10 02 04 BMRI Analyst Day

(1)

(2)

Today’s

Agenda

1. Initial

Results

2009

2 Corporate Plan 2010 2014 Highlights

2. Corporate

Plan

2010

‐

2014

Highlights

3. IFRS &

PSAK 50/55

/

(3)

Full

Year

performance

remains

robust

Q4

2008*

Q4

2009*

Change

Total

Assets

Rp358.4

tn

Rp397.8

tn

11.0%

Total Deposits

Rp289 1 tn

Rp319 5 tn

10 5%

Total

Deposits

Rp289.1

tn

Rp319.5

tn

10.5%

Low

Cost

Deposits

Rp164.0

tn

Rp186.4

tn

13.6%

• Current

Accounts

Rp69.1

tn

Rp72.7

tn

5.2%

• Saving

Accounts

Rp95.0

tn

Rp113.7

tn

19.8%

Total

Loans

Rp174.5

tn

Rp198.5

tn

13.8%

Gross

NPL

4.73%

<3.0%

‐‐

2

Provisioning

Coverage

127.1%

>200%

‐‐

(4)

Maintaining

momentum

for

growth

Y‐o‐Y



Y‐o‐Y



Loans by SBU* (Rp Tn)

Deposits by Product – Bank Only (Rp Tn)

14.90

280 300

FX Time Rp Time FX Demand Rp Demand

17 10

5.38

160 180

Micro Small Cons Comm Int'l Corp

 (30.2%)  23.0% 15 4% 95.69 108.51 15.93 21.35 200 220 240

260 FX Savings Rp Savings

19.27 23.59 14.82 17.10 4.38 120 140 13.4% 15.4% 22.5% 51.82 9.78 15.09 18.04 93.20 80.47 73.43 15.65 12.56 140 160 180 200 4 48 41.56 49.06 14.23 8.86 13.08 1.73 1.94 2.68 80 100 _19.5% 0.0% 18.0% 0 9% 4.12 4.70 7.38 9.66 30.12 33.61 50.43 51.82 11.39 9.07 60 80 100 120

62 04 69.82 0.91 2.82 4.44 4.48 25.85 24.36 31.46 10.66 11.08 7.56 40 60 12 6% 0.9% 30.8% 45.17 57.61

81.54 82.23 96.79

3.50

0 20 40

Q4 '05 Q4 '06 Q4 '07 Q4 '08 Q4 '09

29.94 36.12 44.84 62.04 0.95 0 20

Q4 '05 Q4 '06 Q4 '07 Q4 '08 Q4 '09

17.7% 12.6%

3

Q4 05 Q4 06 Q4 07 Q4 08 Q4 09 Q4 05 Q4 06 Q4 07 Q4 08 Q4 09

(5)

Strong

and

liquid

balance

sheet

Assets Amount % of

Assets Liabilities Amount % of Liab.

C h 7 998 2 14% C t A t 69 863 18 70%

(Rp Bn, Bank Only – In‐house)

Cash 7,998 2.14% Current Account 69,863 18.70%

SBI & BI Placement (net) 45,330 12.14% Savings 106,450 28.50%

l / h b k

Placement w/other banks

(net) 25,258 6.76% Time Deposits (Rp) 108,506 29.05%

Marketable Securities (net) 10,875 2.91% Time Deposits (Fx) 14,904 3.99%

Government Bonds 88,128 23.59% Total Deposits 299,722 80.24%

Loans (Gross) 179,688 48.11% Securities Issued 623 0.17%

Provisions (11,643) (3.12%) Deposits from other banks 10,052 2.69%

Other Advances (net) 4,301 1.15% Borrowings 3,721 1.00%

Investments 6 448 1 73% Other Interest bearing liabilities 6 217 1 66%

Investments 6,448 1.73% Other Interest bearing liabilities 6,217 1.66%

Other Assets _17,126 _4.59% Non Interest bearing liabilities _18,388 _4.92%

Equity _34,785 _9.31%

4

(6)

Significant

Progress

since

2005

Initiatives (Highlights)

Results (Highlights)

10X

Profit

Growth,

ROE

increased

7X,

and

NPLs dropped

below

4%

Initiatives

(Highlights)

Strategy

defined

in

2005,

to

be

a

Results

(Highlights)

Profit (IDR Tn)

+10x

"Dominant

Multi

‐

Specialist

Bank,

developing

towards

a

Regional

Champion

Bank“

0.6

>6.0

2005 2009 Projection

ROE (%)

SBU organization

put

in

place

in

2006

On

‐

going

culture

and

service

transformation

>19.0

ROE (%)

+7x

Specific

initiatives

in

each

SBU and

in

functional

areas

O ti i

d

h

ff

ti

i k

2.5

2005 2009 Projection

NPL (%)

Optimize

and

enhance

an

effective

risk

management

system

&

focus

on

improving

NPLs

26.2%

<3 0%

‐85%

5

<3.0%

(7)

Transformation

drove

broad

improvements

No Description 2005 2006 2007 2008 CAGR / _

% 2009

Growth/

%

Consolidated Rp Billion

1. Total Assets 263,383 267,517 319,086 358,119 10.2%

2. Total Credit 106,853 117,671 138,530 174,498 17.8%

397,822 11.1%

198,501 13.8%

3. Customer Deposits 206,289 205,708 247,355 289,112 11.9% 319,479 10.5%

4. Gross NPLs 25.20% 16.34% 7.17% 4.73% (20.5%)

5. Net NPLs 15.34% 5.92% 1.51% 1.09% (14.3%)

<3.00% >(36.6%)

~0.40% ~(63.3%)

6. LDR 51.72% 57.20% 54.29% 59.16% 7.4% 61.36% 3.7%

7. Cost Efficiency Ratio 55.57% 48.86% 46.72% 42.26% 13.3%

8. Net Profit 603 2,421 4,346 5,313 106.4%

~40.00% NA

>6 000 NA

(8)

Outperforming

the

competition

Assets of 10 Largest Banks, 3Q ‘09 Profit Before Tax of 10 Largest Banks, 3Q ‘09

Rp Trillion Bank only

344.3

274.4 _270.2

200.9

6.963 _6.665

6.426

100.7 98.0

72.2 _56.8

54.5 53.2

Mandiri BRI BCA BNI CIMB Ni

Danamon Panin Permata BII Citibank

2.534 _2.344

1.605 _1.556

0.858 _0.704

0.079

Mandiri BRI BCA Citibank BNI CIMB NiagaDanamon Panin Permata BII

2.8%

Net NPLs of 10 Largest Banks, 3Q ‘09

Niaga

Cost to Income Ratios of 10 Largest Banks , 3Q ‘09

1.3%

1.6% 1.7%

1.8% 1.9%

2.1% 2.2%

35 6% 36 4% 36.6% 37.9% 40.6%

41.5%

49.5% 51.0% 52.6% 53.4%

0.2%

0.7%

35.6% 36.4% 36.6%

BCA Mandiri BRI Citibank BII CIMB Niaga

BNI Permata Danamon Panin

Source: Published Financial Report

(9)

Leveraging

cash

generator

to

accelerate

high

yield

growth

22.5% 22 1% 3 514 2,432 Corporate

g

Net Interest Income

NII (Rp bn) % of Total

Alliance Strategy Focus

22.1% 24.2% 29.2% 7.7% 4,646 3,514 834 2,612

Treasury & Int'l Commercial #

2007

Building Future Growth Engine

(Consumer& Micro/Retail)

CM = Rp4,662 billion

Leveraging Our Cash Generator

(Corporate& Treasury)

4.2% 35.9% 32.1% 9.6% 5,107 671 1,033 3,876 Micro & Retail * Treasury & Int l 2009

Fee Income

Fees (Rp bn) % of Total 9 6% 12.3% 1,955 1,033 Consumer Finance 12.8% 12.0% 12.9% 13.5% 707 631 402 400 Commercial # Corporate ₂₀₀₇ 2009 20.0% 19.0% 47.9% 48 7% 2,549 994 1,491 622 Micro & Retail * Treasury & Int'l

Strengthen Emerging Business

(Commercial Banking)

(10)

Today’s

y

Agenda

g

1. Initial

Results

2009

2. Corporate

Plan

2010

‐

2014

Highlights

3. IFRS &

PSAK 50/55

/

(11)

Bank

Mandiri’s

Vision

for

2014

“To

be

Indonesia’s

most

admired

and

progressive

financial

institution”

f

l

d

l

h

b h

We

strive

to

form

long

term

and

trusted

relationships

with

our

customers

‐

both

businesses

and

individuals.

We

serve

them

with

world

‐

class,

innovative

financial

solutions.

We

want

to

be

known

for

our

performance,

people

and

teamwork.

By

enabling

the

growth

and

success

of

our

customers,

we

will

support

the

long

term

growth

of

Indonesia

and

we

will

deliver

consistently

strong

returns

to

h

h ld

shareholders.

(12)

…addressing

all

stakeholder

perspectives:

Customers,

Employees

p y

and

Investors

To

be

Indonesia's

most

admired

and

progressive

financial

institution

For our Customers

For our Employees

For our Investors

For

our

Customers

For

our

Employees

For

our

Investors

Indonesian

anchor

stock consistently most

Where

people

grow

in

the

long run through innovation

Your

preferred,

trusted

financial partner

 Second home

 Trusted advisor  Performance

stock,

consistently

most

favored

long

run

through

innovation

and

team

work

financial

partner,

always

available

 Second home

 Enabling

 Team work

 Trusted advisor

 Reliable

 Available 24/7

 Performance

 Sustainable

 Blue Chip

(13)

Strategy

focus

on

3

areas

of

highest

potential:

Wholesale

Transactions,

Retail

Payments

&

High

Yield

Loans

T b I d i ' t d i d

,

y

g

To be Indonesia's most admired & progressive financial institution #1 in Indonesia in market capitalization by 2014

Strengthen leadership in wholesale transaction banking

C h i

Build #1 or #2 positions in key retail financing segments

Wi i

Be the retail deposit bank of choice

Comprehensive

financing &

transaction solutions

Holistic relationship

Win in

mortgage, personal

loan & cards

Become a major player

i i b ki

Win through

differentiated

customer experience

and targeted approach for leading

Indonesian institutions

in micro‐banking

Champion Syariah in

Indonesia propositions

Deploy innovative

payment solutions

Breaking down organization'silos' to provide integrated solutions to customers and alliances programs

U di k infrastr ct re(b h IT ti i k PMS) t bl diff ti t d t i

13 Upgrading key infrastructure(branches, IT, operations, risk, PMS) to enable differentiated customer experience

(14)

Enhancing

deposit

franchise,

building

on

wholesale

transactions

Wholesale Deposit Growth (CASA) (Rp tn)

Cash Management Growth in Commercial Banking

Transactions (000) Customers

160

Q4

Q3

Q2

Q1

1.8

2.1 1.6

Comm Savings Comm Demand Corp Savings Corp Demand

+51.3%

6 153

186

Q1

19.4

21.0 19.9

6,153

632 0.7

0.6 0.9

12.1 _14.8

2,414

4,066

407

239

34.0 36.5 37.4

745

,

154

24.9 _23.0

2006 2007 2008 2009 2007 2008 2009

2005 2006 2007 2008 2009

(15)

Building

a

strong

savings

deposit

franchise…

Savings Deposits (Rp tn)

A % f T l D i

Savings Deposit Growth Transaction channel growth

Other As % of Total Deposits

National Share of Savings Deposits (%)

66

75 ₈₅ 97

107 117 131

51 54

57 ₅₆ 62

63 67 73 Other Payment Transfer Withdrawal/Inquiry Avg ATM Daily Vol (000)

30.6% 29 2% 34.6% 38.6%40.0% 35.6% 32.8%33.4%33.7% 34.5%35.5%

4 6 6 8 8 9 1,0 01, 1,1 1,1 1,2 1,3

20 29 39 55 59 66 31 30 37 50 51 16 2% 22.8% 22.7% 29.2%

16 9%17.5% 17.2%18.5%19.1%19.3%17.9%18.0%17.3%17.8%17.9%

4

92.1 607.5 677.0 853.4 899.7 976.7 088.8 043.4 100.5 158.9 230.6 315.4

11.0%11.7% 16.2%

11.6%12.8% 15.3%

16.9%

16.0%17.2% % %

3,009 2,955

3,165

2,7802,822 Quarterly Call Center Trans. (000)

Quarterly SMS Trans. (000)

17.96 22.12 29.59 40.50 52.00 45.20 57.60 81.54 81.65 88.52 82.16 89.61 85.39 91.11 95.95 106.45

1,0693,072

6,988 11,575 16,974 17,969 19,772 18,116 22,328 25,819 33,502 39,570 42,546

(16)

Building

our

high

yield

business

in

Micro

&

Small…

Micro Credits (Rp Bn) 22.8% 14.2% Consumer Loans (Rp Bn) Small Credits (Rp Bn) Loan Yields 13.7% 4,376 5,381 1,005 23.0% 17,04 4 20,604 3,560 20.9% 14,815 17,100 2,285 15.4%

Q4 2008 Growth Q4 2009

Disbursement Breakdown (2009)

4

Q4 2008 Growth Q4 2009*

Q4 2008 Growth Q4 2009

*Excluding Credit Cards

0

Disbursement Breakdown (2009) Disbursement Breakdown (2009)

1,037

796

702

4,365 4,741 1,046 2,420 7,788 240 796 6,365 376 4,741 3,285 4,627 376

Rural Banks Micro Unsecured Micro TOTAL Mortgage Home Equity

Loan

Payroll Loan Other Total

(17)

Leveraging

cash

generator

to

accelerate

high

yield

growth

Rp Billion

Consumer Loans

(10 top corporate clients)

Plantation Small & Micro Lending

Rp Billion

Corporate Card Holders

(10 to corporate clients)

g

Early Alliance Program Results

427 427 423 434 431

2,085 14,612

350 1,609

1,821 12,108

1275

1,389

7,272

791

3,625

1,616 2,007

Q4 '07 Q4'08 Q1 '09 Q2 '09 Q3'09 Q4'09 Q4 '07 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09

(18)

Supported

by

a

new

Organization

Structure

Agus Martowardojo President Director

I Wayan Agus Mertayasa Deputy President Director

Corporate Banking

Commercial & Business Banking

Micro &Retail Banking

Risk Management Finance &

Strategy

Technology & Ops Compliance &

Human Capital

Internal Audit Legal &

Business Services Consumer Finance Institutional Banking

Treasury, FI & Special Asset

Mgmt Change Mgmt.

Office I Wayan Agus Mertayasa

ABDUL RACHMAN RISWINANDI ZULKIFLI ZAINI BUDI G. SADIKIN THOMAS ARIFIN

OGI PRASTOMIYONO

SASMITA BAMBANG SETIAWAN SENTOT A.

SENTAUSA

Corp. Banking I

Corp. Banking II

Treasury Jkt Comm. Sales

Reg. Comm. Sales I

Reg. Comm. Sales

Jakarta Network

Reg. Network

Mass Banking

Consumer Card

Consumer Loans

Compliance

Human Capital Services

Investor Relations

Strategy &

IT Business Solutions & Application Services

IT Ops

Market & Ops Risk

Credit risk & portfolio mgt

Legal

Customer Care & Services

C B ki III Institutional

Banking I

Institutional

Banking II _{FI Coverage &}

Treasury Solutions

MANSYUR S. NASUTION

PAHALA N. MANSURY

HARYANTO BUDIMAN RIYANI T. BONDAN

Reg. Comm. Sales II

Business Banking I

Mass Banking

Human Capital Strategy & Policy

Learning Center

Policy, System & Procedure gy

Performance

Accounting

Credit Ops

Central Ops Special

Asset Mgmt

Procurement & Fixed Assets Corp. Banking

Agro Based Corp. Banking III g

Syndication &

FI Coverage & Solutions

Micro Network Dev Business Banking II Electronic Banking Mandiri Tunas Finance

Corporate Risk II Corporate Risk I

Chief Economist

Mandiri Sekuritas (Inv Banking)

WTB solutions

Bank Syariah Mandiri

Wealth Management

AXA Mandiri

IT Planning, Arch & BCP Electronic Channel Ops

Commercial Risk

Consumer Risk Corporate

Secretary Structured Fin

Corp. Trx Banking Sales

Banking II

Micro Bus Dev

Retail Risk Culture

Specialist

Economist

(Inv. Banking) AXA Mandiri

Bank Sinar Harapan Bali

Mandiri International

Remittance

Retail Risk

BMEL

Directors EVP Coordinators Group Heads Specialists Subsidiaries

Risk and Capital Committee Information & Technology

Committee Personnel Policy Committee Wholesale Executive Committee

Retail & Support Executive Committee

Committees under the Directors

(19)

Mandiri’s

Transformation

Process

Roadmap

“

To

Be

Indonesia’s

Most

Admired

and

Progressive

g

Financial

Institution

”

"Dominant Multi SpecialistDominant Multi‐Specialist "To be Indonesia's most admired

Bank"

Market Cap: IDR 104 Tn1

Revenue Market Share: 12%

and progressive financial

institution"

Market Cap: IDR 225 Tn

2014

ROE: 19%

Gross NPL: 3.8%

Revenue Market Share: 14‐16%

ROE: 25%

Gross NPL: < 4%

Market Cap: IDR 33 Tn

2009

ROE: 2.5%

Gross NPL: 25.2%

2005 2005

1. As of Oct 8 2009

(20)

Targets

for

2010...

Gross Loan Growth

15-18%

Savings Deposits

>

Rp110 tn

Net Interest Margins

~

5.35%

Net Interest Margins

5.35%

Efficiency Ratio

~

45%

Gross NPLs

<

4 0%

Gross NPLs

<

4.0%

Provisioning Coverage

>

150%

New Distribution Infrastructure Targets:

# of New ATMs

2,500

# f N

EDC

25 000

# of New EDCs

25,000

# of New Micro Outlets

500

29

(21)

Today’s

Agenda

1. Initial

Results

2009

2. Corporate

Plan

2010

‐

2014

Highlights

3. IFRS &

PSAK 50/55

/

(22)

IFRS Convergence

Roadmap

of

IFRS Convergence

by

IAI (Accountant’s

Association)

End of Preparation Phase

(2011)

Adoption Phase

(2008‐2011)

Implementation Phase (2012)

Adoption whole IFRS to PSAK.

Preparation of necessary

The completion of necessary

infrastructure preparation.

 The first time

implementation of PSAK

hi h h d d h

Preparation of necessary

infrastructure.

Evaluate and manage the

impact of adoption the PSAK.

which has adopted the whole IFRS.

 Evaluate the impact of

PSAK i l i i

impact of adoption the PSAK.

PSAK implementation in a comprehensive way.

PSAK that

have

been

revised

 PSAK 13 16 30 (2007 revision)

IAI Program

2009

‐

2010

 2009 Adopted 18 IFRS standard

31

 PSAK 13, 16, 30 (2007 revision)

 PSAK 50, 55 (2006 revision)

 2009 Adopted 18 IFRS standard

(23)

IFRS

Convergence

Difference

PSAK Revision

Revisions

to

PSAK arising

from

IFRS adoption:

Implication

PSAK13 (2007) Investment

Property

There are 2 (two) models of quotation for Investment

Property, Cost Model and Fair Value Model. Previously, PSAK

was only regulate the Cost Model.

If Bank select to use the Fair Value

Model, they have to do revaluattion

continuously. Bank Mandiri select to use the

Cost Model.

PSAK 16 (2007) Fixed Assets

There are 2 (two) models for Fixed Asset, Cost Model and

Revaluation Model. Previously, PSAK only regulate the Cost

Model.

If Bank select to use the Revaluatin Model,

they have to do revaluation continuously in

balance sheet date. Bank Mandiri select to

use Cost Model.

PSAK 30 (2007)

To determine whether the rent transaction is operating lease or financial lease, its based on transaction substantion and not a contract.

Th fi i l l f l b i ti t f

Bank have to see the whole rent

transaction and evaluate the nature of the

transaction to determine whether the

Rent The_ownership financial_of lease_assets,, for_the example:_rent_period buying_including option,_almost transfer_the

whole economis age, the present value of rent payment close to fair value, rent asset have specific characteristic.

transaction to determine whether the

transaction are operating lease or financial

lease.

• Classification of financial instruments:

• The mark to marketcalculation its based on bid and ask price, previously based on mid rate.

• The provision (PPA) calculation, consist of individual impairmentandcollective impairment Previously the

PSAK 50 & 55 (2006) Financial

Bank have to do a comprehensive

preparation for PSAK’s

implementation, which consist of

impairmentand collective impairment. Previously the provision (PPA) calculation based on collectibility.

• Recognition of revenue/interest cost using EIR (Effective Interest Rate)

32

Financial Institutions

preparation from IT, policy and

(24)

IFRS

Convergence

Principal

changes

to

accounting

policy

the

application

of

PSAK 50

&

55

(2006

Revision)

Financial Instrument Classification

Financial assets/liabilities must be classified according to categories including

FVTPL (Fair Value through Profit and Loss), HTM, AFS and Loans & Receivables. 1

EIR Att ib t bl

Interest income & interest expense recognition for financial instruments must be

done according to effective interest rates (EIR). 2

EIR, Attributable Transaction Costs

& Fees

Transaction costs and fees which are closely related to specific earning

assets/liabilities must be capitalized into those earning assets/liabilities and are integral to those asset/liabilities.

g ( )

integral to those asset/liabilities.

Fair Value

Fair value determination of financial instruments should be determined through the

application of the appropriate method within a hierarchy of approaches. 3

Impairment Provisions for financial assets are not determined according to BI collectibility

4

33

(25)

IFRS

Convergence

Based on PSAK 55 (2006 Revision) financial instrument must be classify into one of the following categories:

1.

Financial

Instrument

Classification

Initial classification

Financial assets Financial liabilities

Based on PSAK 55 (2006 Revision) financial instrument must be classify into one of the following categories:

FVTPL Loans &

Receivables HTM AFS FVTPL Other Liab.

Early recognition Early recognition

 FVTPL (Fair Value through Profit & Loss : Fair Value (cost)

 Other categories : Fair Value +/‐ transaction costs

Measurement after early recognition Measurement after early recognition

 For FVTPL and AFS : Fair Value

 Other categories : Amortized cost

Amortized

cost Cash paid

Principal repayments

Unamortized premiums or

discounts

Impairment

= ‐ +/‐ ‐

(26)

IFRS

Convergence

2.

Effective

Interest

Rate

(EIR)

Definition:

 Based on PSAK 50 and 55 (2006 Revision) and PAPI Revision Book I interest income and interest expense ofBased on PSAK 50 and 55 (2006 Revision) and PAPI Revision Book I, interest income and interest expense of

financial instruments is recognized using Effective Interest Rate (EIR).

 EIR is the interest rate that accurately discounts the estimation of future cash payments or receipts over the

estimated life of the financial instrument or more precisely the short period to get net carrying value from

financial asset/liabilities.

 EIR for financial instruments must be calculated inclusive of attributable transaction costs & fees.

 Transaction costs are additional costs that can directly attributable to the acquisition, issuance or redemption

of financial assets or financial liabilities. Additional costs are those costs that would not occur when the entity

does not obtain, issue or redeem financial instruments.

Implication:

 Banks must identify the attributable transaction costs & fees for all financial instruments.

 Banks must determine the level of materiality of attributable transaction costs & fees that must be

amortized byy the method of EIR.

 The attributable transaction fees previously recognized as a fee‐based, under PSAK 55 (2006 revision) will be

recognized as interest income either directly or through the mechanism of amortization by using the EIR.

 The attributable transaction costs previously recognized as operating costs, under PSAK 55 (2006 revision)

ill b i d i t t ith di tl th h th h i f ti ti b i th

will be recognized as interest expense either directly or through the mechanism of amortization by using the

EIR.

(27)

IFRS

Convergence

3.

Fair

Value

Definition:

 Fair Value is the amount for which assets can be exchangedg or obligationsg can be resolved between the

parties that know each other and aspire to a fair transaction.

 The hierarchy in determining fair value :

• Published price quotation is bid price for financial assets and ask price for financial liabilities.

• For financial instruments that do not have price quotation in an active market, valuation techniques such

as the following are used :

 prices from recent transactions as long as there is no change significant economic condition since

th t ti d t d

the transaction was conducted.

 similar instruments at fair value

 Discounted cash flow models

 O ti i i d l

 Option pricing models

Implication:

Banks should establish policies related to:

 Use of bid price and ask price in the determination of the financial instrument fair value.

 Use of hierarchy valuation techniques in determining fair value if there is no active market quotation.

(28)

IFRS

Convergence

Creditors provide relief(concession) to

3

4.

Impairment

Impairment Objective Evidence

Contract breach, such as

defaults or arrears of principal

Creditors provide relief(concession) to

the debtor that is not possible given if

the debtor does not have difficulty

2

and interest payments

Indication of a decline in the value based on

future cash flow_{estimation of credit}

portfolio, although the decrease can not be id tifi d i di id ll i th tf li

6

Objective Evidence

Debtors experiencing significant financial

difficulties

identified individually in the portfolio, including :

1

Possibility of the debtor is

Decrease in the payment status of borrowers in credit portfolio

National economic conditions that correlate with the debtor defaults on the loan

4 _{Possibility of}_the_debtor_is

declared bankrupt

or conduct other financial reorganization

with the debtor defaults on the loan portfolio

Loss in active market

from financial assets

due to financial

difficulties

5

37

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IFRS Convergence

Individual Assessment

4.

Impairment

Impairment Method

decrease in value losses

(Provision provided)

vs

Outstanding balance of financial asset

NPV Projected Cash Flow

Decrease in value losses calculated by comparing the outstanding balance of financial assets with the NPV Projected Cash Flow with discount factor based on an effective interest rates of financial

(Provision provided) financial asset

the NPV Projected Cash Flow, with discount factor based on an effective interest rates of financial assets. The difference is less of NPV Projected Cash Flow and the outstanding balance financial assets is a decrease in value losses.

Evaluation of decrease in value carried out every quarter but if there is an objective evidence in Evaluation of decrease in value carried out every quarter, but if there is an objective evidence in declining of the value before the date of the next evaluation, then the bank must estimate the future cash flows and calculate the provisions of decrease in value losses.

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IFRS Convergence

4.

Impairment

Impairment Method

 Collective Assessment

For collective evaluation, banks can use several techniques:

 Formula Based, using certain formulae to calculate the historical loss rates, for example debtor death rates.

 Statistical Method, this approach using statistical method based on internal loan grades. Parameters for calculation this method :

 Probability of Default (PD), is the probability rate of failure debtor to fulfill their obligations, which can be measure with several approaches, such as : migration analysis, roll rate, vintage analysis and default rate.

 Loss Given Default (LGD), is amount of losses rate of failure debtor to fulfill their obligations, which can be measure with several approaches, such as : expected recoveries, collateral shortfall, loss on disposal and loss ratio.

 Bank Mandiri using Statistical Method in collective impairment.

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IFRS

Convergence

4

.

Impairment

Implication

 Banks should establish policies include :

objective evidence of impairment indication.

significance level of financial assets which will be evaluated individually.

 f f l b d ll l b d k h

grouping of financial assets to be assessed collectively based on risk characteristics in common.

impairment evaluation period.

 Need a unit that verifies the reliability of estimates of cash flow information business units organized.

R l d k i i h bj i id f d li i l f fi i l

 Related work units to monitor the occurrence objective evidence for decline in value of financial assets

which individually significant, but at the previous quarterly evaluation there is no objective evidence of

decline in value. if at the monitoring time there are evidence of impairment objective, the related business

units should immediately conduct impairment evaluation individually and communicate to Accounting

Group after the review by reviewers working unit.

 Banks must improve the quality of historical data, minimal during the 3 year, to calculate PD and Recovery

Rate (RR) which will be used in determining the LGD number (LGD = 1 – RR).

 Banks need to develop internal rating owned for the purposes of determining objective evidence of decline

in value and counting collective impairment in all segments of the credit.

Note :

40

Note :

For the CAR calculation, banks still need to maintain collectibility determination process and provision (PPA) calculation as

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ir@bankmandiri.co.id

( )

Plaza Mandiri

Jl. Jend. Gatot Subroto Kav. 36‐38

Jakarta 12190

Main Tel: 526‐5045

Sukoriyanto S. Corporate Secretary Tel: (6221) 524 5299 Fax: (6221) 5296 4024

Jonathan Zax

Head of Investor Relations Tel: (6221) 3002 3172 Fax: (6221) 5290 4249 E‐mail:

i @b k di i id

41

PT Bank Mandiri (Persero) Tbk

For additional information,

Please refer to our website at http://ir.bankmandiri.co.id