Jakarta, 19 May 2020 --- The first quarter of 2020 can be overcome with full challenges by PT Bank Negara Indonesia (Persero) Tbk or BNI. The Coronavirus Disease 2019 Pandemic or COVID-19, which began in Indonesia in early March 2020, not only suppressed the public health sector, but also slowed the growth of the Indonesian economy. However, in the midst of these serious challenges, BNI managed to record a solid first quarter performance, which is quite reliable as a provision to run the business until the end of the year, which will not be easy, especially in strengthening liquidity and managing asset quality.
At the end of the first quarter of 2020, BNI was still able to grow loans by 11.2% year over year (YoY), from Rp 521.35 trillion in the first quarter of 2019 to Rp 579.60 trillion in the first quarter of 2020. When compared with the position at the end of 2019, loans grew 4.1% year to date (YtD). This is in line with BNI's strategy which is very selective in expanding amid the COVID-19 pandemic. The increase in loans was supported by the growth of third party funds (DPK) of 10.4% YoY, from Rp 575.75 trillion in the first quarter of 2019 to Rp 635.75 trillion in the first quarter of 2020. With this good DPK growth, BNI have healthy liquidity: BNI's loan to deposit ratio (LDR) in the first quarter of 2020 was 92.3%.
Going forward, BNI sees the importance of anticipating potential pressure on liquidity, which is affected by delays in payment of principal installments and interest payments from debtors because its business is affected by COVID-19, as well as capital outflow pressure and potential weakening in exports. In a very challenging condition like this, BNI's liquidity will still be managed prudently, as reflected in indicators or liquidity ratios that are entirely in accordance with regulatory provisions and internal risk appetite.
In terms of profitability, good credit performance was able to drive net interest income (NII) growth of Rp 9.54 trillion or an increase of 7.7% YoY compared to the same period in 2019 of Rp 8.86 trillion. The increase in NII was contributed by an increase in interest income by 3.8% and a decrease in interest expense by -2.5%. The decrease in interest expense was interesting because it was caused by the cost of funds which fell by 30 bps. This happened because the acquisition of cheap funds (CASA) which also increased compared to the first quarter of 2019. In terms of operational expenses, the efficiency strategy is still carried out, especially in variable cost items, so that BNI's operational expenses in the first quarter of 2020 can be controlled at 1.7% YoY. Overall, this performance led BNI to record a net profit in the first quarter of 2020 of Rp 4.25 trillion, an increase of 4.3% YoY compared to the first quarter of 2019 of Rp 4.08 trillion.
This solid performance does not make BNI lose vigilance towards future economic conditions that cannot be accurately predicted, especially due to the impact of COVID-19, which cannot yet be predicted by the end of its spread. Moreover, in the first quarter of 2020, an indication of the effect of COVID-19 is seen in the increase in the ratio of non-performing loans (NPLs) from 2.3% in 2019 to 2.4% in 2020 — although it is still far below the maximum NPL limit set by the regulator at 5%.
The important steps taken by BNI during the first quarter of 2020 were mainly focused on saving the company's most important assets, namely employees, in order to stay healthy and avoid being exposed to the corona virus. In addition, the operational reliability continues to be maintained to provide convenience for customers, including through e-channel reliability and the availability of branch services accompanied by the application of disciplined health protocols, and the most important thing now is to conduct credit restructuring in a prudent manner in order to ease the burden on the debtors affected the impact of COVID-19.
Regarding the potential impact of COVID-19 on BNI's credit portfolio, BNI has and will conduct periodic stress tests to find out the potential impact of this outbreak on the possibility of a decrease in credit quality. The stress test method includes identifying sectors suspected to be affected by COVID-19, both directly and indirectly, as well as conducting a quantitative assessment to determine the resilience of the debtor's condition with several assumptions, including a decrease in sales volume and sales cost of goods. BNI also seeks to formulate comprehensive policies to mitigate moral hazard.
Until the end of March 2020, the total loan restructuring was Rp 6.2 trillion, with a total of 3,884 debtors. However, entering April 2020, the realization of restructured loans increased significantly to Rp 69 trillion, with a total of 103,447 debtors. The largest sectors affected were trade, restaurants and hotels, amounting to 38.4% or Rp. 26.8 trillion, the industrial sector (18.4% or Rp. 12.8 trillion), and the transportation, warehousing, and communication sectors (16, 2% or Rp. 11.3 trillion). Whereas based on segmentation, the most affected was the small segment with the realization of restructuring of Rp 27.4 trillion or 39.3% of the total restructuring until April 2020.
The credit restructuring provided to COVID-19 affected debtors is carried out by referring to the Financial Services Authority Regulation No. 11 of 2020 concerning National Economic Stimulus as a Countercyclical Policy on the Spreading Impact of Coronavirus Disease 2019. Debtor assessment is carried out on a case-by-case basis to match the debtor's financial capabilities or cash flow. The restructuring scheme can be provided in the form of a reduction in interest rates, extension of the credit period, delay in repayment of principal installments, or a combination thereof.
For more information, please contact:
Corporate Secretary BNI