Earnings gap between Indonesian banks widen as small players struggle

The 2018 profits of Book II banks dropped to $648.66m from $726.38m in 2017.

The earnings of small and medium-sized lenders in Indonesia, known as Book I and Book II banks, extended their three-year decline in 2018 amidst toughening competition from larger players, reports The Jakarta Post.

Book I banks only booked profits of $48.46m (RP700b) in 2018 from $110.94m (RP1.57t) in 2015. Similarly, the profits of Book II banks fell to $648.66m (RP9.18t) in 2018 from $726.38m (RP10.28t) in 2017 and $729.21m (RP10.32t) in 2016.

The president of Book I lender, Bank Kesejahteraan Ekonomi (BKE) Sasmaya Tahuleley, confirms the more challenging operating environment for smaller players. “The Financial Service Authority has advised [small banks] to carry out consolidations,” said he said, adding that his bank plans to hold an IPO this year with the hopes of being upgraded to a Book II bank.

Also read: Indonesia urged to cut bank network to 70 lenders

A separate report from UOB Kay Hian notes that the country’s top lenders account for the lion’s share of digital banking fees. State-owned Bank Mandiri, Bank Rakyat Indonesia, Bank Central Asia and Bank Negara Indonesia still dominate the mobile and online banking business as medium-sized players players face difficulty in stealing market share whilst smaller banks have failed to offer significant digital response, analyst Alexander Margaronis said in an earlier report.