JAKARTA (Yosefardi) – Investors opt to sell banking stocks this morning on concern increasing trend of cost of funds would significantly impact on net interest margin and profit of the banks.
This morning, Bank Central Asia fell 1.4%, Bank Negara Indonesia declined 1.6%, Bank Rakyat Indonesia down 0.6%, Bank Tabungan Negara shed 1%, Bank Mandiri dropped 1.2%, and Bank Panin lost 2.6%.
Danamon reported its cost of funds grew by 10 basis points in third quarter of this year, compared to previous quarter, and expects it will increase further by 20 basis points in the fourth quarter of this year.
Bank Danamon opts to focus on boosting current account and saving account (CASA) as cost of funds for time deposits tend to increase alongwith the higher benchmark BI Rate which prompts the migration of funds from CASA to deposits. BI Rate has raised to 7.25% from previous 5.75%, which will impact on banking’s cost of funds until this year end.
The increase in cost of funds had impacted on Bank Danamon’s net interest margin (NIM). The bank expects its NIM would decline 20 basis points to 9.5% in the fourth quarter of this year, from current 9.7%.