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Individual banking continues to grow in line with the growing middle class, both from business and PROFESSIONAL BACKGROUNDS 'ROWING CUSTOMER NUMBERS in various segments create an increasing need for individual banking solutions, which drove the individual banking business in 2018. We offer a wide range of individual banking products and services, including
mortgages, vehicle loans, credit cards, deposits, bancassurance, and an array of investment products.
The Bank’s large customer base provides great potential for BCA to offer individual banking products. BCA also leverages technological advancement by using analytic tools to better understand customer needs and offer suitable solutions for individual banking.
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2018 Annual Report PT Bank Central Asia Tbk 127 In 2018, we held attractive promotional events for
consumer loans to stimulate demand. Consumer loans are one of the fundamental parts of BCA’s business, supporting efforts to build long-term relationships with customers and open new opportunities in offering individual banking products and services. Despite the rising interest rates challenge, the consumer loan portfolio saw positive growth, recording an increase of 7.2% to Rp131.7 trillion by the end of 2018, at 24.5% of overall credit. BCA implements prudence in its consumer lending activities, which helps the Bank maintain a healthy loan portfolio.
Mortgage-base lending represents one of the main pillars of our consumer loan portfolio. Mortgage-base lending also caters for productive activities or business use such as lending for commercial properties.
All of our mortgage-base products emphasize on collateral quality and repayment capacity. BCA implements prudence in its lending activities, which helps the Bank maintain a healthy loan portfolio.
Priority and Solitaire Banking, and Wealth Management
We have offered BCA Prioritas, a premium service DEDICATED TO AFmUENT CUSTOMERS SINCE )N we introduced BCA Solitaire service, for high net- worth individual customers. We made continuous improvement in every aspect, including infrastructure, products, services and other benefits specially offered to Prioritas and Solitaire customers. The growing number OF CUSTOMERS IN THE AFmUENT AND HIGH NETWORTH
individual segments raises the performance of individual banking products, including mortgages, vehicle loans, premium credit cards and wealth management, such as bancassurance and a range of investment products.
We offer exclusive lounges for Prioritas customers to conduct banking transactions in comfort by visiting any of 169 Prioritas areas in branches throughout cities across Indonesia, and two Solitaire lounges in Thamrin AND +ELAPA 'ADING PREMIUM AREAS OF *AKARTA 7E collaborate with trusted business partners in health, education, networking, travel and lifestyle to offer exclusive services for Prioritas and Solitaire customers.
We also offer special services for priority customers to better facilitate them in conducting transactions both in Indonesia and overseas.
Prioritas customers get special access to HaloBCA Prioritas, a premium 24-hour call center, as well as a special exclusive information feature in BCA Mobile. BCA also offers a channel for communicating and interacting within the business community, synergize more with fellow customers and enhance relationships with BCA, including through the Online Business Forum which is available on the BCA Prioritas website. A number of facilities are also provided for Solitaire customers, including exclusive services from personal bankers. The personal bankers are equipped with interaction skills, product and services knowledge, and an understanding of the customer’s business to offer comprehensive solutions for Solitaire customers.
The Bank’s large customer base provides great potential for BCA to offer individual banking products and
services in accordance with the needs and preferences
of each segment.
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To meet customer needs for insurance products, BCA partners with AIA and synergizes with subsidiaries BCA Life and BCA Insurance. We also continue to strengthen bancassurance infrastructure at branches, including by improving online applications and developing the competencies and knowledge of our employees. In 2018, we started to work with institutional customers, from both the corporate and commercial segments, to offer insurance and pension fund management for their employees.
We work with leading investment managers in Indonesia to offer access to mutual funds. In 2018, we conducted attractive promotional activities for investment products, launched a new auto-subscription feature for mutual funds investment, and a feature for product switching. We also supported the government by selling Indonesian retail bonds (ORI), Islamic retail bonds (SR), retail savings bonds (SBR) and Islamic savings bonds (ST).
Leveraging on technology advancement, we have developed a customer relationship management system to better understand customer needs and deliver
suitable solutions for customers. In offering individual banking products, we take into consideration the needs of each customer segment.
Consumer Financing Leader
At the end of 2018, BCA consumer loans reached Rp131.7 trillion, 24.5% of the Bank’s total credit. Despite rising interest rates, BCA maintained positive consumer loan growth. In the last decade, consumer loans grew BY A #OMPOUND !NNUAL 'ROWTH 2ATE #!'2 Consumer loans are focused on mortgages, vehicle loans and credit cards.
Mortgages
Mortgages are one of the Bank’s leading products, to build long-term relationships with customers and create opportunities for providing other financial products.
Despite increasing interest rates, the demand for home ownership remains high and the penetration of mortgages is still low in Indonesia. Our large customer base provides great potential for the Bank to offer mortgages to quality customers.
2018 Annual Report PT Bank Central Asia Tbk 129 In 2018, BCA recorded 7.9% growth in mortgage
loans, reaching Rp78.8 trillion. The mortgage portfolio accounts for 59.8% of total consumer loans. BCA is one of the largest providers of mortgages in Indonesia, with a market share of 16.9%. This position is supported by effective promotional programs with attractive interest rates and special events. For BCA’s 61st birthday, the Bank held a special BCA Expoversary event in Tangerang. BCA Expoversary offered various promotions for individual banking products, including mortgages. BCA also held marketing events for individual banking products in MAJOR CITIES OF )NDONESIA INCLUDING 'REATER *AKARTA Surabaya, Bandung, Semarang and Makassar, which generated significant mortgage demand.
In early 2018, we offered low-rate mortgages featuring a fixed rate of 5.61% for two years and a capped maximum rate of 6.61% for the following three years, with five times the initial installment as the retained balance. In line with rising benchmark rates, we gradually increased mortgage interest rates to 8.25% fixed rate for three years and 10% for capped rate for the following two years, by the end of the year.
'ROWTHINMORTGAGESWASDRIVENBYOURLARGECUSTOMER base and facilitated by our extensive branch network and consumer loan centers in major cities in Indonesia.
The majority of mortgages were processed from branch referral, and the rest supported by BCA collaboration with property developers and agents. We continue to strengthen relationships with developers and agents and develop our loan infrastructure, including by enhancing and simplifying mortgage processing.
BCA mortgages are primarily directed to quality customers and focused on financing for landed houses in prime residential areas. On average, outstanding mortgages reached Rp783 million per account, with a loan to value ratio of 50%–60% for new bookings. The QUALITYOFTHE"ANKSMORTGAGELOANPORTFOLIOISREmECTED in the NPL ratio of 1.1%, which has been at a relatively low level for several years.
BCA received the Indonesia WOW Brand 2018 from Markplus Inc. for its achievements in the development and service of mortgages, and an award from Service Excellence Magazine and Care – CCSL for its call center services related to mortgages.
2018 Annual Report PT Bank Central Asia Tbk
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Business Review
Vehicle Financing
BCA manages vehicle financing facilities through joint financing with its subsidiaries - BCA Finance for cars, and Central Santosa Finance (CS Finance) for motorcycles. Joint financing allows BCA subsidiaries to offer competitive pricing while supporting stable low cost of funds structures. A joint marketing strategy through BCA branches has supported BCA Finance and CS Finance in expanding their customer bases.
In recent years, the automotive and financing industries have shown moderate growth in line with economic conditions. In 2018, car sales increased 6.6% to 1.2 million units, while motorcycle sales reached 6.4 million units, an increase of 8.4%. Rising interest rates were also a challenge for consumer loan demand, and raised the potential of non-performing loans. This led the Bank and financing institutions to be more prudent in lending.
Although faced with these challenges, four-wheeler financing recorded a positive performance. In 2018, the overall four-wheeler credit portfolio (joint financing of BCA and BCA Finance) increased 4.3%, reaching Rp44.6 trillion with an estimated market share of 15.5%.
Within this portfolio, BCA’s share was Rp37.9 trillion, an increase of 6.2%.
We strive to improve service quality, accelerate credit processing, and strengthen relationships with dealers and showrooms. We continue to develop products and services to meet customer demand and introduce attractive promotions. In 2018, through the BCA Expoversary event, we offered a competitive fixed interest rate of 3.61% for three years.
In line with the latest technological developments, BCA Finance implemented IT solutions to increase efficiency and support marketing processes. By using mobile apps, partners can interact, conduct transactions, and
receive information on BCA Finance products. BCA Finance’s internal team also has access to a mobile- based application which makes credit processing more efficient. In support of customer needs, we offer a weekend service. Customers wishing to learn more about our financing solutions can also access information through the HaloBCA call center. To facilitate the payment of installments for four-wheeler financing, we offer payment channels such as through autodebit, virtual accounts, and ATM services.
We consistently monitor and manage loan quality, including by implementing high down payments and focusing on financing for the most popular and successful vehicle brands. The NPL ratio for four-wheel vehicles was maintained at 0.9%.
BCA (joint financing with CS Finance) recorded a 24.2%
decline in motorcycle financing, at Rp3.3 trillion. This portfolio includes Rp2.1 trillion of BCA’s portion which declined 19.6%. CS Finance focused on maintaining quality and improving the existing loan portfolio, including by enhancing the effectiveness of the collection process for non-performing loans. CS Finance conducted marketing activities through online channels, in line with the high adoption of technology in Indonesia, to extend the reach of its marketing efforts. CS Finance has also implemented mobile-based apps to improve efficiency in credit processing.
Credit Cards
BCA achieved a strong performance in the credit card business, and is trusted as one of Indonesia’s leading credit card issuers with a wide range of products and services. In supporting both acceptance and issuance services, BCA possesses an extensive EDC network and works with a number of leading international networks.
2018 Annual Report PT Bank Central Asia Tbk 131 BCA also has its own proprietary card, the BCA Card, which
is not affiliated with any other local or international networks. The BCA Card is one of BCA’s main credit card products and a well-known card among the Indonesian public.
In 2018, BCA managed 3.6 million credit cards with a transaction value of Rp69.7 trillion from a total of 89.7 million transactions. Transaction value increased 14.5%
in 2018, reaching a market share of 22.2%. The Bank’s credit card portfolio stood at Rp12.9 trillion in 2018, an increase of 11.8% from the previous year. Credit quality was well maintained, shown by the low NPL ratio of 1.9% at the end of 2018.
More information regarding credit card performance can be found in the Transaction Banking section of this report.
Looking Ahead
We are confident that demand is still high for individual banking products. The growth of the middle class and professionals will continue to drive demand for banking solutions for mortgages, vehicle financing, bancassurance, wealth management and other financial products.
With the Bank’s large customer base, extensive branch network and implementation of digital technology, BCA will continue to capture new opportunities for business growth in individual banking in the coming years.
We will continue to strengthen our human resources, both from the perspective of quantity and quality, and further leverage the use of technological solutions to improve efficiency in individual banking services.
Ongoing analysis of the needs and behavior of customers will play an increasingly important role in the future, as BCA seeks to provide more valuable individual banking solutions, striving always to develop the best products and offer competitive prices.
2018 Annual Report PT Bank Central Asia Tbk
132
Management Report