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Top Indonesian banks’ net profit slid 39% as bad loans rose

The financial results of BUKU IV banks, the top banks by core capital in Indonesia, weakened amid the COVID-19 crisis. Banks experienced a contraction in net loans and set aside more provisions.

March 29, 2021 | Wendy Weng
  • Net profit of Bank Negara Indonesia (BNI) and Bank Danamon dropped the most
  • Bank Central Asia (BCA) saw the smallest decline in net profit, and surpassed Bank Rakyat Indonesia (BRI) as the bank with the largest net profit in Indonesia
  • BUKU IV banks reported higher non-performing loan (NPL) ratios despite loan restructuring incentives

The seven BUKU IV (Commercial Bank Business Activity IV) banks in Indonesia reported a 39% drop in aggregate net profit from IDR 115 trillion ($8.1 billion) in 2019 to IDR 70 trillion ($4.8 billion) in 2020. These BUKU IV banks, or the top banks by core capital include Bank Rakyat Indonesia (BRI), Bank Central Asia (BCA), Bank Mandiri, Bank Negara Indonesia (BNI), Bank CIMB Niaga, Bank Danamon and Bank Permata. Panin Bank, the other BUKU IV bank, saw its net profit fell by 3.1% year-on-year (YoY) in the first nine months of 2020.

Commercial banks in Indonesia are divided into four categories, depending on the amount of the banks’ core capital. The BUKU IV category includes banks with core capital of more than IDR 30 trillion ($2.1 billion). These eight BUKU IV banks accounted for 64% of the total assets of commercial banks in the country. Bank Permata has officially become a BUKU IV bank in January 2021, as the integration with Bangkok Bank’s branches in Indonesia boosted its capital.

Provisions rise while lending shrinks

The sharp decline in net profit was largely due to more provisions, as the aggregate pre-provision operating profit of these seven banks only went down by 4% in 2020. For instance, the provisions BNI made grew by 156% in 2020. Although its operating income went up slightly, its net profit plummeted by 79%. Bank Permata saw its net profit slump by 52%, but its pre-provision operating profit grew by 23.7%.

Meanwhile, weak loan demand amid the pandemic also contributed to the decline. The aggregate net loans of these seven...

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Keywords:Profit, Net Loans, NPL, Profitability, Covid-19