - 17.37% 14.35% 11.76% - 16.94% 3. Consumption Loans 15.98% 13.82% - 18.13% 15.21% 9.582% - 20.84% 1. Working Capital Loans 7.46% 5.93% - 8.99% 7.52% 5.67% - 9.37% 2. Investment Loans 7.70% 6.25% - 9.16% 7.93% 6.19% - 9.67% 3. Consumption Loans 7.72% 5.71% - 9.73% 7.64% 5.34% - 9.94% 6