The Board of Directors sets out the business strategy and policy of the Bank. In 2020, the Board of Directors continued execution of the 5 pillar Strategy as our core strategy. In its conception, the Board of Directors has set forth the ideas and formulation behind the strategy, which is key for the Bank to achieve business growth. In order to ensure that the Bank can effectively implement the strategy and policy, the Board of Directors has broken down the elements and incorporated them into the RBB of 2020.
Seeing how 2020 was filled with challenges, the Board of Directors keenly focused on identifying and responding to changes that occurred in our business environment, both externally and internally, in order to achieve the Bank’s business goals and objectives. The 5 pillar
Strategy of CIMB Niaga has become more relevant in these challenging times, all the more reason why the strategy has consistently been adopted. The Five Pillars are: 1) playing to our strengths, 2) expanding the CASA franchise, 3) discipline in cost management, 4) preservation of capital and balanced risk culture and 5) leveraging Information Technology.
1. Playing to Our Strengths
CIMB Niaga focuses on growing market share in the segments that constitute the Bank’s key strengths and well-understood target markets. The Consumer and SME segments are our main focus for growth, not only because they represent our primary strengths, but also because of the significant growth potential for these two segments in the future. Moreover, Consumer and SME Banking segments provide Risk-adjusted Return on Capital (RAROC) that are relatively higher than other banking segments.
Throughout 2020, Consumer Banking successfully booked a positive loan growth amid weakening domestic economic growth due to the pandemic.
Consumer Banking loans grew 1.69% to Rp55.2 trillion from Rp54.3 trillion a year before. Mortgages and auto loans grew by 5.92% and 4.44% respectively and became the backbone of the consumer segment growth. This grew CIMB Niaga’s mortgage market share from 6.4% to 6.6%.
We consider SME as a segment with good potential.
Although the segment experienced negative loan growth of -5.75% in 2020 as a direct result of the COVID-19 pandemic, we are confident that the SME segment will be one of the first to recover along with the expectation of the national economic recovery.
By collaborating with other business units through the referral and cross selling programs, and our strengths on digital technology, we work closely with our SME customers, helping them to recover their businesses more quickly.
Sharia Banking is another business unit that is resilient against crisis. Although outstanding financing declined by 3.52% to Rp31.9 trillion, Sharia Banking was still able to post a growth of 17.56% in Profit Before Tax. The implementation of Dual Banking Leverage Model (DBLM) coupled with the Sharia First
initiative resulted in a strong performance for the Bank.
2. Expanding the CASA Franchise
We believe that low cost of fund will provide a competitive advantage for CIMB Niaga and enable us to grow good quality assets sustainably. Our efforts to increase the composition of CASA have been and will continue to be our focus to reduce the Bank’s cost of fund. So far, these efforts have yielded good results over the years, continuing through to 2020 as our CASA ratio rose to 59.62% from 55.35% in 2019.
The Bank successfully undertook several initiatives and programs in an integrated manner between consumer banking and business banking. The offering of bundling products and services such as payroll, cash management and other banking transactions represents our efforts to optimize our relationship with customers from different banking segments. Furthermore, the use of data analytics and digital capabilities have been instrumental in providing the right products and services to targeted customers. Efforts to improve business processes and the customer experience remain front and center to growing our customer base and maintaining customer loyalty.
3. Discipline in Cost Management
Discipline in cost management is key to achieving not only operational efficiency but also high productivity in a consistent and sustainable manner. At a time when growth is hindered by unfavourable economic conditions, the Bank has not stopped investing in information technology, digital and robotics capabilities in order to automate business processes, as well as high-volume and repetitive tasks. Hence, employees can focus on high value added activities.
Other efficiency measures are carried out in optimizing the costs of telecommunications, transportation, and outsourcing.
In 2020 the number of our ATMs decreased by 184 as part of the Bank’s efforts to optimise its network footprint while encouraging customers to migrate to online banking. These initiatives succeeded in
to 48.95%, at a time when the Bank’s income has declined as a result of the pandemic.
4. Preservation of Capital and Balanced Risk Culture
As the second largest private bank in Indonesia in terms of asset size, CIMB Niaga is committed to maintaining sound capital adequacy. In 2020, the Bank had a Capital Adequacy Ratio (CAR) of 21.92%, well above the prevailing minimum statutory ratio.
CIMB Niaga has implemented the Enterprise Wide Risk Management (EWRM) as the guideline for the Bank’s business activities and decision-making processes enabling the Bank to build a balanced culture of
“Risk and Compliance” in all of its business units.
Risk awareness is also instilled by strengthening the roles of the Risk Control Unit (RCU) as well as quality assurance in all functions of the organization.
The use of the latest technology, such as machine learning in data-driven risk management, is continuously enhanced to help the Bank in managing risk more effectively. At the same time, the risk culture is instilled in all CIMB Niaga personnel at all levels of the Bank’s operations.
The NPL ratio of the banking industry in Indonesia has increased as a result of the pandemic including that of CIMB Niaga whose NPL rose to 3.62% in 2020 from 2.79% the year before. We continue to place a strong emphasis on asset quality by strictly adhering to prudential principles in order to ensure sound capital adequacy and a sufficient level of provisioning expenses to anticipate future economic challenges.
5. Leveraging Information Technology
The Bank sustains its commitment to invest in information technology in order to strengthen its position as a leader in information technology and digital banking services. The use of the digital platform remains a main focus of the Bank in providing the best customer experience and safest banking transactions. The Bank continues to explore opportunities for innovation and to exploit data analytics to maintain a competitive advantage.
Changes in customer transaction behaviour have seen an increase in the use of digital channels to serve this growing need. Even though the Bank possess advanced and the latest features in our digital banking, we continue to develop new features and service capabilities in both the retail and non- retail banking segments with the aim of enhancing the customer experience.
A number of initiatives from the Information Technology team in conjunction with the Digital Centre of Excellence began long before the COVID-19 pandemic. The initiatives include OCTO Clicks, API (Application Programming Interface) gateway, sales force tools, collaboration with a fintech firm in financing, opening of an online account with securities and fintech firms, OCR (Optical Character Recognition), biometrics and chatbot. The initiatives are supported by upgrades of systems and IT infrastructures to meet dynamic business needs and future growth opportunities.
PERFORMANCE ACHIEVEMENT OF 2020 IN COMPARISON WITH TARGETS
Amid these challenging conditions, as of year-end 2020, CIMB Niaga has been able to maintain its level of performance, despite pressure on purchasing power and consumer demand. The Bank has responded by continuing implementation of a selective and prudent policy in providing loans to all segments of our banking business. Overall, CIMB Niaga’s total loans outstanding in 2020 amounted to Rp174.8 trillion, a decline of 10.03%
from Rp194.2 trillion in 2019. However, total loans in the Bank’s Consumer Banking segment increased by 1.69% from Rp54.3 trillion a year ago to Rp55.2 trillion in 2020. This growth was primarily driven by loan growth in mortgages and auto loans.
On the funding side, in line with our strategy to increase the portion of low cost funds, the Bank’s CASA ratio rose significantly to 59.62% from 55.35% a year before, mainly due to the growth of CASA by 14.28% to Rp123.7 trillion.
We expect our strategy to increase CASA will continue to reduce our cost of funds in the long run. The Bank’s total customer deposit grew by 6.10% to Rp207.5 trillion in 2020, from Rp195.6 trillion a year before.
Through various sustainable efforts, we succeeded in increasing the operational efficiency of the Bank which is marked by the declining Cost to Income (CIR) ratio from 49.07% to 48.95%. Liquidity was well maintained as evidenced by the Liquidity to Capital Ratio (LCR) of 235.17%. Meanwhile, consolidated net profit for the year under review was Rp2.0 trillion, or a net Earnings per Share (EPS) of Rp80.72.
Other achievements by the Bank in 2020 were various awards and certifications that were received at national, regional and international levels. Amid the COVID-19 pandemic, the Bank is grateful for having been designated the Most Helpful Banks During COVID-19 in Indonesia and the 10th Most Helpful Bank During COVID-19 in Asia Pacific through a survey of bank customers in The Bank Quality Consumer Survey and Rankings 2020 by The Asian Banker. This testified to our commitment in supporting and helping customers to deal with the pandemic. CIMB Niaga was also selected as one of the companies in Indonesia that qualify for the ASEAN Asset Class Category in the assessment of the ASEAN Corporate Governance Scorecard (ACGS). In 2020 CIMB Niaga earned a total of 38 awards and certifications, the details of which are presented in the Section on Awards and Certifications in the Discussion of Financial and Operational Highlights of this Annual Report.
ANTICIPATING CHALLENGES
The COVID-19 pandemic, which has brought multi- dimensional crises on a global scale, is unprecedented.
It has become a major challenge for CIMB Niaga in 2020.
Overall, the banking industry has experienced declines in loan growth and profitability as a result of increased loss provisioning on credit risk. As such, the Bank strives continuously to maintain sound liquidity, asset quality, cost management and a reliable control and risk management system during these difficult times. Equally important is our effort to look after the health and welfare of Bank employees, helping customers to maintain their business continuity and meet their financial needs, as well as to support government programs to revive the national economy.
However, there is always a silver lining in every cloud. As the frontrunner in digital banking in Indonesia, we see the COVID-19 pandemic as an opportunity for the Bank to innovate continuously in the delivery of our services,
providing unmatched customer experience through the strength of CIMB Niaga’s digital banking services. In line with changes in customer preferences for banking transactions, we continue to complement the features of our digital services through a diverse range of applications such as OCTO Clicks, OCTO Mobile, BizChannel@CIMB and other digital services, all of which are able to deliver reliable banking services amid the pandemic.
In addition, the Bank also strives to accelerate the use of digital tools and data analytics for various internal business processes, such as to support sales processes, implement risk management, decision making, and other operating processes in the interest of cost efficiency.
ANALYSIS OF OTHER KEY PERFORMANCES Key Activities and Types of Products and Services
CIMB Niaga carries out business activities in the banking services of funding and lending at the most competitive interest rates. The products and services that we offer, including the loan disbursement to SME business customers, are presented in the section of Company Profile in the discussion on the Products and Services of CIMB Niaga.
Interest Rates on Deposits and Loans
In 2020, CIMB Niaga’s offered interest rates on deposits and loans in the Rupiah currency were as follows:
Description
Base Lending Rates by Segment
Interest Rates on Rupiah Deposits
Loans Consumer Loans
Corporate Retail Mortgage Non-Mortgage
2020
March 9.40% 10.10% 9.55% 9.95% 4.45%
June 9.40% 10.05% 9.50% 9.95% 4.11%
September 9.40% 9.95% 9.50% 9.95% 3.86%
December 9.40% 9.95% 9.50% 9.95% 3.62%
Organizational Structure
To ensure the continuity of leadership within the Bank and its business, especially that which pertains to critical positions within the organization, the Bank carries out a successor identification process in a structured and integrated manner, combined with the development process of the successors. Our organization is also reviewed continuously to enhance its effectiveness and efficiency, ultimately to ensure the continuity of the organization going forward.
Operating Network and Business Partners
CIMB Niaga forges close cooperation with a number of business partners both at home and abroad to increase the Bank’s resilience, competitiveness, and efficiency in achieving the targets set in the RBB. A number of collaborations to provide financial products and services as well as the best options on banking transaction access in 2020 included the cooperation on bancassurance products capitalizing on the Bank’s distribution networks and customers as the target market. The Bank also undertook other collaborations in an effort to expand its business and increase the sustainable performance of the Bank.
Number, Type and Location of Branches
As of year-end 2020, CIMB Niaga’s banking activities are supported by a network of 451 branch offices, 4.316 ATM units,
Share Ownership of Members of the Board of Directors, Board of Commissioners, and Shareholders within the Bank’s Business Group The share ownership (either direct or non-directly) of the members of the Board of Commissioners and the Board of Directors who are currently active and/or appointed in 2020 within the business group of either CIMB Niaga or the CIMB Group, is in accordance with the information presented in the Corporate Profile Section of this Annual Report. All members of the Board of Directors and the Board of Commissioners do not hold any share ownership in the Subsidiary Entities.
Material Changes in the Bank and Subsidiary Entities We can report that, throughout 2020, there were no material changes in either the Bank or Subsidiary Entities.