Construction workers at a construction site in Jakarta, Indonesia, on Nov. 25, 2013. (EPA Photo/Adi Weda)
Indonesian coal and property firms could find obtaining loans increasingly difficult next year as banks tighten their lending due to higher interest rates, slowing economic growth and a weakening rupiah, industry officials said.
The central bank this month issued guidance to banks to slow loan growth to 15-17 percent in 2014, from 18-20 percent this year, in an effort to protect the financial system from potential turbulence amid heightened global uncertainties.
In response, Bank Mandiri, Bank Central Asia (BCA) , Bank Tabungan Negara, and other top financial institutions are becoming more particular about companies they lend to.
“We haven’t turned cautious for any sector, but we see challenges in infrastructure, construction, coal, cement, and real estate because of several policies. We are expecting a slowdown,” said Eugene Gailbraith, a BCA director, at an investment conference.
Gailbraith said the country’s biggest bank by market value plans to “take a breather” and will lend less than its expected 45 trillion rupiah ($3.8 billion) target this year.
Loan growth at Bank Mandiri is seen slowing to 17-18 percent in 2014 from 19-20 percent this year, while Bank Jabar Banten eases to 22 percent from 33 percent, company officials said.
“We will be more cautious on sectors that are sensitive to interest rates,” said Pahala Mansury, Bank Mandiri’s chief financial officer. “Secondly, sectors whose raw material costs involve relatively high imports.”
Indonesia’s increased hesitation to lend to coal companies comes as no surprise with banks around the world curbing their exposure to the industry due to a sharp fall in demand and prices.
For the property sector, Bank Indonesia has made the industry less attractive to banks by implementing several policy measures to curb purchases of second homes.
Financial institutions are expected to favour consumer driven industries, such as retail and food companies, as domestic consumption continues to remain strong.
The former emerging market star has looked one of the most vulnerable to expected tapering in US monetary stimulus and a sharp rise in its current account deficit in the second quarter helped sap investor enthusiasm, hitting the rupiah harder than any other currency in Asia.
It has fallen nearly 20 percent so far this year, hitting 12,000 per dollar on Thursday for the first time in almost five years.
Reuters
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