On
Friday, February 19, 2016 the stock investors were surprised by the sharp
decline in stock index closed up -1.69% in 4697. The decline was triggered by
the drop in banking shares. BBRI shares fell -4.58% -4.37% BBCA BMRI BBNI
-2.61% -6.42%. Suspected decline in banking stocks after the statement of
planned restrictions on net interest income margin (Net Interest Margin) of the
Financial Services Authority (FSA). What is Net Interest Margin or NIM is it?
What is the impact of the limitation or reduction in NIM? What are the
prospects of banking stocks next?
WHAT IS NET INTEREST MARGIN (NIM)?
Net
Interest Margin (NIM) or Margin Net Interest Income is the ratio between the
net interest income to the value of assets distributed as a credit. In
principle, the greater the value NIM, the bank is getting better. NIM indicates
the level of profitability of a bank. Banks with a larger number NIM means more
efficient use of its assets to generate profits. (Quoted from the book Stocks
Fundamental Analysis Second Edition)
Banking
industry in Indonesia is an industry that is most beneficial when compared to
the banking industry of other countries. Banking industry in Indonesia has a
return value greater 2-fold compared with banks in the United States. Average
Return On Equity (ROE) of Indonesian banks is 18% -25%. While ROE banking
companies in the United States only 9%. The magnitude of the Indonesian banking
profit was driven by the factor of the magnitude of the Net Interest Margin
(NIM).
Figures
NIM Indonesia is bigger than the other ASEAN countries, which in 2015 amounted
to 4% -5%. Figures NIM Indonesia has actually declined, in the years 2011-2013
the range of about 6%. But still greater when compared to other ASEAN
countries. NIM Philippines only reached 3.3 percent, Thailand 2.6 percent,
Malaysia 2.3 percent and Singapore 1.5 percent.
FSA
plans to reduce the value of NIM to a range of 3% -4% (probably still
discourse).
WHAT IMPACT LIMITATION NIM?
The
high NIM is indeed a positive impact on the bank's profit, but instead burden
the company owes the bank. This means that the cost of debt companies are
taking debt in the country to be great. Therefore many companies find funding
from abroad are much smaller flowers. But there are risks that the rupiah
exchange rate, if the rupiah weakens the burden on companies to pay foreign
debt will increase. This resulted in a high cost economy.
By
limiting the NIM, in the short term is the bank's profit is likely to decline.
But the actual decline in NIM will have more impact in the long run.
•
The first is Indonesia's economy will benefit, because it can obtain funds at a
lower cost. In the end the company's expansion.
•
Secondly, banks will potentially have a larger market share, because it can
channel funds which have a lower cost. Companies that previously looking for
low-cost funds abroad could potentially turn to local banks.
So
far, Indonesia is banking dininabobokkan with the ease of obtaining large
profits by NIM. In my opinion, the FSA measure is appropriate. It is time for
Indonesian banks to work more efficiently, and to channel more funds for the
development of Indonesia.
HOW TO SHARE OUTLOOK FUTURE
INDONESIAN BANKS?
I
personally was not overly concerned with the future outlook for Indonesian
banks (in the context of long term yes). With the decline in NIM, as long as
banks are more efficient work will be able to gain a larger market share. BI
also cut interest rates and reserve requirement, it is a positive sentiment for
the banks to be more daring and more lending. If the first bank to lend a bit
with large flowers, small flowers but now credit amount more. Experience, the
edges are the same as tho? In addition there are other sources of income that
can be extracted by such bank Fee Based Income. There are still many other
business potential that can be done bank.
As
explained above, the NIM figures Indonesia has decreased during 2011 to 2015.
Note the value of the assets and the bank's profit during that period, remains
great, right? So the NIM down value is not new for Indonesian banks.