PEFINDO views the outlook for the multi-finance company industry as stable in the near to medium term, supported by the national economic recovery stimulating the industry's growth going forward, especially after the Government lifted the Restriction on Community Activities (PPKM) at the end of December 2022. In addition, we view that the enactment of the second booster vaccine will continue to keep the Covid positive case rate at a manageable level. However, we view the trend of rising interest rates to become the main challenge, and accordingly we expect the multi-finance companies’ net service assets growth will be lower this year. With the majority of industry's funding coming from external including banks and debt issuances, we view industry will experience pressure from the rising cost of funds, which will also impact the growth of financing portfolios. As of December 2022, net service assets were recorded at IDR581.8 trillion or grew 16.4% YoY compared to 2021 receivables of IDR500,0 trillion. Going forward, we expect growth to be lower at 7%-9%. In terms of contribution, automotive financing will remain the main contributor of 60%-70% of total industry receivables. In terms of financial performance, high cost of funds may put additional pressure to multi-finance companies' net interest margin. In addition, we expect provision expenses to be stable with no potential substantial increment compared to the pandemic period.
More detail ...