No immediate NPL recovery for Indonesian banks in 2017: analyst

NPL forecast for 2017 is 3%.

UOB Kay Hian's 3% forecast is slightly down from 3.1% previously.

"Our 2016 NPL forecast is 2.9%, up 10bp. Our base- ase scenario assumes NPL ratio runs at a monthly NPL addition to the system of Rp2.2t per month for 2016 and loan growth forecasts of 10% and 12% for 2016 and 2017 respectively. Restructured loans and NPLs worth Rp97t and Rp127t respectively are significant, as the value of the restructured loans is high."

Here's more from UOB Kay Hian:

We estimate current real NPL ratio at 3.6% including NPLs from restructuring. Last year’s relaxation of loans’ restructuring criteria has obscured the real NPL level. We estimate 25% of restructured loan portfolio is in the NPL category.

Relaxation of criteria on restructured loans has been beneficial to many companies that are in financial difficulties and have helped banks to lower formal NPLs. High levels of restructuring prolong provisioning for loan impairments and give extra time for reducing bad loans.