National
economic condition which slowed down over the past 3 years was beginning to
generate chain affect to the banking sector. Some big bank were booking profit
slump in Q-1 of this year. This bank of biggest asset was only able to make profit
growth of 4.3% to become Rp.5.1 trillion of the same period in 2014 at Rp.4.9
trillion. For comparison, in the first 3 months last year Bank Mandiri stall made
profit of 14.5%.
Bank
Mandiri’s profit slowed down because down because ratio of NPL increased by 200
basic points to become 0.89% which forced Bank Mandiri to set up provision
amounting to Rp.1.5 trillion, higher than the same period of last year at Rp.1.2
trillion.
At
the same time, fund expenses increased by 35.3% to become Rp.6.85 trillion. The
result was that Net Interest Margin was eroded by 0.3% and yet in term of
income, Bank Mandiri still managed to book notable growth, In Q-1, income from
interest increased by 19.6% to become Rp.17.12 trillion. Fee based income grew
by 9,9% to Rp.3.87 trillion. Similarly credit pipelining still grew by 13,3% to
become Rp.532.8 trillion.
Previously
Bank Danamon ws also suppressed early this year. Profit of Bank Danamon of
Temasek Group dropped by 21% to become Rp.687 billion in Q-1/2015. Bank CMB
Niaga as even worse, it booked slump of profit by 43.91% to become Rp.83
billion. Juat like Bank Mandiri, CIMB had to put bigger provision, i.e. Rp.7.37
trillion, an increase of 80.6%. the cause was gross NPL ratio which swelled
from 2.57% to 4.07%.
Pressures
also befell on Bank International Indonesia (BII) since credit pipelining was
still slow. Credit pipelining by BI of Q-1/2015 only grew only grew below 11%.
It was almost sure this bank’s performance was not as good as in Q-1 last year.
Somehow
fortune was on the side of Bank Negara Indonesia (BNI). In Q-1/2015 BNI’s net
profit rose by 17.7% to become Rp.2.82 trillion. Over the same period last
year, BNI grew by 15.46% the question was, would this bank be able to maintain
good performance in the following quarters?
Bad
performance of the abovementioned banks showed that national economic slowdown
had its serious effect on banks. The adverse condition did not only smash the
banking sector but also the financing sector. Low sales of heavy equipments in
2014 last had suppressed performance of security exchange agents. As example
was PT Verena Multi Finance Tbk. whose credit extention slumped by 20%.
Through
2014 last, verena only extended financing to the amount of Rp.1.58% trillion.
The Presidential election held last year was mentioned as one of the factors
that suppressed company’s performance. Besides, low demand for new cars forced
automotive dealers to offers discount. All in all market of used cars turned
just as quiet.
On
the other hand implementation of the Minerba Law and low commodity prices
downsized demand for heavy equipments, while purchasing power of the people
living near mining sites also dropped. Company’s net profit also slumped by 30%
(y o y) to become Rp.24.1 billion while outstanding expenses also shrunk by
2.7% to become Rp.2.59 trillion.
The
decision not to divide dividend had been approved by shareholders at the
meeting. Last year GLOB reaped income of Rp.4.04 trillion, up by 4% against
same period the year before while their net profit shrunk by 20% to become Rp.92.12
billion. The last time GLOB divided their dividend was in 2013 which was of
2012 at the value of Rp.51 per share.
Being
aware of the tight liquidity today, the company had decided not to expand
business or open phones new outlets. The company predicted sales of cellular
phones would be flat this year. Description of Rupiah had cause developers to
postpone opening of new malls and yet malls were opportunity for GLOB to open
new outlets.
Even
if there were opening of new malls the locations was unstrategic so they were
unprospective. Low cellular phone market was indicated by GLOB who service
centers like service centers of Blackberry and Nokia. Closing of the service
centers were compensated by opening of 10 new outlets last year.
Limited
company expansion discourage the Management from setting higher targets this
year; the income target was set at 5% to 9%. Last year, realized income was Rp.4.04
trillion. Growth assumption this year considered also the trend of feature
phone users migrating to smart phones and tablet.
The
cement industry was affected by economic slowdown as indicated by sales of
cement in Q-1/2015 which inched down by 3.3% against same period of 2014. The
culprit was Government infra structure projects that never started, among
others due to heavy rainfall.
With
reference to data to the Indonesian Cement Association (ASI), sales of cement
in Q-1/2015 was only 13.6 million tons. This figure went down against same
period of 2013 amounting to 14.07 million tons. Sales downturn was due to low
purchase of cement due to suspended Government’s infra structure or property
projects.
Sales
of cement was also low due to people’s low purchasing power due to weakening
global economy with chain effect on domestic economy; moreover the Government
had just increased price of Premium oil by Rp.500 per liter to be followed by
increased food price.
Cement
producers projects that increase of cement sales would only be in May-June next
in like with the execution of Government’s infra structure projects. One of the
national cement producers, PT Semen Indonesia, expressed the game grievances.
Through
q/2015 there had been downturn in cement sales when SMGR sold their cement at
the domestic market amounting to 6.04 million tons. This figure dropped by
1.94% against same period the previously year.
Today
SMGR were operating 3 cement factories in Indonesia and one cement factory in
Vietnam. The cement factory in Gresik had production capacity of 14 million
tons/year and the factory in Vietnam was to serve export need and domestic
market in Vietnam. Although sales was negative in Q-1/2015, this year end SMGR
was optimistic they would increase sales by 4% - 5%.
Downturn
of cement sales in Q-1/2015 was felt by PT Sement Baturaja Tbk. (SMBR). In Q-1/2015
sales of SMBR dropped by 1% to become 302.0321 tons. In the same period of last
year, sales SMBR was posted at 304,815 tons. By this year end, SMBR sets sales
target to increase to 1.75 tons, an increase of 38% against sales of last year
at 1.26 million tons.
For
information, SMBR ran 3 factories in Indonesia. The first one was in Palembang
with capacity of 350,000 tons/years, the second one in Baturaja with capacity
of 1.2 million – 1.3 million tons per year. The third one was in Panjang with
capacity of 350,000 tons/year.
In
terms of consumption, the consumption by the private sector tend to drop. In
Q-1 of this year, Government budget absorption was around 18% or below the
proportion which was 25%. It seemed reasonable that economic growth in Q-1 year
was projected at only 4.9% - 5.0%.
Ironically,
the government was optimistic realization of Government expenditure this year
end would reach 90%, because by May 2015 budget absorption would be maximized.
The reason was that the Budget form of the Ministries were already filled in. A
rosy promise still to be proven because the public had often heard it.
According
to the Budgeting officials, budget absorption of Q-1/2015 was slightly
suspended due to Budget revision, but the Ministry of Finance had coordinated
with all ministries and predictably absorption would reach its climax in
May-June because most project forms would have been completed.
The
only thing was, although DIPA form had been completed, the budge absorption
itself depended on the execution by each respective Ministries, and absorption
must be cautiously done. Weather budget absorption could reach 90% or 100%
depended on Government’s scenario. The most important thing was quality, not
absorption for its own sake.
In
this case it was necessary to reform on the spending side, i.e. for infra
structure development focused on multi-years, so there should be no rush as the
cost of quality downgrading. With a little time left, the Government could make
administrative reformation or ask for house’s permit.
Admittedly
many DIPA forms in ministries were not verified which caused slow budget
absorption, especially for projects based on Tender; therefore betterment of
administration was indispensable.
At
the macro level, today stakeholders and analyst were anxious to see
Government’s monetary and fiscal policy not being synchronous. Lately, BI tend
to adopt tight monetary policy while the Ministry of Finance tend to run expansive
fiscal policy.
BI’s
tight monetary policy had been in effect since 2013 last, and was still going
on today. As known, government’s aggressiveness to jack up capital market might
expand deficit in current transaction, i.e. 3% against GDP. Inflation might
soar up due to imported inflation amidst Rupiah depreciation.
Attitude
of the banking sector seemed to follow BI’s stance who seemed to persist to run
tight money policy. Evidently BI rate remained to stay at 7.5% and the ceiling
of Loan-to-deposit ratio (LDR) was still 92% and such would mean obstacle for
the Government in building infra structure.
The
Government’s passion to boost investment to fuel economic development must be
balanced by BI’s policy to relax their monetary policy, hence there would be
synchronous effort to spur on development while maintaining economic stability.
When
the banking sector had to cope with uncertainties, it was about time for BI to
stand on their side by relaxing monetary policy, for example by allowing banks
to use the SUN state promissory notes, it would step up their credit-giving
capacity.
Apparently
it was not advisable for BI to continue with their tight money policy. BI must
relax their monetary policy to harmonize policies through expensive fiscal
strategy so banks’ performance could be jack up. (SS)
Business New - May 6, 2015
