Bank Indonesia (BI) has cut its benchmark interest rate four times by 25 basis points (bps) each so far this year in its effort to help the government cushion the adverse impact of the COVID-19 outbreak on the economy. At the same time, cooling economic activity has slowed loan demand and growth.Indonesian banks’ loan growth slumped to 1.49 percent year-on-year (yoy) in June from 3.09 percent in May. Meanwhile, third party funds grew 7.95 percent annually in June, slightly lower than 8.89 percent in May.The slowing loan demand helped improve BTN’s liquidity as its loan-to-deposit ratio (LDR) stood at 111.27 percent in the first half of this year, lower than 114.24 percent in the corresponding period of 2019. Its liquidity-to-coverage ratio (LCR), which measures a bank’s short-term liquidity resilience, rose to 132.22 percent in the first half of this year from 105.5 percent the year before.A lack of appetite for new loans, however, resulted in the bank only recording 0.32 percent growth in loan disbursement as of June. The figure was far lower than the 18.78 percent recorded in the same period a year before. BTN, which focuses on mortgages, pocketed Rp 768 billion in net profit during the period, plunging by more than 41 percent annually. The steep drop was caused by a 5.86 percent annual decline in net interest income to Rp 4.44 trillion and skyrocketing loan-loss provision that went up 115.03 percent during the period.However, Pahala said the net profit figure was actually above the bank’s initial projection of around Rp 700 billion.“We’ve booked a pretty solid performance in the first half of this year so we are quite optimistic that we can exceed our target,” he said.BTN distribution and retail funding director Jasmin added that the bank’s ability to record positive, albeit slight, loan growth during the period was the result of increased demand for subsidized housing mortgages.“Subsidized housing mortgages grew 5.84 percent as of the second quarter of this year and this clearly shows that this will be our growth engine in the future,” he said.Although mortgages for non-subsidized housing contracted 1.96 percent during the period, Pahala said the segment had started to show signs of improvement in June.Demand for non-subsidized housing loans increased 40 percent in June compared to April and May, following the easing of large-scale social restrictions (PSBB), he added.BTN also reported a jump in its non-performing loan (NPL) ratio to 4.71 percent as of June, much higher than the 3.32 percent ratio recorded in the same period last year. It expects to further lower the ratio to 4.5 percent by the end of the year.The bank has restructured 36.46 trillion in loans from 230,000 borrowers as of June, with most of them being mortgage loans.“Customers can also extend their loan restructuring as long as they can provide proof that the pandemic has affected their income,” said Pahala.BTN shares, traded under the code BBTN on the Indonesia Stock Exchange (IDX), soared 3.72 percent as of 12:26 p.m. on Tuesday as the main gauge, the Jakarta Composite Index (JCI), jumped 1.13 percent. The stocks have lost 40.8 percent of their value this year.Topics : State-owned Bank Tabungan Negara (BTN) is optimistic that it will exceed its net profit target this year as the COVID-19 pandemic lowers its cost of funding.President director Pahala N. Mansury expressed his optimism on Monday that the publicly listed bank could book more profit than its initial projection of Rp 1.1 trillion (US$75.36 million) by the end of this year, supported by easing liquidity competition.“There is plenty of liquidity in the market right now as interest rates decline and loan demand slows, making competition for liquidity less fierce and helping us to improve our liquidity,” he said, adding that the bank’s cost of funding had decreased by 80 basis points during the first six months of the year from the same period last year.