Left to right :
Raden Pardede
Independent Commissioner
&
Commissioner Djohan Emir Setijoso
President Commissioner
Independent Commissioner
/' Independent Commissioner
2018 Annual Report PT Bank Central Asia Tbk 33 53$BILLIONOF'$0INORUPFROM53$
BILLION OR OF '$0 IN 4HE WIDENING CURRENT ACCOUNTDElCITALONGWITHmUCTUATIONSINFOREIGNCAPITAL affected by the rising Fed rates, placed pressure on the Rupiah, which ranged from Rp13,289 to Rp15,238 to the US dollar throughout 2018. Rupiah exchange rate closed at Rp14,390 to the US dollar at the end of 2018.
Responding to these developments, Bank Indonesia increased the 7-day reverse repo rate gradually through 2018, with a total overall rise of 175 bps, reaching 6.0% by the end of the year. Indonesia maintained adequate foreign exchange reserves of USD120.7 billion in 2018, equivalent to the value of 6.7 months of imports, or 6.5 months of imports and servicing government external debt. These reserves were above the international benchmark of 3 MONTHSOFIMPORTS,OWINmATIONTHROUGHOUTFURTHER supported the economy’s resilience.
The recovery of the national economy supported moderate growth in banking sector assets. The national banking industry recorded positive profitability, supported by the growing loan portfolio and third party funds, managed operating expenses increase and controlled provision expenses of non-performing loans. We saw the stability of the national banking sector maintained with a strong capital position and a tolerable NPL level.
Short-term challenges in the banking sector were raised by THEINDUSTRYSINCREASINGLYTIGHTLIQUIDITYPOSITIONREmECTED in the Loan to Deposit Ratio (LDR), which reached 94.8%
by the end of 2018, above the regulator’s benchmark.
Tighter liquidity encouraged competition among banks for third party funds. The regulator continued to monitor liquidity conditions and relax the minimum reserves requirement, and exercised discipline in setting the 6.5%
minimum reserve requirement. These policies afforded INDUSTRY mEXIBILITY IN MANAGING LIQUIDITY BUT MAINTAINED macroprudence.
Assessment
The Board of Directors successfully managed BCA business lines, consistent with the nation’s economic growth and the condition of the banking sector in 2018. The evaluation of the Directors is based on the annual work plan submitted by the Directors and approved by the Board of Commissioners, and their response to the dynamic business and economic conditions. In our review, the Directors have led BCA to achievements consistent with the Bank’s vision and mission and in line with the strategic direction and established work plan.
We appreciate the steps taken by the Board of Directors to strengthen the transaction banking franchise and to engage in prudent lending, achieving a positive financial performance overall. Several programs were undertaken prioritizing the increasingly varied needs of customers.
The use of information technology supports the Bank’s efforts to maintain its competitive edge, cater to customer demands and increase work process efficiency.
The Directors have received advice from the Board of Commissioners on managing the business with caution and maintaining a balance between making investments, capturing opportunities, and managing risk. BCA also deepened synergy with the subsidiaries to offer better comprehensive banking solutions to customers and strengthen the Bank’s business ecosystem. The Board of Commissioners and Board of Directors are committed to the implementation of good governance, careful risk management and internal controls, as foundations for promoting positive business performance and generating added value for customers and stakeholders.
Overall, we achieved strategic targets and sustained financial performance. Net profits increased 10.9% to Rp25.9 trillion in 2018. BCA recorded stronger loan growth in 2018, with an increase of 15.1% to a total portfolio of Rp538.1 trillion. CASA growth of 8.9% brought the total to Rp483.0 trillion, supported by the trust customers have
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in the Bank’s transaction banking services and ecosystem.
Return on Assets (ROA) and return on equity (ROE) exceeded pre-defined targets, and the Bank secured a SOLIDCAPITALANDLIQUIDITYPOSITIONREmECTEDINTHE#APITAL Adequacy Ratio (CAR) at 23.4%, Loan to Deposit Ratio at 81.6% and Liquidity Coverage Ratio (LCR) at 278.2%.
Supervision of BCA’s Strategy Implementation
In 2018, we conducted our business in line with the annual work plan, vision and mission and strategic direction. Through careful observation of macroeconomic conditions, changes in the business environment and customer behaviour and needs, we were able to adapt and implement strategies relevant to current developments.
BCA maintained its core advantage in the transaction banking business by upgrading capabilities and making measured investments in the Bank’s integrated multi- channel network. Developments are always made with security, convenience and reliability in mind. In the current era, digital technology is a central part of everyday living and has had a significant impact on the transaction behaviour of customers. The same developments have also driven the growth of the e-commerce industry and fintech companies. The Bank sees these trends as opportunities and has collaborated with fintech and e-commerce companies to strengthen the BCA payment ecosystem.
Internet and mobile banking services along with app-based services, are continually developed and upgraded in line with the needs of customer transactions through digital services. Digital transactions conducted through internet and mobile channels, as well as ATMs, now account for 98% of the Bank’s transaction volume, which supports operational efficiency; 54% of all transaction value is still handled through the branches. The branch network remains an important part of the Bank’s infrastructure, especially for handling high-value cash transactions and maintaining close personal relationships with customers.
To increase efficiency, investments in branch offices have been focused on simpler branch formats with support from automated systems.
These strategic steps supported growth of Current Accounts and Saving Accounts (CASA), the primary source of the Bank’s funds. Aside from collection of CASA, time deposits play an important role in maintaining the Bank’s liquidity position. Overall, CASA funds grew 8.9% to Rp483.0 trillion, and time deposits increased 6.8% to Rp146.8 trillion by the end of 2018.
To develop the lending business, we improved the credit infrastructure to support loan processing. Amid relatively high credit demand, the Bank optimized lending to customers with long-term track records in high-potential sectors. A healthy credit portfolio was maintained by implementing the principle of prudence, which minimized NPL ratio, well within the Bank’s risk appetite. In 2018, BCA successfully increased its loan portfolio in all segments:
corporate, commercial, small and medium-sized enterprise (SME) and consumer. Diversified lending across multiple sectors allows the Bank to minimize concentration risk.
BCA strengthened synergy with its subsidiaries and increased the coordination among the transaction banking unit, lending units and other business units, in order to cater to the customers’ needs for comprehensive financial services.
Implementing Good Corporate Governance
"#! ENSURES THE IMPLEMENTATION OF 'OOD #ORPORATE 'OVERNANCE '#' PRINCIPLES THROUGHOUT THE ENTIRE organization, represented by the Bank’s commitment to transparency, accountability, responsibility, independence AND FAIRNESS 4HE IMPLEMENTATION OF '#' IS CONDUCTED in accordance with the prevailing local regulations, and is increasingly aligned with the standards of the ASEAN
#ORPORATE 'OVERNANCE 3CORECARD )N "#! IMPROVED its governance guidelines with reference to new provisions from the regulators.
2018 Annual Report PT Bank Central Asia Tbk 35 '#'"#!CONDUCTSPERIODICALSELFASSESSMENTOF'#'BOTH
as a standalone firm and as a consolidated (integrated) group with its subsidiaries. In 2018, the results of the self- ASSESSMENT OF BOTH INDIVIDUAL AND INTEGRATED '#' WERE 6ERY'OOD
7ITHTHEIMPLEMENTATIONOF'#'WEHAVEMAINTAINEDTHE trust of stakeholders and supported long-term business OPERATIONS&ORITSCOMMITMENTTO'#'"#!HASRECEIVED a number of awards, including The Most Trusted Company FROM THE )NDONESIAN )NSTITUTE FOR #ORPORATE 'OVERNANCE ))#' AND37!-AGAZINEAND"EST2IGHTOF3HAREHOLDERS from the Indonesian Institute for Corporate Directorship (IICD).
Board of Commissioners’ Whistleblowing Role
The Board of Commissioners provides guidance in the development of a whistleblowing system and supervise its IMPLEMENTATIONATTHE"ANKASAPARTOF'#'
To increase the effectiveness of the whistleblowing system in order to detect fraud and other violations committed internally, BCA has implemented a whistleblowing policy.
of the whistleblowing system implementation, which is responsible directly to the President Director, while maintaining close communication and reporting directly to the Board of Commissioners.
To introduce the whistleblowing system for employees, BCA provides socialization through the e-learning channel.
Fraud and other violations can be reported by internal and external parties through the company website. The system enables detection and prevention of fraudulent activity, in TURNSUPPORTINGIMPLEMENTATIONOF'#'
Supervisory and Advisory Role to Board of Directors The Board of Commissioners monitors the Directors’
management of the business. In 2018, it gave guidance to the Directors regarding policy and strategy. Such guidance is given through meetings or documented by memorandum. In 2018, there were 37 meetings of the Board of Commissioners and 14 joint meetings of the Board of Commissioners and the Directors. The Board of Commissioners also conducted various ad-hoc meetings as needed.
The Board of Commissioners’ advice and recommendations to the Board of Directors are as follows.
Topic Summary
Business strategy and management s -AINTAIN"ANKSPERFORMANCEBYINCREASINGCOSTEFlCIENCYSUSTAININGLOANQUALITY and quality growth.
s 3UPPORTINNOVATIONSANDADJUSTMENTSTOKEEPUPWITHTECHNOLOGYANDlNTECH industry developments.
s 3UPERVISEANDPROVIDEADVICEONCORPORATEACTIONS s 0ROVIDEADVICEONOPTIMALIZATIONUSEOFLIQUIDITY
Risk management s 2EQUIREFURTHERREVIEWONMAJORRISKSSTRATEGICIMPACTS OFTHE"ANKANDITS subsidiaries.
s 0ROVIDEADVICEONEXCHANGERATERISKANDITSIMPACTONBUSINESS
s -INIMIZECONCENTRATIONRISKDIVERSIFYLENDINGACROSSHIGHPOTENTIALSECTORS s 0ROVIDEADVICETOREVIEWTHECOMPLEXITYOFRISKSINLENDINGFORINFRASTRUCTURE s 2EQUIREPOLICIESFORMONITORINGOFRESTRUCTUREDLOANS
s !PPROVETHEUPDATEOFRECOVERYPLAN
Audit and compliance s 0RIORITIZEAUDITINGFORHIGHRISKMATTERSRISKBASEDAUDIT
s !PPROVETHEPROPOSEDAMENDMENTSTOTHE"#!S!RTICLESOF!SSOCIATIONACCORDINGTO THE,AWANDSYSTEMATICSOF!NNUAL'ENERAL-EETINGRESULTS
s !PPROVETHEPROPOSEDAMENDMENTTOTHE!UDIT#OMMITTEE#HARTERREGARDING THERECOMMENDATIONMATTERSFORAPPOINTMENTDISMISSALREPLACEMENTOFPUBLIC accountant.
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Assessment of Committees Under the Board of Commissioners
We appreciate the contributions of committees to increase the effectiveness of the Board of Commissioners in 2018. The Audit Committee, Risk Oversight Committee, Remuneration and Nomination Committee, and the )NTEGRATED #ORPORATE 'OVERNANCE #OMMITTEE ALL SHOWED strong performance and upheld high standards of competency and quality.
The Audit Committee ensures the implementation of internal controls and effectively assists the Board of Commissioners in overseeing the implementation of internal and external audit functions, implementation of corporate governance and compliance with prevailing laws and regulations. In carrying out its duties, the committee held 22 meetings, met with the Internal Audit Division 10 times, and reviewed more than 166 internal audit reports in 2018.
The Risk Oversight Committee ensures the Bank’s risk management system provides protection against the risks faced by BCA. In 2018, the committee held 10 meetings, reviewing credit portfolios, assessing operational risk, cyber security and business continuity plans, among others.
The Remuneration and Nomination Committee has carried out its duties in providing recommendations to the Board of Commissioners regarding BCA’s overall remuneration policy. The committee held six meetings in 2018, including those related to tantiem policy, remuneration and talent mapping.
4HE)NTEGRATED'OVERNANCE#OMMITTEESUPPORTSTHE"OARD of Commissioners in supervising the implementation of integrated corporate governance at BCA and its subsidiaries. In 2018, the committee held four meetings and reported on the implementation of integrated governance to the Board of Commissioners.
Changes to the Board of Commissioners
In 2018, there were no changes to the membership of the Board of Commissioners. The Commissioners’ profiles can be found under Company Profile on pages 66-69 in this report. Each member of the Board of Commissioners has carried out supervisory functions and provided advice to the Board of Directors in managing the Bank, in accordance with their respective competency and experience.
Business Prospects and Assessments of the Board of Commissioners
The recovery of the national economy will continue in 2019.
The macroeconomy and the banking sector are resilient amidst dynamic global economic conditions, supported by THEACTIVEROLEOFREGULATORSANDTHE'OVERNMENT
Nevertheless, possible adjustments of the Fed rate may AFFECT THE mOW OF GLOBAL CAPITAL AND THE "ANK )NDONESIA benchmark rates. BCA will continue to monitor liquidity conditions in Indonesia, including the liquidity of the banking sector, which is expected to tighten.
Efforts to strengthen the transaction banking business will maintain the confidence of customers placing funds with BCA. Competition in the banking sector is expected to intensify while fintech companies and e-commerce players enter the field, offering new innovations in transaction banking. BCA constantly monitors the development of the business and adapts to maintain its excellence in transaction banking franchise. Efforts to expand the customer base and connect customer businesses with the BCA payment system will further support excellence in transaction banking. Technological developments provide an opportunity for BCA to better analyse customer needs and increase the efficiency of business processes.
2018 Annual Report PT Bank Central Asia Tbk 37 of Directors, and considering economic conditions, the
Board of Commissioners agrees with the Bank’s strategic direction to maintain a balance between its liquidity position, targeted credit growth and asset quality.
Economic recovery is expected to continue with moderate economic growth. Therefore, BCA continues to implement prudent principles in lending as well as maintaining solid financial performance.
To accommodate developing customer needs, BCA will strengthen synergy with its subsidiaries, which ultimately support the business of the BCA group as a whole, and provide opportunities for collecting fee-based income.
BCA continues to maintain the Bank’s business continuity through efforts to strengthen the transaction banking franchise, improve quality lending and develop other business lines. BCA’s work plan in 2019 is still conscious of the balance between various business opportunities and the risks that they bring with them. BCA will continue to adapt to changes in the business environment while maintaining business continuity and providing added value to stakeholders.
BCA’s achievements in 2018 cannot be separated from the support given by all the Bank’s stakeholders. The Board of Commissioners would like to thank all shareholders, customers, business partners, staff and other stakeholders for the trust they have shown in supporting the continuity of BCA’s business. We give appreciation to the Board of Directors, who have steered the company to a solid financial position, and to the subsidiaries who have contributed to the overall performance of the BCA group.
We also thank the Indonesian Financial Services Authority /*+ AND"ANK)NDONESIAFORCARRYINGOUTTHEIRSUPERVISORY functions and supporting the resilience of the national banking business throughout 2018. BCA is committed to providing sustainable value and benefits to customers, stakeholders and the Indonesian community.
Jakarta, March 2019
On behalf of the Board of Commissioners,
Djohan Emir Setijoso
President Commissioner
2018 Annual Report PT Bank Central Asia Tbk
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2018 Annual Report PT Bank Central Asia Tbk 39
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Management Discussion and Analysis Management Report
Financial Highlights
/)*
Name
PT Bank Central Asia Tbk
Line of Business Commercial Bank
Ownership
PT Dwimuria Investama Andalan 54.94%
Public 45.06%
Establishment 10 October 1955
Legal Basis of Incorporation
Notary Deed No. 38 of Raden Mas Soeprapto dated 10 August 1955.
Approved by the Minister of Justice in Decision Letter
.O*!DATED/CTOBER
Authorized Capital Rp5,500,000,000,000 (88,000,000,000 shares)
Issued and Fully Paid Up Capital Rp1,540,938,125,000
(24,655,010,000 shares)
Stock Exchange
Shares of PT Bank Central Asia Tbk are listed and traded at the Indonesia Stock Exchange (IDX)
Listing Date 31 May 2000
Share Code BBCA
ISIN Code ID1000109507
SWIFT Code CENAIDJA
Total Employees 24,941
Change of Name
Effective on 2 September 1975 the name of the Bank was changed to PT Bank Central Asia (BCA)
Headquarters:
-ENARA"#!'RAND)NDONESIA Jl. M.H. Thamrin No. 1
Jakarta 10310
Tel. (62-21) 2358 8000 Fax. (62-21) 2358 8300
Networks:
1,249 branches, 17,778 ATMs, and hundreds of thousands EDCs
(Information of branches address can be found in the Branches section on pages 98-100)
Subsidiaries:
s 04"#!&INANCE s "#!&INANCE,IMITED s 04"ANK"#!3YARIAH s 04"#!3EKURITAS
s 04!SURANSI5MUM"#!
s 04#ENTRAL3ANTOSA&INANCE s 04!SURANSI*IWA"#!
s 04#ENTRAL#APITAL6ENTURA
(Information of subsidiaries address can be found in the Information on Subsidiaries section on pages 88-89)
Company Website:
www.bca.co.id www.klikbca.com
Call Center:
Halo BCA 1500888
Corporate Secretary s0UBLIC2ELATIONS s)NVESTOR2ELATIONS Menara BCA
'RAND)NDONESIAth Floor Jl. M.H. Thamrin No. 1 Jakarta 10310
Tel. (62 21) 2358 8000 Fax. (62 21) 2358 8300 E-mail: [email protected]
As of 31 December 2018
2018 Annual Report PT Bank Central Asia Tbk 41
In 2018, BCA carried out banking business and activities with consideration to the Bank’s Articles of Association. Based on Article 3 of its Articles of Association, BCA as a Commercial Bank may engage the following business activities:
a. To collect funds from the public in the form of deposits comprising of clearing account (giro), time deposit, deposit certificate (sertifikat deposito), savings account ANORANYOTHERFORMEQUIVALENTTHERETO
b. To provide credit facilities;
c. To issue debt acknowledgment letters;
d. To purchase, sell or guarantee, whether at its own risk or for the benefits of and at the request of its customers, the following:
i. Drafts, including drafts accepted by bank with a validity period not to exceed that in the normal practice for trading of such instruments;
ii. Debt acknowledgment letters and other commercial papers, with a validity period no to exceed that in the normal practice for trading such papers;
iii. State treasury notes and government guarantees;
iv. Certificates of Bank Indonesia (SBI) v. Bonds;
vi. Commercial papers with a validity period in accordance with the prevailing laws and regulations;
vii. Other commercial papers with a validity period in accordance with the prevailing laws and regulations.
e. To transfer funds, either for its own benefit or for the benefits of its customers;
f. To place fund at, to borrow funds from, or to lend funds to other banks, whether by letters, telecommunication facilities, or bearer drafts, cheques or other media;
g. To receive payments of receivables from commercial papers and make calculations with or among this parties;
h. To provide safe deposit box for goods or valuable papers;
i. To engage in custody activities for the benefit of any other party under a contract;
j. To conduct a placement of fund from one customer to another customer in the form of commercial papers that are not registered on the stock exchange;
k. To conduct factoring (anjak piutang), credit card and trusteeship services;
L 4OPROVIDElNANCINGANDORCONDUCTBUSINESSACTIVITIES under Sharia Law, through either the establishment of a subsidiary or formation of Sharia Business Unit in accordance with the rules and regulations stipulated by Bank Indonesia, or Indonesian Financial Services Authority or other authorized institutions;
m. To carry out business activities in foreign currencies in accordance with the rules and regulations determined by Bank Indonesia, or Indonesian Financial Services Authority or other authorized institutions;
n. To conduct capital participation in banks or other financial companies, such as leasing companies, venture capital companies, securities companies, insurance companies, and a clearance, settlement and depository institutions, subject to rules and regulations stipulated by Bank Indonesia, or Indonesia’s Financial Services Authority or other authorized institutions;
o. To conduct temporary capital participation for the purpose of dealing with credit failure, provided that such participation must be later withdrawn, subject to the regulations stipulated by Bank Indonesia, or Indonesia’s Financial Services Authority or other authorized institutions;
p. To act as a founder (pendiri) or managing executive (pengurus) of pension funds in accordance with the existing regulations on pension funds; and
q. To conduct other activities generally conducted by banks to the extent permitted by the prevailing laws and regulations, including among others, any measures pertaining to restructuring or credit rescue, such as buying collateral, whether partially or wholly, at an auction or by other means, in the event that a debtor fails to fulfill its obligations to the bank, provided that such collateral must be cashed immediately.
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Financial Highlights
Bank Central Asia (BCA) founded as “NV Perseroan Dagang Dan Industrie 3EMARANG+NITTING&ACTORYv
BCA commenced operations on 21February 1957 with Head Office located in Jakarta.
Effective on 2 September 1975 the name of the Bank was changed to PT Bank Central Asia (BCA).
BCA strengthens its delivery channels and obtained a license to open as a Foreign Exchange Bank in 1977.
BCA develops the Automated Teller Machine (ATM) network as an alternative delivery channel.
In 1991, BCA installed 50 ATM units in various locations in Jakarta.
BCA intensively develops the ATM network and features.
BCA works with well-known institutions, such as PT Telkom and Citibank, allowing BCA’s customers to pay their Telkom phone bill or Citibank credit card bill through BCA ATMs.
BCA experiences a bank rush during the Indonesian economic crisis.
In 1998 BCA became a Bank Take Over (BTO) and was placed under the recapitalization and restructuring program operated by the Indonesian Bank Restructuring
!GENCY)"2! A'OVERNMENT Institution.
BCA was fully recapitalized with THE'OVERNMENTOF)NDONESIA through IBRA, assuming ownership of 92.8% of BCA shares in exchange for liquidity support from Bank Indonesia and a swap of related-party loans for 'OVERNMENT"ONDS
BCA aggressively expanded its branch network in line with the deregulation of the Indonesian banking sector.
BCA developed its information technology capacity, by establishing an online system for its branch office network, and launches new products and services including the Tahapan BCA savings accounts product.