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Hitting the numbers
- ‰ The final week of 2010 drove loan expansion north of 24% on a YoY basis as of December 29th. In our view, Indonesia remains on track for greater expansion in 2011 as GDP should grow north of 6%.
- ‰ Deposits ended the year on a strong note, rising 2% in the week and 16% for FY10. We anticipate stronger growth in 2011 as large banks are expected to remain in growth mode through 2011.
- ‰ Foreign holdings of SBI rose slightly by 2% WoW to Rp54.9tn, which shows a 24% YTD increase.
Robust loan growth
Based on central bank weekly data, the financial sector in the Southeast Asia’s
biggest economy through Dec 31 is performing in line with our expectation. System
loan growth increased 1% in the last week of 2010 to 22% YTD or up 24% YoY.
Rupiah denominated loans remain the biggest contributor toward loan growth,
rising by Rp14.0tn in the week while foreign currency loans increased by Rp6.0tn.
Indonesian banks now disbursed US$193.65bn in loans or US$34.73bn YTD.
Deposits outpace loans in the final week
Deposit growth reached at 16% YTD to US$253bn or up by another 2% WoW.
While LDR increased by 382bps from YE09 to 76.4%, it decreased modestly on a
WoW basis. We expect banks to expand aggressively in 2011 by hiring more people
for their new branches, adding more ATM and EDC machines which can help deepen
the penetration and increase the deposit base. With over 40% of the population
under 19 years old, we anticipate organic deposit growth as this population
continues to rotate into working age.
Saving accounts increased by 18% YoY from Rp603tn to Rp712tn, helping drive
CASA account expansion in the system to 55.1% from 54.3% of deposits at YE09,
thanks to an improving economy in the country and booming commodity prices in
the last few months. Demand deposits rose 15% YoY to Rp545tn , representing
17% expansion from YE09. The lending spread, as reported by the average lending
rate subtracting the SBI rate has decreased by 55bps to 5.47%.
Foreigners Staying put
Foreign investors buying government’s bonds (SBI) have increased by 2% to
Rp55tn in the last week of 2010 or up by 24% YoY, supported by expanding global
and regional economy. Foreign ownership now stands at 27.45% up 50bps WoW.
Noting that since November’s weakness, the SBI’s held by foreign investors has
been steadily increasing again. In turn, outflows remain stable, reflecting foreign
investors’ confidence in the country’s standing.
Outlook
As we expect GDP to grow ~6% in 2011, loan growth should surpass 2010 levels.
That said, we are closely monitoring the potential for additional inflation given the
upcoming rainy season and the fact that prices of raw foods and fuels have been
rising. In our view, the Rupiah is primed for further appreciation from here to help
offset inflation concerns and we maintain our bullish outlook on Indonesian banks
into 2011 as drivers of GDP expansion through elevated loan distribution.
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