Economic Sector Portfolio Optimization in the Commercial and Retail Segments
Abstract: Credit disbursement
is an investment decision in the banking business. Therefore, the concept of
"high risk high return" becomes the focus of banks in managing
credit. One of the effort of these banks to manage risk and enhancing/
increasing returns is forming their portfolio. This research was conducted in
one of the state banks in Indonesia, which has the goal of increasing lending
in the retail and commercial segments. Single Index Model is used to find the
optimal composition of the economic sector. This model recommends economic
sectors into the portfolio on the basis of Excess Return to Beta, which
represents the difference between the rates of return in the form of interest
income with a risk-free asset returns, divided by beta sectors of the economy
itself. The results showed that the
return portfolio can be improved and the risks derived using that approach.
Banking business purpose is the return and growth so that the portfolio
optimization needs to be supported with other parameters when the economic
sectors that are not recommended put in a portfolio. Analysis of the
performance of RAROC is a performance metric that of performance that computes
net profit after adjusting for potential losses than capital allocation, can be
used to help the formation of portfolios that received the return and risk are
still in line with expectations.
Author: Diah Diana
Sulistyorini, Sri Hartoyo, Trias Andati
Journal Code: jpadministrasinegaragg150043
