Lending to support economic growth orientation
Indonesia’s banks are ready for high loan growth, supported by ample liquidity and stronger capital base (report on 8 June). While competition in funneling loans is intensifying, we believe that the current low loan to GDP of 28% should offer sufficient room for potential growth. The recent launch of the Master Plan for Acceleration and Expansion of the Indonesian Economic Development (AP3E1), targeting GDP per capita of $15,500 by 2025, should assure continued strong GDP growth, helped by massive investments across all sectors (importantly in infrastructure), involving total spending of around IDR3,348t. With rising infrastructure spending, we believe substantial multiplier effect will materialize, augmenting the need for future financing availability, including bank borrowings.
Both organic and inorganic expansions in micro loans
Unlike India where micro lenders are politicized as villains, Indonesian banks have had flexibility in pricing micro loans, depending on the size and type of micro loan. Moreover, half of this segment is still currently served by informal institutions, which price their credits at substantial premium. Apart from commercial micro loan, the government has offered guaranteed micro loans (KUR), of which some are priced at 14% for loans between IDR5-500m (USD588-58k) and 22% for borrowings less than IDR5m (USD588). We believe that growth in this segment, estimated worth over IDR500b (USD588m), stems not only from organic but also inorganic growth via loan acquisitions from informal institutions, which are currently untapped. Note that there are over 11,000 traditional markets, but only half have been explored by formal financial institutions.
Burgeoning demand for consumer loans
On top of this investment and working capital loans, we also believe consumer loans are likely to continue growing. With the expected annual demand of 820,000 in new 4W and 8.2m 2W units, involving total credit line value of over IDR120t (i.e. assuming 30% cash transactions and 20% average down-payment), this segment is too big to be ignored. Likewise, demand for property remains buoyant, with an estimated market size of nearly IDR100t, of which around 45% are transacted through bank borrowings. The use of plastic cards has also shown a continued uptrend, with total cardholders of 14.02m (+11.1% y-y) and annual transaction value of IDR57.1t (+13.8% y-y) as of April 2011. It is worth noting that consumer loans accounted for 30% of the domestic loan portfolio.
Re-iterating our top picks: BBNI, BMRI & BBRI
Supported by competitive funding structure and strong capital, we believe BBNI and BMRI would possess the flexibility to meet the shift in loan demand while BBRI, which controls nearly 30% market share, remains as the beneficiary of continued growth in micro segment.
Minggu, 19 Juni 2011
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