1Branch Banking. 26 BCA 2008 Annual Report. Third Party Funds (in billion Rupiah) SME & Commercial Banking Loans 1 (in billion Rupiah) 51,172

Transcription

1 1Branch Banking Third Party Funds (in billion Rupiah) SME & Commercial Banking Loans 1 (in billion Rupiah) ,172 Current Accounts 23,464 Commercial 105,390 Savings 21,297 SME 52,967 Time Deposits ,936 Current Accounts 17,383 Commercial 94,730 Savings 17,543 SME 50,506 Time Deposits 1 In 2008 commercial loans were reclassified as credit facilities between Rp 7.5 billion and Rp 100 billion from Rp 5 billion to Rp 50 billion in 2007; while SME loans were reclassified as credit facilities up to Rp 7.5 billion from Rp 5 billion in The Commercial and SME loans in 2007 reflect the new reclassification. 26 BCA 2008 Annual Report

2 ...balanced growth in transactional banking... Suwignyo Budiman Director BCA continued to improve customer services in 2008 as part of our core strategy to be the leading transactional bank in Indonesia. Electronic banking delivery channels have gained wider acceptance as the number of Internet Banking users grew by 48.0%, while ATM transactions increased 21.9%, and Mobile Banking increased 84.3% in value of transactions. Customer convenience and quality service leads to satisfied customer base that in turn provides a source of funding for liquidity purposes. This strength allows the banks to maintain and expand business in the midst of the global crisis. Lending to Commercial Business and SMEs increased satisfactorily in 2008, although the economic uncertainties in the second half of the year led the Bank to raise lending criteria and to restrict new lending. Nevertheless, outstanding loans to Commercial Business and SMEs increased by 28.2% in 2008 while non-performing loans (NPLs) improved to 0.9%. Transaction Banking A unique advantage of BCA is its strength in transactional banking network with 844 branches nationwide and our comprehensive electronic banking. BCA offers the most complete and convenient range of banking options and services to our business and individual transactional banking customers. In 2008, the value of Internet Banking transactions overtook those of ATM transactions. This significant milestone indicates not only the success of our Klik BCA Individu and Klik BCA Bisnis products in providing a top quality service but also the increasing sophistication of the Bank s internet customers, whose numbers increased by 48.0% and now stand at more than 1,170,000 customers. BCA 2008 Annual Report 27

3 Branch Banking ATM transactions remained the most popular electronic delivery channel, recording over 790 million transactions throughout Our network of strategically placed ATMs, consisting of multifunction, deposit and Kiosk ATMs, increased by 343 ATMs to reach 5,997 ATMs at the end of Mobile phone banking also recorded a tremendous increase of 73.3% in number of transactions with a total transaction value of Rp 95.5 trillion. The benefits of such the convenience create satisfaction among users and provide a stable source of fee-based income for the Bank. Merchant debit services have been extended to more than 53,000 outlets at more than 30,000 different commercial establishments. Our highly visible multiuse Electronic Data Capture (EDC) unit allow the use of the debit card, the Flazz Card a cash card, and BCA s credit card line, including Visa, Mastercard and the BCA Credit Card. Distribution Channels (unit) Number of Branches Number of ATMs 5,997 5,654 Number of EDCs (Electronic Data Capture) 81,750 65,645 Electronic Delivery Channels Transaction ATM Number of Transactions (in million) Transaction Value (in trillion Rupiah) Internet Banking Number of Transactions (in million) Transaction Value (in trillion Rupiah) Mobile Banking Number of Transactions (in million) Transaction Value (in trillion Rupiah) BCA 2008 Annual Report

4 Underpinning these services and providing the foundation for cross-selling is a customer base of around 8 million accounts. Our customers main operational account is the Tahapan Savings Account, which at more than Rp 100 trillion in deposits accounts for 47.8% of total third party funds. Tahapan Gold, serving the specialized needs of individual entrepreneurs, continued to grow in both number of accounts and total funds, increasing 38.1% to thousand accounts and 26.0% to Rp 39.2 trillion in funds. Started in 2007, BCA has seen sustained growth with the FlazzCard, with the number of FlazzCard in use increasing to 265,082 in 2008, and total transaction volume of Rp 56.6 billion, up 6652% from the previous year. Based on this success, we plan to move out of the trial period into a wide-spread campaign to expand FlazzCard usage. In 2009 we will introduce the Combo Card, which combines the on-line access of ATMs and credit cards with off-line access of the FlazzCard. In 2008, we conducted a pilot project at a large institution, combining financial functions and additional userprogrammable non-financial options all on a BCA card. SME and Commercial Banking SME and Commercial Banking are focused on meeting the demands of small to medium sized business catering to Indonesia s diversified economy. Lending is divided into four segments: Commercial Banking customers are those customers with borrowing between Rp 7.5 billion and Rp 100 billion; SME customers with loan outstanding ranging from Rp 500 million to Rp 7.5 billion; KUK or small loans to family oriented businesses, are loans under Rp 500 million, while microcredit facilities are loans under Rp 50 million. Year on year loan growth in these areas was 28.2%, and total loans represents 39.7% of the Bank s total lending portfolio, while combined NPLs have declined to 0.9% in 2008 from 1.2% in SME and Commercial banking lending is undertaken by experienced account officers who are committed to building sound business relationships. To help staff adapt and respond effectively to the changing business environment, extensive training was provided throughout 2008 in sales marketing and managerial skills with an emphasis on credit issues. During this time of crisis, new loan marketing is targeted to existing quality debtors and stable BCA depositors. BCA 2008 Annual Report 29

5 Branch Banking Commercial Banking concentrates on serving the top players in each market segment. Total for Commercial Banking loans were up 35.0% to Rp 23.5 trillion in By focusing on developing long-term and comprehensive relationships, we create stable high quality partners. This is evidenced by the quality of the commercial loan portfolio as seen in the decline in the NPL ratio to 0.9% at year end 2008, from 1.0% at year end Throughout 2008, we continued to centralize loans in Regional Offices and Commercial Business Centers, simplifying bureaucratic procedures and policies and enabling marketing personnel to be better focused on serving customers. SME loans are targeted to provide working capital needs to medium scale businesses, primarily in wholesale trading. Loan pre-qualification is quick and easy, using our effective on-line Loan Originating System. Lending to SMEs grew by 21.4% to Rp 21.3 trillion in 2008, while NPLs in 2008 improved to 0.9%, down from 1.4% in While the portfolio is currently relatively small, BCA also offers KUK loans to existing BCA depositors who wish to establish home industries, retail shops, restaurants and the like. BCA is also enthusiastic about involvement in microcredit. BCA has developed over 111 strategic alliances with established institutions, such as the State-Owned Pawnshop Operator Pegadaian, Rural Credit Banks, and Cooperatives to directly and indirectly make funding available to support micro initiatives in rural area. 30 BCA 2008 Annual Report

6 Supply Chain Financing In 2008, we brought together existing core competencies to implement a wholly new business platform. This supply chain financing scheme provides credit to support transactions of distributor, supplier, dealer, and kiosk financing through our IT network. Within pre-established limits, credit is revolving and can be closely monitored. Initial results have been encouraging and we are moving ahead with similar projects on a broader scale. Future Direction Going forward, we aim to target growth towards our core competencies, to increase both transaction volumes and amounts and to infuse excitement into our new services. Commercial & SME Banking will emphasize maintaining loan quality, while at the same time improving credit infrastructure and staff training so as to be ready for rapid loan expansion when conditions improve. We will expand Commercial Business Centers throughout Java as well as outside Java, continuing the improvement in efficiency and service quality. As an expansion of the supply chain financing, we will develop new credit schemes, including bridging loan for Business to Business (B2B) transactions. BCA 2008 Annual Report 31

7 2 Corporate Banking Corporate Loan Portfolio 1 (in billion Rupiah) ,233 Rupiah 9,721 Foreign Currencies ,595 Rupiah 8,707 Foreign Currencies 1 In 2008 corporate loans were reclassified as credit facilities above Rp 100 billion from above Rp 50 billion in Corporate loans in 2007 reflect the new reclassification. 32 BCA 2008 Annual Report

8 ...deepening our relationship with our corporate partners... Dhalia Mansor Ariotedjo Director BCA s Corporate Banking group focuses on relationship building with Indonesia s leading and largest corporations. Our Corporate Banking teams are organized along industry lines in order to gain a deeper understanding of each industry sector so as to develop tailor-made solutions for our customers. This strategy has been highly effective in promoting better understanding of our customers and has been especially helpful in allowing us to prepare for the impact of the global crisis on our clients. In the current economic environment BCA is stressing three core principles in lending for the corporate sector. First, BCA s corporate lending philosophy is to provide value added lending for investment in core business assets: expansion of product lines, working capital, horizontal and vertical integration, and investment in property, plant and equipment for realizable future demand. BCA does not deal in derivative lending products. Secondly, BCA s selection of diversified, stable and reputable corporations throughout all market segments minimizes risk exposure of a significant downturn in any one industry. Lastly, though we reduced all lending as a precautionary measure in late 2008, Indonesian business and industry remains strong and we will focus our efforts on these corporate partners in the upcoming year. BCA 2008 Annual Report 33

9 Corporate Banking Direction in 2008 Throughout the year, we balanced long-term growth, client needs, and liquidity demands with our risk appetite. Growth in loans, especially in the top five industrial sectors of telecommunications; chemicals and plastics; building materials and other construction-related industries; food and beverage; and agriculture and plantations, was very robust through the third quarter, tapering off at year end, with an overall increase of 42.3% from end of 2007 to stand at Rp 46.0 trillion at yearend The major portion of corporate loans growth occurred in the first half of the year in response to a sudden unavailability of normal funding options for our large corporate customers. In response, available liquidity was redirected to satisfy our existing customers funding needs, offering the Bank higher returns well within acceptable risk limits Corporate Loan by Facilities (in billion Rupiah) 20,767 19,910 Investment Working Capital 5,277 Others ,726 14,705 Investment Working Capital 3,871 Others 34 BCA 2008 Annual Report

10 Special interest was paid to developing lending clusters within the telecommunication industry and the agribusiness industry. This strategy is designed to build integration between our corporate lending, commercial and SME lending and our transactional excellence. Through this integration, larger and related smaller businesses benefit from the full range of BCA cash management and transactional services, while Bank lending is available at both levels. Only after close consideration of an industry will we apply this approach. Syndicated loans for infrastructure projects, notably for toll roads and power generating stations, were negotiated in 2007 and were proceeding through the preparation phases in We are committed to continuing our involvement in infrastructure developments and other infrastructure loans for 2009 are in the negotiating phase. Strengthening Relationships Widely-expected slower global economic growth in 2009 will have a palpable spill-over effect in Indonesia, especially in commodities and export related industries. Taking this into consideration, BCA continues to maintain a proactive provisioning policy to anticipate this uncertainty. Though we have intentionally limited new loans, we are committed to our existing customers and will see them through this downturn. The Bank s interest is, accordingly, best served with both the Bank and its customers remaining profitable and competitive at all points along the economic cycle. BCA 2008 Annual Report 35

11 3 Individual Banking 2008 Consumer Loans (in billion Rupiah) 10,284 Mortgage 7,856 Vehicles 2,853 Credit Cards ,785 Mortgage 4,329 Vehicles 2,045 Credit Cards 36 BCA 2008 Annual Report

12 ...improving convenience and adding value for our customers... Henry Koenaifi Director In 2008, BCA experienced robust growth in our home mortgages, car loans, credit card, and wealth management businesses. Our strong and diversified funding base allows the Bank to develop highly competitive consumer loan products that are marketed to the growing middle class in Indonesia. Positive demographics will lead to continued growth in consumer lending in the future. In 2008 we organized a dedicated Individual Banking business unit designed to facilitate expected future growth and position ourselves to better serve our customers in this dynamic market segment. The integration of consumer financial products within the Individual Banking business unit has resulted in increased efficiency in the lines of communication, a streamlining of the approval process, and re-energized marketing programs, as well as enhancing our potential for crossselling and cross-promotion of various products. Despite loans growth tapering off in the 3 rd and 4 th quarters due to tightened approval standards as a result of the global economic condition, total consumer loans grew 47.8% to Rp 21.0 trillion in 2008 from Rp 14.2 trillion in Growth in this sector was led by strong mortgage and car loan products. Consumer lending now represents 18.6% of total Bank lending at year end 2008, up from 17.2% in Mortgage: A Growing Market In 2008, total home mortgages outstanding come to Rp 10.3 trillion for a year on year increase of 32.1%. New loan products and features succeeded in increasing the number of borrowers to 34,536, most of whom were existing BCA customers. Unusual within the industry, 85% of our mortgages are generated directly through Individual Banking network with the remaining 15% as referrals from developers and brokers. While we view this situation favorably as it reinforces the Bank s commitment to existing customers, BCA is also increasing cooperation with property developers and brokers to take advantage of this large and growing market. As of December 2008 BCA formed housing loan partnerships with 251 developers and 85 brokers. BCA 2008 Annual Report 37

13 Individual Banking The Fix and Cap mortgage product continued to generate substantial interest in 2008 and is poised to become the top of mind mortgage loan product in Indonesia. BCA is committed to developing a mutually beneficial relationship with our customers by offering attractive and competitive borrowing products to our core customer base. Vehicle Loans Subsidiary BCA s vehicle loans are marketed by BCA Finance, a wholly-owned subsidiary of BCA. BCA Finance operates in both the dealer-driven market and direct customer-driven market. BCA Finance s target market is the medium to upper class consumer. In 2008, three new branches were opened, making a total of 34 outlets nationwide. Among new products offered in 2008 was KKB Instant, which provides short-term loans for established customers using their vehicles as security. Increased effort was also made to diversify into the lucrative used vehicle segment by balancing higher risk with higher returns. Despite tightened loan requirements, including higher down payment levels, BCA Finance continued to experience increase consumer demand for automobile financing. Credit Card Business We expanded and diversified our range of credit cards to suit specific market segments according to lifestyle needs. BCA offers both Visa and Mastercard as well as our private label BCA credit card. In 2008, BCA cards in force increased by 28.6% to 1.8 million cards of which 40% are gold and platinum cards. Total credit card outstanding grew 39.5% to Rp 2.9 trillion at year end In 2008, we increased credit line utilization of the BCA credit card with a number of special offers and numerous joint promo programs with strategic partners. The successful launch of the co-branded Carrefour BCA card in April 2008 should allow for significant growth potential to further expand our card business in the future. BCA credit card holders now also enjoy enhanced convenience through the introduction of an SMS service for new applications, card activation, and for converting purchases 38 BCA 2008 Annual Report

14 into fixed installment payments. These initiatives have been well received by the market and we expect will provide a cornerstone for the future solid growth at our credit card products. Wealth Management Potentials Professional Wealth Management services are provided for select customers through BCA Prioritas branches. The major products offered to our high networth clients include bancassurance and a variety of investment products such as Government Retail Bonds (ORI) and mutual funds. Due to recent dislocation in the global markets we are currently reassessing our approach to the wealth management business in order to better protect our clients from market uncertainties. Future Direction We anticipate that selective lending to our existing long-term customers and selective marketing to new customers will provide the basis for the strategic growth of the Individual Banking business. Through careful selection of customers and prudent risk management the NPL of our consumer loans has always been held at manageable levels thereby allowing some flexibility for new lending. As part of this, in 2009 BCA plans to introduce a special highly competitive home mortgage product to long-time BCA customers. We remain confident that new bookings will be generated through the transactional strength of the Bank and that we will become the premier provider of housing loans in Indonesia. For vehicle loans the focus will be on expanding the network and infrastructure, developing new products to suit customer needs without sacrificing loan quality, and focusing on those market segments with relatively low risk. In the credit card business, we will continue with our strategic partnerships and expand promotional programs in order to provide more customer benefits, increase both consumer and merchant loyalty, and acquire new cardholders. We also have plans to launch the BCA Visa Corporate Card, a personalized card for corporate expenses. To improve credit quality and minimize credit risk, higher requirements for new applications will be instituted, as well as new standards for the verification process, requests for limit increases, control and monitoring of card activities, and the collection process. BCA 2008 Annual Report 39

15 4 Treasury and International Banking Marketable Securities (in billion Rupiah) ,811 38,183 Government Bond Bank Indonesia Certificates 12,374 Corporate Bonds and others ,778 Government Bond 35,552 Bank Indonesia Certificates 10,399 Corporate Bonds and others 40 BCA 2008 Annual Report

16 ...maintaining liquidity and ensuring optimum profitability... Jahja Setiaatmadja Deputy President Director Treasury Throughout 2008, BCA s Treasury focused on accomplishing its primary responsibility of maintaining Bank liquidity. Sharply reduced international inflows of capital placed demands on local funding sources while globally, stock market crashes reduced the available capital base. These extraordinary contractions warranted more stringent actions to maintain liquidity and greater diligence in predicting future capital flows. Throughout 2008, BCA succeeded in maintaining adequate liquidity levels both in Rupiah and in US Dollar terms, with secondary reserves of Rp 41.0 trillion and US$ million at the end of A very close eye was kept on interest rates, on ways to balance risk and return on excess liquidity, and on means to maintain profitable margin spreads. Third party funding remains strong, with demand deposits representing 24.4%, savings deposits representing 50.3%, and time deposits representing 25.3% of total funding. In line with the industry as a whole, interbank placements were curtailed and limited to select correspondent banks while secondary reserves in the form of Bank Indonesia certificate were preferred on both a returns and a security basis. Fine tuning of returns was pursued by acquiring discounted corporate and government bonds on a case by case basis. The result of these actions was that the Bank s NIM was maintained above the 6% target. The past decision to withhold involvement on purchasing exotic derivative products allowed the Bank to focus on its competencies and pursue long term profitability, avoiding asset evaporation. BCA 2008 Annual Report 41

17 Treasury and International Banking Treasury also provides a diverse range of products, to assist corporate, commercial and individual customers to meet short term and long term investment and transaction needs. These financial products are developed to suit the risk profile and risk appetite of customers. Included are facilities for the forward buying and selling of currencies as well as for investment in mutual fund products. BCA was also active as a designated primary dealer for Surat Utang Negara (SUN) and as a sales agent for Obligasi Retail Indonesia (ORI). In 2008, BCA sold Rp 888 billion of ORI-004 and Rp 580 billion of ORI-005 series in the primary market. BCA also provides regular price quotes for all ORI series in the secondary market. We feel honored this year as BCA was recognized as the Best Foreign Exchange Bank in Indonesia 2008 by FinanceAsia for its high quality forex services. International Banking BCA maintains its commitment to its loyal export-import customers who have contributed to the solid performance of the International Banking business. BCA continues to issue Letter of Credit as well as providing exporters with pre- and post-shipment financing in the form of negotiated or discounted export bills on L/Cs, while taking care to be prudent in light of the declining export markets in fourth quarter BCA provides outward remittance services in 13 major foreign currencies. For remittances to China, BCA offers the China Today (send today- receive today) and the Yuan Remittance (receive full amount in Yuan on the same day) services. For inward remittances from migrant workers overseas, 42 BCA 2008 Annual Report

18 BCA offers the FIRe (Financial Institution Remittance) service, a web-based on-line remittance service utilizing the network of BCA s correspondent banks. For recipients without a BCA account, the overseas sender can use FIRe Cash, by which the recipient can withdraw cash conveniently at any BCA branch nationwide. BCA s correspondent banks now total around 1,800 banks in 108 countries, including 136 FIRe tied-up partners in the Middle East and Asia-Pacific countries. To further maximize this cooperation we place marketing officers with our FIRe partners in those countries. We also increased from 27 to 35 the number of participating banks in the US Dollar Direct Settlement service, which provides bilateral and multilateral payment services. Expanding Services Treasury will continue to act in support of BCA s overall strategy to maintain liquidity and to ensure the Bank s optimum profitability. In International Banking, BCA intends to expand its profitable services by increasing the number of sales outlets and encashment points for FIRe, and promoting Yuan Remittance. In addition, applications for trade finance will be installed and operated by customers at the customer s own premises International Banking (in billion Rupiah) 267 Trade Revenue 177 Remittance Revenue Trade Revenue 155 Remittance Revenue BCA 2008 Annual Report 43