OJK Calls Banking Industry Profit Reaches IDR 171.03 Trillion In August 2024

According to OJK, the profits from the Indonesian banking industry grew 6.42 percent compared to August 2023. (Photo: Freepik.com)

JAKARTA - The Financial Services Authority (OJK) noted that the banking industry's profit reached IDR 171.03 trillion in August 2024. When viewed on an annual basis (year on year / yoy), this achievement grew 6.42 percent compared to August 2023.

"In general, until August 2024, the majority of the banking industry in Indonesia posted profits," said OJK Chief Executive of Banking Supervision (KEPP) Dian Ediana Rae quoting Antara.

Furthermore, based on the projection, bank profit can still grow sustainably, especially after the monetary relaxation policy in the form of a decrease in the BI Rate from 6.25 percent to 6 percent which can have an impact on reducing cost of funds, thus becoming a driving factor in sustainable growth that will contribute to bank performance.

Dian said that efforts to increase reserves by banks are mitigation steps in anticipating credit risk if there is a potential increase in credit risk exposure. The non-performing loan (NPL) of banking coverage in August 2024 was recorded at 191.75 percent with maintained NPL at 2.26.

Based on OJK Regulation Number 40/POJK.03/2019 concerning Commercial Bank Asset Quality Assessment, Reserves for Value Reduction Losses (CKPN) are preliminary forms based on the decline in the value of financial instruments according to financial accounting standards (SAK).

This is one of the strategic steps taken by banks in order to mitigate the increase in bank credit exposure both in the short and long term.

OJK always encourages banks to continue to strengthen risk management and implement prudential banking and good governance so that banks can continue to grow in health and sustainability.

Peningkatan pencadangan dapat terjadi sesuai dengan penurunan nilai pada instrumen keuangan sesuai dengan SAK sebagaimana portofolio dan atau exposur yang dimiliki masing-masing bank.

Meanwhile, credit quality is maintained with a relatively stable ratio of NPL Gross banking at the level of 2.27 percent and NPL Nett at 0.79 percent.

Loan at risk (LAR) also showed a downward trend to 10.17 percent in August 2024. The LAR ratio also approached the pre-pandemic level of 9.93 percent in December 2019. In this regard, there is currently no credit risk that has an impact on bank profitability significantly.

On the other hand, OJK's supervisory steps are always carried out according to the risk based supervision cycle, including providing guidance to banks so that they are in line with the Bank's Business Plan, reserve evaluation, and capital adequacy.

In addition, OJK carries out on-site supervision that is carried out by sampling so that credit is given in accordance with the prevailing prudential banking with adequate risk management and governance and evaluates the recording of financial reports in accordance with SAK.