Banks Needs to Improve their Efficiency

JAKARTA – In contrast to profit growth that grew 23% last year, Indonesia’s interest margin / NIM margin actually decreased during 2017.

In 2016 Bank NIM was recorded at 5.63%, up from 5.39% in the previous year. However, by the end of 2017 it declined to 5.32%.

President Director of PT Bank Mayapada Internasional Tbk. Hariyono Tjahjarijadi said that the bank’s profit span can be sourced from efficiency, credit quality improvement and decrease of reserves, as well as the increase of income from fee based income.

Nevertheless, he continued, the main source of bank income still comes from interest income. Hariyono admitted that the earnings of Bank Mayapada last year decreased because the ratio of net interest margin decreased.

“Our profit is somewhat stagnant compared to the previous year due to the decline in NIM,” he told on Monday (12/3/2018).

Hariyono’s opinion is in line with Indonesian Banking Statistics released by the Financial Services Authority (OJK). In the last few years, banks are increasingly efficient as reflected by the ratio of Operational Costs to Operational Income (BOPO).

In December 2017, banks’ BOPO stood at 78.64%, down 3.58% from December 2016 of 82.22%.