In 2018, the Board of Commissioner’s advice and direction centered on improving the competitiveness of the Bank as well as strengthening its strategies to achieve growth in the midst of macroeconomic challenges and in the era of digital banking. As a result, we managed to record an increase of the Bank’s net profit of 16.9% to Rp3.48 trillion.
By way of this report, the Board of Commissioners submits this report regarding its duties and responsibilities in line with the direction from the shareholders at the AGM and the Articles of Association implemented through various initiatives during 2018. We are also submitting the Board of Directors’ performance assessments which comprise their operational and financial performance, execution of the Bank’s strategy, business prospects as prepared by the Board of Directors, and implementation of Corporate Governance.
MACROECONOMIC CONDITIONS 2018
In 2018, we were faced with various global macroeconomic headwinds, including the increases in the Fed Funds Rate (FFR), the intensifying trade tensions between the United States (US) and China as well as geo-political pressures which resulted in a reduction in global trade volumes. Furthermore, there was a decrease in global commodity prices, including oil, resulting from the increased supply from several producing countries. Subdued trade activities in Dear Shareholders and Stakeholders,
developed countries, in line with slower growth, with the exception of US, as well as the escalating issues regarding protectionism including among others, import tariff fixing by the US government, and the Brexit sentiment lowered global trade volumes.
Moreover, the global financial markets are still facing higher risks associated with the uncertainties in the US financial market. These risks consequently triggered several central banks in both developed and developing countries to raise their interest rates in line with their respective monetary tightening policies, affecting capitals flows, which then impacted the capitals outflows from developing countries (EM).
On the domestic side, throughout 2018, Indonesia’s economic outlook exceeded market estimation and recorded a growth of 5.17% fueled by domestic demand. Investments remained strong, driven by Government infrastructure projects. Inflation at 3.13%
remained low, under control and stable within the 2018 inflation target. The Rupiah exchange rate weakened 5.98% against the US Dollar after undergoing pressure at the end of 2018 from increased global uncertainties.
The Banking industry’s liquidity remained at an adequate level, and likewise, its credit risk is well- managed. The Banking industry’s Capital Adequacy Ratio (CAR) remained high at 22.97% and the liquidity ratio (LDR) remained stable at 94.8%, as of December 2018. The non-performing loans (NPL) ratio remained
stable at 2.4% (gross). Going forward, Bank Indonesia predicted that in 2019, Indonesia’s economic outlook growth will remain stable around 5.0-5.4%, supported by stability of national demands and improved net exports.
ASSESSMENT OF PERFORMANCE OF THE BOARD OF DIRECTORS
Overall, the Board of Commissioners’ assessment shows that the Board of Directors has managed and supervised the Bank well, considering the unfavorable environment during the year, as reflected by their achievement in 2018 as compared to 2017. The assessment is based on a number of financial indicators, such as total assets which grew 0.2% to Rp266.8 trillion, an increase in credit of 1.8% to Rp188.5 trillion, as well as an increase in customer deposits which grew 0.8%
to Rp190.8 trillion. Regarding profitability, profit before taxes grew 16.7% to Rp4.9 trillion while the Bank’s net profit grew 16.9% to Rp3.5 trillion. Earnings per share rose Rp21.2 to Rp139.7 from Rp118.5 in the previous year.
Our assessment shows that the Board of Directors has been successful in implementing a prudent credit growth strategy in the midst of a competitive market situation. CIMB Niaga’s loan portfolios increased 1.8%
to Rp188.5 trillion mainly driven by credit growth in the Mortgage and SME segments. The ratio of NPL-gross significantly improved and was maintained at the level of 3.11% from 3.75% previously. CASA balances hit Rp100.4 trillion which resulted in a CASA ratio of 52.61%.
CIMB Niaga’s Capital Adequacy Ratio (CAR) improved to 19.66% from the previous year of 18.60%, more than meeting its minimum limit requirement.
The Board of Commissioners recognizes that the Bank’s achievement in its overall growth is inseparable from the strong leadership of its management team.
Moving forwards, we hope the Board of Directors would keep up and improve its performance in accordance with the established strategic directives while still practicing prudence in their risk taking as well as continuously maintaining its market share.
Report of the Board of Commissioners
SUPERVISION OF STRATEGIC POLICIES IMPLEMENTATION
Throughout 2018, there were numerous activities carried out as part of the duties and responsibilities of the Board of Commissioners. In accordance with the Bank’s Articles of Association, we continuously supervise the implementation of strategic policies carried out by the Board of Directors and provide support, advice, and recommendations that are required in order to sustain the Bank’s growth. In 2018, the Board of Commissioners oversaw the implementation of the five pillars of its strategic policies referring to 1) playing to our strength, 2) expanding our CASA, 3) maintaining our cost discipline, 4) Focusing on risk management culture, and 5) leveraging information technology and digital platforms.
Additionally, the Bank has also supported CIMB Group’s group-wide T18 programme, a mid-term strategy to recalibrate CIMB’s business, strengthen its foundation and drive greater productivity. Over the 4 year period, the Group’s foundation in terms of cost and capital has improved significantly.
We consistently remind the Board of Directors to prioritize prudence on credit processes, uphold integrity to eliminate fraud, practice agility in facing the digital era challenges, maintain cost discipline, preserve capital adequacy and liquidity and also other advice to increase low cost funding through CASA and revenue through development of quality services throughout all our business segments and continuous innovation in digital banking, including Go Mobile with its latest features.
We also support improvements to information technology in business processes including automation to improve service quality and reduce existing risks which also improves efficiency and effectiveness, thus reducing costs.
VIEW OF BUSINESS PROSPECTS THAT ARE DESIGNED BY THE BOARD OF DIRECTORS
In 2019, global economic conditions are expected to maintain its flattish growth trend. Some barriers that could limit economic growth are the height of intensity of trade tensions and pressure from world financial markets. On the domestic economy, the 2019 Presidential and Legislative political agenda would be a key consideration for investors whom we expect will take a “wait and see” approach. Meanwhile in the banking industry, there will be an expectation on liquidity tightening and an increase in interest rates.
However, Bank Indonesia predicts Indonesia’s 2019 economic growth to remain stable between 5.0-5.4%, supported by domestic demand and improvements of net exports. Credit growth is expected to be in the range of 10-12% (yoy) while Third Party Funds growth is predicted to be in a range of 8-10% (yoy).
SUSTAINABLE FINANCIAL INITIATIVES
The preparation of CIMB Niaga’s Sustainable Financial Action Plan (RAKB) is a manifestation of the Bank contribution to its sustainability commitment. This enables the Bank to contribute in maintaining economic stability and deliver harmonization in economic, social and environmental aspects. In line with the publication of POJK No. 51/POJK.03/2017 on the Implementation of Sustainable Finance for Financial Service Institutions, Issuers, and Public Companies, the Board of Commissioners welcomes and fully supports the Bank’s efforts in carrying out Sustainable Financial actions for both short term (1 year) and long term (5 years).
A balance between economic, social and environmental aspects is necessary to raise awareness to achieve sustainability, stability and inclusivity. The Board of Commissioners considers CIMB Niaga’s RAKB which contains details of the Bank’s priorities and implementation plans, will enable CIMB Niaga to be a bank that consistently places importance between economic, social and environmental aspects. The Board of Commissioners will also monitor CIMB Niaga’s RAKB programs closely in the future.
HUMAN RESOURCES
In 2018, the Board of Commissioners have assessed that the Board of Directors have focused and implemented various strategic plans in order to develop effective Human Resources (HR) programs. We also recognize the efforts made in HR which enable improvements in risk awareness and compliance culture through various programs such as the “Bring ZAC (Zealous About Compliance) to Life” campaign, intensive communication through various channels and joint discussion programs discussing related matters risk and compliance. Going forward, we aim to continue the focus on sustainable HR management and increase the number of qualified employees who are trained in the fields of Data, Digital and Disruption (3D). This will help us to prepare ourselves for the changes and challenges of the 4th Industrial Revolution. We also support the development of automation in processes and continuous improvement in order to minimize manual operational risk and improve employee productivity.
INFORMATION TECHNOLOGY
Our assessment shows the Board of Directors have managed and developed effective strategies on information technology to provide services according to customer expectations and needs. CIMB Niaga has introduced solutions to offer centralized banking services in branchless banking, customer experience and sales processes through digital channels as well as enhancing the capabilities of the mobile banking system. Going forward, we hope that CIMB Niaga will continue to implement technological advancements according to the Bank’s strategy and support the business based on service quality that is effective, efficient, reliable and secure.
CORPORATE GOVERNANCE
With the support of the Audit Committee, we supervised the implementation and noted the adoption of Good Corporate Governance (GCG) in the Bank. The basis for the implementation of CIMB Niaga’s GCG refers to the 4 aspects of Corporate Governance which are governance commitment, governance structure,
FREQUENCY AND ADVICE METHODOLOGY FOR THE BOARD OF DIRECTORS
In 2018, we have given direction and advice relating to duties and responsibilities of the Board of Commissioners, including recommendations regarding the Bank’s strategic policies, through various forums including the Board of Commissioners’
Meetings; Joint Meeting with Committees under the Board of Commissioners; Board of Commissioners’
Working Visits; and the Board of Commissioners’
Meeting with the Board of Directors as invitee (Joint Meeting). In 2018, the Board of Commissioners held 8 meetings in addition to having 4 joint meetings with the Board of Directors.
WHISTLEBLOWING SYSTEM
CIMB Niaga’s Whistleblowing System (WBS) is part of a control system that aims to detect and prevent deviations or violations in all business activities. The WBS supports the creation of an open, sincere, honest and responsible work climate in the CIMB Niaga environment. The Bank has appointed a third party to manage whistleblowing reports and encourage all stakeholders to report if there are any violations or fraud indication.
The Board of Commissioners is assisted by the Audit Committee to supervise and monitor the implementation of the WBS. The Board of Commissioners together with the Audit Committee and other units will continue to evaluate and take follow-up action for any reports received.
CORPORATE SOCIAL RESPONSIBILITY
CIMB Niaga has a strong bond with the community and environment having operated for more than six decades. We recognize the need to continuously grow and develop which requires the support, synergy and harmonious relationships with the community and the environment as well as other stakeholders. Therefore, we have a strong commitment to play an active role governance process and governance outcomes
a manifestation of CIMB Niaga’s responsibility to stakeholders (customers, employees, the community and others). We recognize the Board of Directors has been effective in implementing GCG based on standards set by regulators and also in accordance with internationally accepted standards. CIMB Niaga has implemented Governance to protect the rights of shareholders by ensuring equality to all shareholders, involvement of stakeholders, information disclosure that are complete, accurate and timely as well as carrying out the duties of the Board of Commissioners and the Board of Directors responsibly.
Furthermore, in the implementation of an integrated risk management system, CIMB Niaga adopted the Enterprise Wide Risk Management (EWRM) framework. Through EWRM, CIMB Niaga strives to minimize the potential impact from various types of risks faced, through the formulation of the risk appetite and risk tolerance for each type of risk, as well as the development of policies and appropriate risk management policies and procedures to maintain the risk level within predetermined limits. In 2018, CIMB Niaga carried out the risk management process in the EWRM framework which includes the process of identifying risks that are considered significant in the Bank’s business activities. Measurement and aggregation of risk is carried out with proper methodology in accordance with the Bank’s risk appetite while management and control as well as risk reporting are carried out continuously for evaluation.
Supported by the Risk Monitoring Committee, we continue to monitor the implementation of risk management as an effort to mitigate major risk factors and ascertain the sustainability of the Bank’s business.
Report of the Board of Commissioners
in the development of a sustainable society and environment through the implementation of various Corporate Social Responsibility (CSR) programs. CSR is one of CIMB Niaga’s commitments to strengthen its relationships with stakeholders, which is achieved through discussions on business and financial requirements, as well as the implementation of sustainable CSR activities.
CHANGES IN THE COMPOSITION OF MEMBERS OF THE BOARD OF COMMISSIONERS
In the Extraordinary General Meeting of Shareholders (EGMS) 2018, the Bank approved changes in the composition of the Board of Commissioners. The EGMS accepted the resignation of Dato’ Sri Nazir Razak from his position as President Commissioner of CIMB Niaga effective from 19 October 2018 and Armida Salsiah Alisjahbana as Independent Commissioner.
The EGMS also approved the for Tengku Dato’ Sri Zafrul Tengku Abdul Aziz to step down from his position as Commissioner of CIMB Niaga and concurrently appointed him as President Commissioner of CIMB Niaga replacing Dato‘ Sri Nazir Razak.
The members of CIMB Niaga’s Board of Commissioners are as follows:
• Tengku Dato’ Sri Zafrul Tengku Abdul Aziz : President Commissioner (pending regulator’s approval)
• Glenn Muhammad Surya Yusuf : Vice President Commissioner
• Zulkifli M. Ali : Independent Commissioner
• Pri Notowidigdo : Independent Commissioner
• Jeffrey Kairupan : Independent Commissioner
• David Richard Thomas : Commissioner
CIMB Niaga expresses its highest gratitude and appreciation to Dato‘ Sri Nazir Razak and Armida Salsiah Alisjahbana for their contributions and dedication to develop the Bank as the second largest private owned bank in Indonesia. It is expected that with the new leadership, CIMB Niaga will continue to improve and create a sustainable growth.
APPRECIATION
Through submission of this report, we believe CIMB Niaga will continue to improve its performance through an integrated and superior banking offerings as well as consistent implementation of GCG principles.
The Board of Commissioners mandates for all levels of management and employees to synergize and provide the best banking services that goes beyond customer expectations.
As a closing statement of this report, representing members of the Board of Commissioners, we would like to express our appreciation for the hard work and dedication of the Board of Directors and Management for their consistent commitment in the implementation of GCG and develop CIMB Niaga. To all our partners and stakeholders, we would like to express our deepest gratitude for the trust given so far.
Lastly, we would also like to thank all employees for their hard work and enthusiasm to continuously develop as well as for their contribution for the Bank growth throughout 2018. We look forward to working together even more closely in 2019 and in our next transformational strategy, “Forward23 Semangat Perubahan” which will fold into the Group’s overall transformational strategy, “Forward23”, which are based on five strategic pivots – Customer Centricity, Sustainability, Ventures & Partnerships, Technology &
Data, and our People – to help realize our new purpose statement: Advancing Customers and Society.
Thank you.
15 March 2019
Glenn Muhammad Surya Yusuf Vice President Commissioner
Dato’ Sri Nazir Razak President Commissioner
Let me express my deepest gratitude to all our Shareholders for the trust given to me during my tenure as President Commissioner from effective dated 1 May 2012 until 19 October, 2018.
I would also like to thank my fellow members of Board of Commissioners, Directors and Management, as well as Employees and Customers of CIMB Niaga, past and present, for their support. It has been a great honor for me to have served this organization and I will cherish every memory.
During my tenure at CIMB Niaga, we marked many important milestones, including our 60th anniversary, becoming Indonesia’s leading digital bank, entering the category of “BUKU 4” and becoming the first publicly listed company in Indonesia to use e-voting system at the time of voting at the General Meeting
of Shareholders. We remained profitable throughout despite some difficult operating conditions.
I believe that CIMB Niaga has excellent foundations, grounded on sound strategy and methodical execution by a highly talented Management team and committed cadre of Staff. Highest standards of governance and integrity underpin everything we do. At the same time, CIMB Niaga enjoys the full support and networks of CIMB Group across ASEAN.
Shareholders can look to the future with optimism.
On this occasion, I would like to extend my congratulations to the new President Commissioner:
Tengku Dato’ Sri Zafrul Tengku Abdul Aziz. I believe he lead the positive changes for business continuity in CIMB Niaga, and provide benefits for the Stakeholders.
Dato’ Sri Nazir Razak President Commissioner
Dear Shareholders,
Letter from Dato’ Sri Nazir Razak
Warm regards, Dato’ Sri Nazir Razak
Board of Commissioners
Tigor M. Siahaan President Director
The Board of Directors is pleased to announce that, in 2018, we were able to continue our sustainable growth momentum. In the midst of challenging macroeconomic and banking industry conditions, the Bank managed to end 2018 year book with significant improvement in financial and business performance.
In line with the FORWARD brand promise, CIMB Niaga is committed to building stronger relationships with its customers, and continuously provides solutions for its customer on every aspect of their life.