Banks remain under margin pressure in third quarter
Major Indonesian banks have seen their interest margins continue to decline in the third quarter of this year, putting pressure on profitability amid high benchmark rates and intensifying competition for both borrowers and deposits.
Major Indonesian banks witnessed a decline in interest margins during the third quarter, putting stress on their profitability. High benchmark rates and intense competition for both borrowers and deposits have contributed to this trend. Industry experts anticipate the pressure will continue through the year as Bank Indonesia (BI) maintains high interest rates to support the rupiah, which has remained close to its lowest point against the US dollar.
The average net interest margin (NIM), a crucial profitability metric, has been decreasing since BI raised its policy rate by 100 basis points in May and June. According to data from the Financial Services Authority (OJK), banks' NIM fell to an average of 4.31 percent in August. In September, NIMs at state-owned banks Bank Mandiri and Bank Negara Indonesia (BNI) continued to decline, while private lender Bank Central Asia (BCA) experienced a minor quarterly increase despite a year-on-year decline.
Bank Mandiri's consolidated NIM dropped to 4.43 percent from 4.56 percent in the previous quarter and 4.89 percent in the same quarter last year. The bank's funding costs rose by 30 basis points to 2.34 percent due to higher time deposit costs.
Written by urgent.news from The Jakarta Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
