Resona Boosts Rupiah Loans After Indonesia Changes Currency Rule

  • Central bank restricted foreign-currency transactions in 2015
  • Indonesian growth is attracting Japan’s consumer-goods makers

Resona Holdings Inc., the Japanese bank with ties to Indonesia dating back more than half a century, is boosting lending in rupiah following rules introduced last year to ensure greater use of the currency.

The regulation requiring most business transactions in Indonesia to be conducted in rupiah rather than dollars represents an opportunity for the bank’s local unit because it has deposits in the currency, said Atsushi Tahara, president director of Bank Resona Perdania. Almost 70 percent of the unit’s 10.7 trillion rupiah ($821 million) in loans are now in rupiah, after being evenly split with dollars before the rule change took effect, he said.

Japanese banks are expanding in emerging economies to tap faster growth as a shrinking population and evaporating interest rates squeeze profitability at home. Indonesia’s emerging ranks of consumers have prompted Japanese companies such as seasoning maker Ajinomoto Co. to increase their presence in Southeast Asia’s most populous nation.

“Bank Resona Perdania has a 58-year history in Indonesia and our local customer base is our strength,” Tahara said in an interview in Tokyo this month. The bank’s deep network of local companies also helps it to find business partners for Resona’s Japanese clients that are expanding into the country, he said.

Loans Growing

Japan’s fifth-biggest lender by market value owns a controlling 43 percent stake in Bank Resona Perdania, which employs 300 people across its eight-branch network. The Jakarta-based bank’s loan balance grew 11 percent in the two years after Tahara took his post in 2013. The unit contributed 1.4 billion yen ($13 million) to Resona’s net income last year.

Indonesia’s central bank introduced the rule in July 2015 banning the use of foreign currency for transactions except in cases such as international trade, in an effort to deepen the rupiah market and stem a slide in the local currency. While some companies expressed concern at the time that the move would increase their borrowing costs and currency risk, the rupiah has gained about 2 percent against the dollar since the regulation took effect.

For more on the introduction of the rupiah rule, click here.

Resona’s larger rivals are also looking to Indonesia for growth. Sumitomo Mitsui Financial Group Inc. completed the purchase of a 40 percent stake in PT Bank Tabungan Pensiunan Nasional in 2014. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, is seeking acquisitions in the nation and Mizuho Financial Group Inc. has a unit there.

Consumer Shift

Tahara said that while many of the 1,800 Japanese companies operating in Indonesia are manufacturers such as automakers, there is an increasing shift toward consumer industries including food and drinks.

Ajinomoto said in June it plans to invest 2.5 billion yen in a new factory that will boost production capacity in Indonesia by 80 percent. Growth in Southeast Asia’s largest economy, which is showing signs of rebounding from a commodity slump, will accelerate to 5.3 percent next year, according to economists surveyed by Bloomberg.

Next year “could mark a turning point for Indonesia” as fiscal spending and infrastructure investment fuel growth, Mohamed Faiz Nagutha, a Singapore-based economist at Bank of America Corp., wrote in a note on Oct. 13.

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