Global Uncertainty and Slowing Performance Make Himbara Bank Shares Collapse
The profits of a number of Himbara banks in the first quarter of 2024 grew slower compared to the same period last year.
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JAKARTA, KOMPAS — The performance of shares in the Association of State-Owned Banks or Himbara fell by double digits compared to its highest point this year. This is partly due to the impact of global uncertainty and sentiment of slowing net profit growth.
During April 2024, the global economy was shrouded in uncertainty in line with expectations of a delay in cutting the benchmark interest rate of the United States central bank, the Federal Reserve (The Fed), and heated geopolitical conflicts in the Middle East. This uncertainty has resulted in portfolio capital flows from developing countries turning to more liquid (safe haven) instruments, such as the US dollar and gold.
Based on transaction data from 1–25 April 2024, foreign investors have recorded net sales in the domestic financial market of IDR 32 trillion. This selling action occurred in the government securities (SBN) market amounting to IDR 13.28 trillion, stock market amounting to IDR 11.89 trillion, and in Bank Indonesia Rupiah Securities (SRBI) amounting to IDR 6.83 trillion.
As a result, the Composite Stock Price Index (IHSG) plunged to its lowest level at 7,036.07 on April 26, 2024, or a contraction of 5.64 percent compared to its highest point of 7,433.31 on March 14, 2024.
This weakening is in line with the fall in shares experienced by various issuers driving the JCI, including banking issuers. As part of the banking sector, shares of PT Bank Mandiri (Persero) Tbk, PT Bank Rakyat Indonesia (Persero) Tbk or BRI, PT Bank Negara Indonesia (Persero) Tbk or BNI, and PT Bank Tabungan Negara (Persero) Tbk or BTN were also recorded as weakening .
Shares of Bank Mandiri, for example, have contracted by 15.15 percent at Monday's (6/5/2024) market close compared to its highest level on March 14, 2024. Furthermore, shares of BTN have also contracted by 19.34 percent compared to its highest record on March 26.
In addition, BNI also contracted by 22.79 percent compared to its highest achievement on March 13, 2024. Meanwhile, the deepest contraction was experienced by BRI stocks at 25.19 percent compared to their highest level.
Capital market practitioner and Co-Founder of Pasardana, Yohanis Hans Kwee, said on Tuesday (7/5/2024) that there are several factors that caused the Himbara stocks to experience a correction. One of which is the global economic condition, as well as the potential delay in the Fed's interest rate cuts due to the strong economic data and high inflation rate in the United States.
Moreover, the correction of Himbara's stocks is also influenced by market mechanisms and performance report sentiment in the first quarter of 2024. The price of the Himbara emitter's stocks is also considered relatively high, so they eventually correct by themselves.
"Share prices are relatively high following good performance in the previous period. "This means that people (investors) take profits first so that the price is corrected," said Hans Kwee, who also teaches the Master of Applied Economics at Atma Jaya Catholic University of Indonesia when contacted from Jakarta.
On the other hand, the correction of prices of the Himbara issuers is also influenced by the performance reports in the relatively slower Q1-2024 compared to the achievements of the previous period. Furthermore, the decrease in stock prices of state-owned enterprise (BUMN) banks is also influenced by the sentiment of the potential increase in loss reserves after the Covid-19 credit restructuring program ends.
Overall, the decline in the performance of Himbara stocks happened within a short period of time. However, when looked at in the long term, these stocks are still relatively attractive, so the weakening actually becomes a momentum to collect and save them.
For long-term shareholders, the enhancements and improvements we are currently making should provide higher benefits.
Responding to these conditions, various efforts were made, one of which was BRI by going through the process of buying back (buyback) BBRI shares. Previously, this corporate action had received approval from shareholders through the annual general meeting of shareholders on March 13 2023.
From the results of the agreement, the buyback of BRI shares is a maximum of IDR 1.5 trillion within 18 months of the approval of the buyback. BRI President Director Sunarso, in his official statement last week, explained that the buyback was a signal that the company's condition was much better than what was perceived by the market.
The Finance Director of BRI, Viviana Dyah Ayu RK, added that they want to ensure the company can grow better and healthier in the long term. However, this requires minor corrections along the way in the short term.
"For long-term shareholders, the improvements and improvements we are currently making should provide higher benefits," he said.
Also read: Himbara's Net Profit Growth Returns to Normal
Profit growth slows
Himbara presented its performance during the first quarter of 2024 at the end of April 2024. Overall, Himbara's credit disbursement recorded Rp 3,783.01 trillion or grew by 13.96 percent annually, higher than the average annual credit growth of the banking industry of 12.4 percent.
Nevertheless, the net profit of several Himbara banks has grown at a slower pace. For example, Bank Mandiri recorded a consolidated net profit of Rp 12.7 trillion in the first quarter of 2024, or a 1.13% annual growth.
In the same period, BNI recorded a net profit of IDR 5.33 trillion or grew 2 percent annually.
Before the restructuring ended, the banks had already acted as if the policy had ended so that CKPN formation returned to normal. In other words, they are back to normal
Apart from that, BRI posted consolidated net profit growth of IDR 15.98 trillion or grew 2.6 percent annually.
The net profit growth of Himbara in the first quarter of 2024 increased by single digits annually. However, in the same period in 2023, the majority of Himbara were able to achieve double-digit net profit growth, including BNI at 31.8 percent, BRI at 27.37 percent, and Bank Mandiri at 25.2 percent.
The slowing growth of net profit has created negative sentiment towards the Himbara issuers. A day after announcing their performance during Q1-2024, Bank Mandiri's stock fell 8.33 percent, BRI's stock contracted 6.21 percent, and BTN dropped 4.44 percent. Meanwhile, BNI stock plummeted 8 percent within two days of announcing their quarterly performance.
Senior economist and Associate Faculty at the Institute for Indonesian Banking Development, Ryan Kiryanto, explained that the slowing growth of Himbara's net profit could be seen as an effort to face the end of the Covid-19 credit restructuring policy on 31 March 2024. This policy has made the formation of bank loss reserve (CKPN) cheaper.
"Before the restructuring ended, the banks had made it as if the policy had ended so that the formation of CKPN returned to normal. "In other words, they are back to normal," he said (Kompas.id, 4/5/2024).
Meanwhile, Himbara's credit quality in the first quarter of 2024 will remain maintained. The lowest non-performing credit quality ratio was recorded by Bank Mandiri on a bank only basis of 1.02 percent or down compared to the same period the previous year of 1.7 percent.
On the other hand, BRI's non-performing loan ratio on a bank only basis was 3.27 percent or an increase compared to the same period last year of 3.02 percent. Meanwhile, BTN's non-performing credit ratio fell from the previous 3.5 percent to 3 percent. Likewise with BNI, from the previous 2.8 percent to 2 percent.
Despite eroding net profit growth, Himbara's reserve ratio has become stronger and more adequate. This can be seen from the size of Himbara's nonperforming loan (NPL) coverage in the first quarter of 2024, namely BTN at 152.8 percent, BRI at 202.82 percent, BNI at 330 .2 percent, and Bank Mandiri at 368 percent.
Also read: Banking Credit Can Continue to Grow 10-12 Percent
MSME Credit
Based on data from Bank Indonesia, the non-performing loan ratio for micro, small, and medium enterprises (MSMEs) segment as of February 2024 has reached 4.09 percent. This figure is higher compared to the previous month's rate of 4.05 percent and the same period last year's rate of 3.84 percent.
Based on the classification of businesses, the medium-sized enterprise sector recorded the highest non-performing loan (NPL) ratio at 5.54 percent, which is above the threshold. On the other hand, the small and micro enterprise sectors recorded NPL ratios of 4.78 percent and 3.03 percent, respectively.
The situation will affect the quality of bank credit, primarily in the micro, small, and medium enterprises (MSMEs) sector, such as BRI, which has a 83.25 percent share of MSMEs credit amounting to Rp 1,308.6 trillion. This, in turn, will trigger negative sentiments for investors holding BRI shares.
Nevertheless, the Small and Medium Enterprises Business Index for the first quarter of 2024 and the expectations for the second quarter of 2024 published by BRI indicate that the growth of SMEs businesses will continue, as reflected in the SMEs Business Index at a level of 102.9.
Another factor, the increase in merchandise prices causes production volume or sales volume to tend to decrease. Competition is also getting tougher from online businesses and modern retailers, as well as limited operating hours during the fasting month for restaurant or stall businesses.
Micro Business Director of BRI, Supari, stated that compared to the previous quarter, the SME Business Index for the first quarter of 2024 has slightly weakened. This means that the expansion of SME business is indicated to have slowed down due to the weakening purchasing power of the community, delayed harvest season in some areas affected by El Nino, and normalization of demand for goods and services after the celebration of the National Religious Holiday (HBKN) of Christmas and New Year.
"Another factor, the increase in merchandise prices causes production volume or sales volume to tend to decrease. "Competition is also getting tougher from online businesses and modern retailers, as well as limited operating times during the fasting month for restaurant or stall businesses," said Supari in a written statement last weekend.
Supari is optimistic that business expansion by UMKM actors will continue in the second quarter of 2024. This condition is driven, among other things, by the peak of the harvest season that occurs in most production centers, the celebration of Eid al-Fitr, more conducive weather, and the acceleration of government and private projects' implementation.
Also read: MSME Problem Loans Crawling Up
Previously, Deputy Minister of SOEs Kartika Wirjoatmodjo stated that there are several factors causing the increase of NPLs in the MSME sector. These factors include geopolitical tensions, global economic uncertainty related to the US benchmark interest rates, and inflation in food prices.
"This is starting to have an impact on people's purchasing power and the paying ability of lower middle class people from the micro and SME (small medium enterprise) segments," he said at the hybrid Bisnis Indonesia BUMN Forum 2024 at the end of last month.
Kartika added that exchange rate stability and liquidity management in the era of high interest rates will remain a challenge until the end of 2024. This will result in a more moderate growth in bank credit and profits, around 10 percent.