ALTERNATIVE EARNING ASSET ALLOCATION BEYOND LOAN WITH GOVERNMENT BOND; THE CASE STUDY OF PT BANK BUKOPIN TBK

• Main Author: Jatnika, Okki
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/35757
• Institution: Institut Teknologi Bandung

Bank has an important role in the economy cycle. As the intermediary institution in finance, bank has a responsibility to manage the fund that collected from the people and channeling the fund as a loan to parties either through direct loan or capital market to generate profit. Every investment decision contain a risk as an opposite part of the rate of return. The higher of return contain a higher risk and vice versa and it settled in Asset and Liability Management (ALMA) to get an effective asset allocation. Every risk of the bank is highly related with the other risks. Market risk will impacts the liquidity risk, and also the reputation risk. Government Bond is believed as one of the lowest free investment. A country, especially developing country like Indonesia launched government bond as one of source of fund to do development. Currently, Indonesia Government have main concern with the infrastructure development, and it will needs a huge fund to support those developments and Indonesia Sovereign Credit Rating still have good rating. According to Central Bank of Indonesia, in April 2018 the rating from Standard & Poor’s is BBB-, Fitch Ratings BBB, and Moody’s Baa2. It means that Indonesia is one level higher than Investment Grade. As a bank that has focus in the Small and Medium Enterprise segment, for Bank Bukopin, loan is one of its largest revenue stream machine. But the volatility of the economy impacts the Non-Performing Loan of Bank Bukopin, which raise a highest level in December 2017 with 8.54%. This condition makes the management should consider the other earning assets that have a lower risk with government bond to rebalance the portfolio that have a high risk characteristic, such as loan. The forecasting results using ARIMA concludes that the expected Indonesia 10Y Government Bond Yield have a stable growth. Whereas the Interest Income Ratio is decay gradually and aggravated by the Provision Ratio that has a stable growth. It shows that government bond could be an alternative investment option. Loan is still the most priority earning asset of the bank because bank has a responsibility as the intermediary institution, and also loan gives a highest interest income. In other side, Government Bond could be used to rebalance the risk of the earning assets as the less risky investment. FR0046 could be considered as a short-term IDR government bond option and FR0059 as the option for the longer term investment. The simulation on the past financial statement as in December 2017 has shown that the government bond investment can increase the Net Interest Margin from 3.43% into 3.51%.