IBI Banking Consolidation Urgent To Be Competitive In Region

Jakarta, Aug 13 (Antara) - The Indonesian Association of Bankers (IBI) restate the importance of banking consolidation to keep pace with tighter competition in this region. Consolidation could be carried out either through merger of banks or other corporate action such as acquisition, deputy chairman of IBI, Jahja Setiatmadja said. "Indonesia needs consolidation of its banking industry to be competitive in Asean even in Asia," Jahja said here on Wednesday. He said merger of three Malaysian banks -- IMB Group, RHB Capital and Malaysia Building Society - accumulated assets valued at Rp2,300 trillion making it the fifth largest in Asia in term of assets. "It is a challenge in this region for us. Now DBS, UOB are the largest regionally. Indonesia has Bank Mandiri, but to be competitive in this region it needs stronger capital," he said. Bank Mandiri is the country`s largest lender in assets, but by the end of the second quarter of 2014, assets of Bank Mandiri were valued only at Rp764.9 trillion. Jahja said banks need to expand quality credits and at the same time collecting cheap funds. Chairman of the National Banking Association (Perbanas) Sigit Pramono said capital planning for national banks became urgent ahead of the implementation of ASEAN Economic Community in 2015. He pointed out the loan to deposit ratio (LDR) of Indonesian banks already reached 90 percent . According to a Bank Indonesia regulation LDR may not exceed 92 percent. He said Malaysia proved that it could carry out consolidation successfully even when the crisis hit as well as at normal condition. Earlier, deputy chairman of the Commission XI of the House of Representatives Harry Azhar Azis recommended merger between state lenders Bank Mandiri and Bank Negara Indonesia (BNI) "The most possible for merger are Bank Mandiri and Bank Negara Indonesia (BNI)," Harry said. Merger of the two lenders would create a financially powerful bank that could face competition facing banks of other Asean countries, he said. Asean has agreed to allow each of its member countries to have two banks operating in other member countries after the implementation of the AEC. "Therefore, Indonesia has to prepare state banks to be more competitive," he said. Bank Rakyat Indonesia (BRI), another state lender, is not as big as Bank Mandiri but it has recorded good performance with annual profit margin of Rp17 trillion. "Unfortunately the profit of the bank has always been paid to the state," Harry said. He said BRI should be allowed to retain its profit to increase its capacity to finance expansion . A director of Bank Mandiri Pahala N. Mansury said banks in ASEAN would face an open competition in 2020, therefore, consolidation of the country`s banking industry is urgent.