TRANFORMING FINANCIAL SECTORS TO ATTRACT THE INVESTMENT INDONESIA - PowerPoint PPT Presentation

TRANFORMING FINANCIAL SECTORS TO ATTRACT THE INVESTMENT INDONESIA FINANCING INVESTMENT FORUM Wimboh Santoso Chairman of Indonesia Financial Services Authority

MACRO-ECONOMIC AND FINANCIAL SECTORS CONDITION

GLOBAL ECONOMIC SLOWDOWN Various prominent institutions have made downward adjustments to global growth forecast 3.0% 2.5% 2.9% (revised in Oct’19), (revised in Oct’19), (revised in Sept’19) previously 3.2% (May’19) previously estimated at 3.2% (Jul’19) Previously projected at 2.6% (June’19) Downward revision of global economy projection in 2019 & 2020 by WEO 2019 Projection 2020 Projection Oct’19 Δ Oct’18 Δ Apr’19 Apr’19 Oct’19 Δ April’19 WEO Oct'18 WEO April'19 Oct’18 Apr’19 WEO WEO WEO WEO Oct'19 World Output 3.7 3.3 3.0 -0.7 -0.3 3.6 3.4 -0.2 3.9 AE 2.1 1.8 1.7 -0.4 -0.1 1.7 1.7 0.0 3.7 US 2.5 2.3 2.4 -0.1 0.1 1.9 2.1 0.2 3.7 3.6 Japan 0.9 1 0.9 0.0 -0.1 0.5 0.5 0.0 3.5 3.6 3.4 EMDEs 4.7 4.4 3.9 -0.8 -0.5 4.8 4.6 -0.2 3.3 3.3 China 6.2 6.3 6.1 -0.1 -0.2 6.1 5.8 -0.3 3.1 India 7.4 7.3 6.1 -1.3 -1.2 7.5 7.0 -0.5 Brazil 2.4 2.1 0.9 -1.5 -1.2 2.5 2.0 -0.5 3.0 2.9 South Africa 1.4 1.2 0.7 -0.7 -0.5 1.5 1.1 -0.4 2.7 2013 2014 2015 2016 2017 2018 2019 2020 ASEAN-5 5.2 5.1 4.8 -0.4 -0.3 5.2 4.9 -0.3 Indonesia 5.1 5.2 5.0 -0.1 -0.2 5.2 5.1 -0.1 3

MAJORITY OF COUNTRIES HAVE ADOPTED MORE ACCOMMODATIVE MONETARY POLICY Responding to the economic slowdown, majority of countries have adopted more accommodative The Central Bank of The Russian Federation monetary policy 50 bps to 6.5% Bangko Sentral ng Pilipinas 25 bps to 4% The Fed 25 bps 1.5-1.75% . Bank Indonesia 25 bps to 5% (4th cut rate) cut its benchmark 7-day reverse repo rate by another 25 basis points to 5.00 percent and has now cut it by 100 points following cuts in July, August, September and October in 2019 Reserve Bank of India 25 bps to 5.15% Reserve Bank of Australia 25 bps to 0.75% (3rd cut rate) Besides, several countries also imposed non-conventional policies such as Quantitative Easing by buying bonds through secondary market 4

INDONESIA ECONOMIC CONDITION REMAINS ROBUST Stable growth, driven by strong household consumption and stable inflation Indonesia Economic Growth has been maintained above 5% led by household consumptions 12 6 10 5.5 5.17 5.07 5.07 5.05 5.03 5.01 5.02 4.88 8 5 6 4.5 4 4 2 3.5 0 2014 2015 2016 2017 2018 Q1 2019 Q2 2019 Q3 2019 3 -2 2.5 -4 -6 2 Processing Industry Trade Agriculture Construction Mining Transportation Financial Services Information and Comm. Gov. Adm. Growth PDB, yoy (%) Modest foreign exchange reserves (Oct 19 : USD126.70 billion) Inflation remains under control within 3,5% +-1% (Oct 19 : 3.13%) % % Reserve Exc. Rate 18 IHK (rhs) Vol Food Adm Price Inti (rhs) 5.00 Cadangan Devisa Nilai Tukar (rhs) 140.00 126.70 20000 % 120.00 13 4.00 3.13 15000 100.00 8 3.00 80.00 10000 60.00 3 2.00 40.00 5000 -2 1.00 20.00 0.00 0 -7 0.00 Feb-17 Apr-17 Jun-17 Aug-17 Feb-18 Apr-18 Jun-18 Aug-18 Feb-19 Apr-19 Jun-19 Aug-19 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Oct-19 Oct-17 Dec-17 Oct-18 Dec-18 Oct-19

IMPROVEMENT IN INDONESIA In the recent years, open unemployment rate has been decreasing, poverty has been declining and economic inequality has been narrowing Poverty level decreased and reached the lowest level since 1998 Open unemployment rate showed a downward trend (Feb-19: 5.01%) Men Women Gini ratio improved Poverty Level in million Poverty Level in % of total population 6

FINANCIAL MARKET OVERVIEW Domestic financial market still resilient Do JCI and Return Net Buy/Sell Stocks Net Buy/Sell Govt Bonds 7,000 25 6,356 6,195 6,123 18 Nov ‘19 20 174.62 19.99 18 Nov 2019 6,000 170.33 44.02 5,297 Net Sell 15.33 Net Sell 15 4,593 5,000 10 4,000 16.17 5 3,000 0 -1.16 57.1 -2.53 2,000 -5 5 6 7 8 -0.07 9 9 9 d d 1 1 1 1 1 1 1 t t m y 0 0 0 0 - - - p t v 2 2 2 2 c e o O N 1,000 S -10 - - 1 - 0 8 3 3 1 1.37 -12.11 -0.60 -4.12 - -15 -22.59 -0.43 2017 2018 30-Aug-19 30-Sep-19 31-Oct-19 18-Nov-19 ytd 2015 2016 2017 2018 18-Nov-19 -50.75 -39.87 JCI (rhs) Return -0.89 -2.59 -0.31 Govt Bond Yield Adequate FX Reserves Yield (%) Declining yield 120.289.500 10.0 102,4 bps ytd 119.680.410 119.944.630 118.595.120 118.400.130 9.0 8.0 7.0 18-Nov-19 6.0 111.480.920 22-Aug-19 5.0 28-Dec-18 4.0 0,1y 4y 8y 12y 16y 20y 24y 28y Source: Bloomberg, IBPA, CEIC

CAPITAL ADEQUACY REMAINS STRONG AND LIQUIDITY REMAINS AMPLE Life and General Insurance RBC Banking CAR Multifinance Gearing Ratio above the threshold (120%) 720% 370% 25 23.38 3.4 threshold 10% 660% 667% 3.2 23 600% 330% 3.0 2.72 21 540% 21.64 2.8 321% 480% 19 2.6 290% 420% 2.4 17 RBC Asuransi Jiwa 360% 2.2 CAR % (rhs) Tier I % RBC Asuransi Umum (RHS) 300% 250% 15 2.0 Nov-18 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 2015 2017 Jun/18 Aug/18 Oct/18 Dec/18 Feb/19 Apr/19 Jun/19 Aug/19 Liquidity is ample RIM (Intermediation Ratio), LDR, AND LFR Liquid Asset to NCD around 93.9% (as of 6 Nov 2019) % % AL/NCD (LHS) AL/DPK (RHS) 25 120 19.70 20 100 15 93.91 80 threshold AL/DPK=10% 10 60 threshold AL/NCD=50% 40 5 10-May 20-May 30-May 9-Jun 19-Jun 29-Jun 9-Jul 19-Jul 29-Jul 8-Aug 18-Aug 28-Aug 7-Sep 17-Sep 27-Sep 7-Oct 17-Oct 27-Oct 6-Nov 8

BANK LOANS GREW… Third Party Fund, Credit (yoy) and LDR Credit of Invesment remains the main driver Kredit Credit DPK Third Party LDR (rhs) Working Capital Investment Consumption Total 16.00 98.00 18% Fund 14.00 96.00 16% 93.76 12.00 14% 12.84% 94.00 12% 10.00 92.00 7.89 10% 7.89% 8.00 8% 90.00 6.82% 6.00 7.47 6% 88.00 4.00 4% 5.94% 86.00 2% 2.00 0% - 84.00 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-16 Jan-17 Jul-17 Sep-17 Nov-17 Jan-18 Jul-18 Sep-18 Nov-18 Jan-19 Jul-19 Sep-19 Mar-17 May-17 Mar-18 May-18 Mar-19 May-19 Credit Growth by Economic Sector (yoy) Yoy (%) Agriculture MIning Processing Industry Construction Retail Transportation and Communication 50% Households 40% 26.27% 30% 10.55% 20% 9.33% 8.28% 10% 5.59% 0% 4.25% -10% -5.44% -20% -30% Sep-16 Sep-17 Sep-18 Sep-19 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19

RISKS REMAIN MANAGEABLE Banking NPL remains below the threshold Multifinance NPF remains managable 4.00% 3.47% 4.00 % NPL Gross NPL Net 3.25% 3.15% 3.17% 3.16% 3.18% 2.96% 3.50% 2.71% 2.71% 2.82% 2.66% 2.66 3.00 3.00% 2.50% 2.00 2.00% 1.31% 1.47% 1.16% 0.93% 1.17% 0.97% 1.08% 1.50% 1.00 1.15 0.69% 0.62% 0.55% 0.51% 1.00% 0.00 0.50% NPF Gross NPF Netto Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Dec-15 Mar-16 Jun-16 Dec-16 Mar-17 Jun-17 Dec-17 Mar-18 Jun-18 Dec-18 Mar-19 Jun-19 0.00% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 Banking NPL by Economic Sector Multifinance NPF (Sharia and Conventional) Pertanian Pertambangan Total Agriculture Mining Total Konstruksi Perdagangan Construction Trade 10.00% Pembiayaan Konvensional % Conventional Finance 10 Akomodasi Accommodation Transportasi dan Komunikasi Transportation & Comm. Pembiayaan Berdasarkan Prinsip Syariah Sharia Finance Households Processing industry Rumah Tangga Industri Pengolahan 6.07 8.00% 6.75% 8 3.86 3.65 6.00% 6 3.55 4.00% 3.10 4 2.66% 2.18 2.00% 2 2.50% 2.16 1.46 0 0.00% Sep-15 Jun-16 Sep-16 Jun-17 Sep-17 Jun-18 Sep-18 Jun-19 Sep-19 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Dec-15 Mar-16 Dec-16 Mar-17 Dec-17 Mar-18 Dec-18 Mar-19 10

FINANCIAL SECTOR PROFITABILITY PERFORMANCE REMAINS HIGH AND STABLE RETURN ON ASSETS OPERATING COST/REVENUE NET INTEREST MARGIN 96 BOPO Commercial Bank ROA Commercial Bank NIM Commercial Bank 5.8 2.8 92 91.24 5.6 88 5.4 2.6 5.2 84 2.48 5.0 2.4 80 4.90 4.8 76 4.6 2.2 72 4.4 2.0 4.2 68 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-15 Aug-18 Jan-16 May-16 Jan-17 May-17 Jan-18 May-18 Jan-19 May-19 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Aug-18 Jan-19 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Jan-19 Jun-19 Jun-19 RETURN ON ASSETS BY BUKU NET INTEREST MARGIN BY BUKU PROFITABILITY Pendapatan Bunga 3.50 Interest earning 6.00 472.4% 5.48 Pendapatan Operasional Selain Bunga Non-Interest earning 3.10 450% Non-operational earning Pendapatan Non-Operasional 3.00 4.90 4.88 4.81 5.00 350% 2.48 2.50 3.97 4.00 250% 2.00 1.78 3.00 1.53 150% 1.50 1.20 11 13.3% 2.00 1.00 50% 1.00 0.50 -19.6% -50% Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 - - ROA BUKU 1 BUKU 2 BUKU 3 BUKU 4 NIM BUKU 1 BUKU 2 BUKU 3 BUKU 4 11