With suitable fund distribution strategy and a series of pre-emptive actions, Commercial Banking was able to reduce its exposure to impaired loans, maintain the funding structure and increase low-cost funds with the support of CASA growth.
The year 2014 was a challenging period. The global economy is yet to recover from the recent slump which affected the economic performance of developing countries that constitute Indonesia’s major markets, especially mining product industry. As a result, global and regional mining commodities demand levels has decreased causing global commodity prices level to decrease significantly and impacting the mining industry – and particularly the Indonesia coal industry.
The impact of the weakening coal industry has been widespread, automatically affecting the supporting industries including distribution channel, transport and logistics. This has placed
higher number of NPL within the Commercial Banking Division, which increased from 1.95% in 2013 to 3.3% by the end of 2014. It appears that most of the NPL originated from loans disbursed to the coal-supporting sectors. The increase in NPL in coal-supporting sectors reached nearly 50%.
Nevertheless, the Commercial Banking Division was still able to identify financing prospects in other sectors that have shown potential growth. Although slightly reaching the expected target, Commercial financing grew by 5.7%
to reach Rp36.1 trillion. Commercial Banking was financing prudently to sectors that potentially appeared slow down, and focusing on deepening existing customer.
Strategic Initiatives
In an effort to moderate further impact of the weakening commercial financing sectors, the Commercial Banking Division has established Asset Quality Management (AQM), a unit assigned to identify potential credit risks; monitor and analyze matters pertaining to loan quality management by business units; provides up-to-date information on the industry outlook and matters relating to regulation of loan quality (internal and external) to both the management and all business units; and simultaneously providing assistance to business units in terms of monitoring the status of debtor accounts that are experience loan impairment.
The function of AQM has been reinforced by senior and experienced employee’s assignment from each business unit.
In 2014, this strategy has reduced the Bank’s exposure to impaired loans by undertaking a series of pre-emptive actions that resulted in the aforementioned NPL level.
Other Strategic Initiatives
In order to prepare for the enactment of the ASEAN’s free trade market policy, Commercial Banking has undertaken other strategic initiatives, including:
The ASEAN Business Solution is a Regional Desk specifically designed to improve support for the Bank customer’s aspiration to expand into ASEAN countries. The Regional Desk is also supported by BQM Knowledge Enrichment programs designed to provide added value to business units by providing information via email: helpdesk.bqmcom@
cimbniaga.co.id
In collaboration Human Resources Division, each business unit has planned and developed competency enhancement programs through training sessions on Managerial Skills, Technical Skills and Personal Development.
Another strategic step has been the separation of the Sharia Business Unit from the Commercial Banking Division in order to sharpen the focus of both segments. Even though interrelated, both units are fundamentally different and as such require a different management strategy.
Fund Raising
The unfavorable economic situation has also placed pressure on the Commercial Banking Division’s fund rising activities.
The competition for funds, especially low-cost funds, is becoming increasingly fierce. The cost of funds rising has increased following Central Bank’s benchmark interest rate incremental yet again this year.
In anticipation to this condition, Commercial Banking Division intensified its efforts of the previous years to gather funds through CASA product bundling with Payroll, Biz Channel, Value Chain, EDC, and the activation of Operating Accounts.
The third party funds in the Commercial Banking Division totaled Rp24.5 trillion by the end of 2014, or a decrease of 12.0% from the previous year.
Focus in 2015
Although Indonesia’s economy is expected to eventually recover, the global conditions remain uncertain, particularly due to the high likelihood of Fed policy to increase its interest rates in April 2015.
deepening on existing customers. Working capital financing will be increased to compensate for investment financing that had been disbursed so aggressively in the previous years.
The Commercial Banking Division has analyzed the geographic distribution of financing. Based on the findings, penetration will be intensified to areas in Eastern Indonesia, considering their potential for growth.
Another strategy will be to increase third party funds. This strategy will include efforts to increase low-cost funds and fee-based income.
In 2014, the total commercial loan grew by Rp2.0 trillion or 5.8% to Rp36.1 trillion from previous year’s Rp34.1 trillion.
This increase means that the Commercial Banking Division contributed 20.7% to the Bank’s overall financing in 2014.
The Commercial Banking’s loan quality during 2014 declined as is reflected by the increasing ratio of non-performing loans by 137 bps from 1.9% in 2013 to 3.3% in 2014.
Total third party funds in Commercial Banking increased by Rp2.6 trillion, or 12.0%, from previous year’s Rp21.9 trillion to Rp24.5 trillion in 2014 with LDR ratio down 9.7% from 153.2% in 2013 to 143.5% in 2014.
By the end of 2014, Commercial Banking posted a pre-tax income of Rp574 billion or a decrease of Rp180 billion or 23.9% from the previous year’s Rp754 billion. This decline in pre-tax profit was due to the increasing provision for impairment losses on financial and non-financial assets that amounted to Rp289 billion, or 127.4% to Rp532 billion in 2014 compared to Rp234 billion in the previous year.
Since we first built cooperation in with CIMB Niaga in 2012, they have assisted us in developing our business by providing products and banking facilities that support our growth. The excellent services of all CIMB Niaga employees and management have been the key to success to our partnerships. Our cooperation with CIMB Niaga is more than bank-customer relationship and has been one that has made us as a business partner they like to see growing as the Bank grows.
We are proud to be CIMB Niaga customer and hope that CIMB Niaga will continue to make new innovations, in order to meet the needs of business growth along with technological developments and to improve the product quality and assurance of their banking products in order to become the leading bank in Indonesia.
Jongkie Sugianto President Director
PT Hyundai Indonesia Motor
2014 3.3
2013 1.9
2012 1.7
Non Performing Ratio (%)
2014 574
2013 754
2012 973
Profit Before Tax (Rp billion)
2014 3.57
2013 3.50
2012 4.27
Net Interest Margin (%)
2014 36.1
2013 34.1
2012 30.3
Loan (Rp trillion)
2014 24.5
2013 21.8
2012 22.0
Customer Deposit (Rp trillion)
2014 1.2
2013 1.1
2012 1.1
Net Interest Income (Rp trillion)