On behalf of the Board of Commissioners, I am pleased to report that CIMB Niaga had a satisfactory year in 2013. Against a very challenging backdrop, we registered a profi t before tax of Rp5.8 trillion with a Return on Equity of 17.7% and Earnings per Share of Rp170.4.
CIMB Niaga has grown signifi cantly since the 2008 merger between CIMB Niaga and LippoBank.
The synergies from this merger resulted in the Bank’s expanding its network and number of customer touch points. We now have more than 14,000 employees who are ever ready to provide excellent banking services to our 4.7 million customers.
Dato’ Sri Nazir Razak President Commissioner
Evaluation of 2013 Performance
On behalf of the Board of Commissioners, I would like to congratulate the Directors of CIMB Niaga for a commendable 2013. Against the challenging macroeconomic setting, they were able to record Rp4.3 trillion net profi t. The Bank has taken a cautious stance on asset growth with loans growing only 8% YoY. This somewhat compounded its earnings challenge this year as the Bank’s net interest margins were compressed by rising liability cost and higher liquidity requirements imposed by the regulators.
Moving Forward
We anticipate that we will be able to grow assets more strongly in 2014 as customers and competitors will by then have adjusted with our more conservative stance.
In addition we do not expect interest rates to hike as frequently or as severely as in 2013.
In 2013, we took a lead in digital consumer banking. This digital space will be a recurring theme for us moving forward. Some of the initiatives already in place include the CIMB Niaga Digital Lounge and products such as Rekening Ponsel.
Preparations are already underway for our biggest IT project – 1Platform, our regional core banking platform.
This system is already up and running in CIMB Group’s banking entities in Malaysia, Thailand and Singapore and they have seen positive results in cost effi ciencies and speed of processes. We hope to replicate those successes in Indonesia.
Report of the President Commissioner
CIMB Niaga has grown its total assets, loans, customers deposits and low cost deposits (current accounts and savings accounts) by about two-fold since 2008. At the same time, management has kept the Bank sound with a low level of non-performing loans.
2013, A Year of Challenges
2013 saw the Indonesian economy recording its weakest growth in four years. The economy grew 5.8%, a drop of 0.4% from the previous year, as the end of the commodities boom slowed exports which began to strain the country’s current account and placed Indonesia amongst several large emerging markets with the dreaded “twin defi cits”.
Indonesia was one of the countries most affected by the outfl ow of funds from emerging markets. The pullout was triggered by strong signs of economic recovery in the US and growing speculation that the US Federal Reserve would start to taper off its key stimulus programme and start raising interest rates. The resultant fi nancial market pressure on the Indonesian economy and the Government’s various responses saw the Indonesian currency depreciating by 26% against the US Dollar, infl ation jumping to 8.4% from 4.3% in the previous year and BI raising its offi cial rates 5 times during the year by a total of 175bps.
The Activities of the Board of Commissioners and its Committees in 2013
The Board of Commissioners was actively involved in the progress of CIMB Niaga throughout 2013. A more detailed report of the focus areas, activities and recommendations of the Board of Commissioners of CIMB Niaga and the activity report of the various Board Committees can be found separately in the Corporate Governance section of this Annual Report, along with elaborations of supporting Committee activities during the year.
We would like to thank the various Committees, namely the Audit Committee, the Risk Monitoring Committee, and the Nomination and Remuneration Committee for their professionalism and commitment.
Good Corporate Governance
The Board of Commissioners is pleased with the corporate governance structure at CIMB Niaga. We were the recipient of multiple Corporate Governance awards in 2013, including The Best Responsibility of the Boards 2013 at the IICD Corporate Governance Award 2013 and The Most Trusted Company at the Corporate Governance Perception Index Award 2012. CIMB Niaga was also the winner of the Annual Report Awards 2013 in the Private Listed Financial Company category for the 11th consecutive time.
Not an organisation to rest on our laurels, we are continuously enhancing our internal procedures to ensure all employees adhere to the Code of Conduct. The Board of Commissioners applauds the organization’s consistent efforts to observe good corporate governance as well as best-practice standards in its operational policies and processes.
Corporate Social Responsibility
In line with our commitment to ‘give back’ to the communities that we serve, we have placed great importance on our corporate social responsibility (CSR).
In 2013, our CSR efforts included scholarships for SMK Level in Cilincing and Vocational Program at IKOPIN and the establishment of CIMB Niaga Peduli Community and CIMB Niaga for natural disaster relief.
We hope these initiatives will continue to contribute positively to the development of the society at large.
We fully support and encourage the Directors’ decision to further develop the quality of our CSR programs. The resilience of a nation lies with the strength of its people and we hope to play our part.
A more detailed report of our CSR activities can be found in the CIMB Niaga’s Sustainability Report which includes parts of the new global reporting initiative standards.
Dividend Policy
In view of the anticipated need to strengthen CIMB Niaga’s capital structure, we have taken a prudent decision to not distribute any dividends from the 2012 net profits. This will better position the Bank to navigate through the current conditions of the local and global macro economies.
Changes in Board of Commissioners and Directors Composition
The Annual General Meeting of Shareholders of CIMB Niaga held in March 2013 approved the appointment of Pri Notowidigdo as Independent Commissioner, effective 26 November 2013. Pri has solid professional experience in Human Resources and is expected to contribute positively to the progress of CIMB Niaga going forward.
Ananda Barata has recently completed his term in offi ce as Independent Commissioner. On behalf of the Board of Commissioners, allow me to convey my highest appreciation to Ananda Barata and we wish him well for his future undertakings.
We also wish to report that there were several changes in Board Committee member compositions in 2013. We would like to welcome new members, Shariq Mukhtar, Sumantri Slamet, and Darminto, all experts in their own fi elds with long and solid track records in banking and fi nancial related industries. All three of them will join our Audit Committee. Shariq is now a member of the Risk Monitoring Committee, while Sumantri is a member of the Nomination and Remuneration Committee.
The appointments of Vera Handajani as Director and Dr.
Yulizar Djamaluddin Sanrego Nz, M.Ec. as a new member of Syariah Supervisory Board, replacing M. Taufi k Ridlo, Dipl. EC., who resigned from Sharia Supervisory Board were approved on 26 July 2013 in the Extraordinary General Meeting of Shareholders. Vera’s appointment was effective as Risk Director on 26 November 2013 and Yulizar’s appointment was effective on 10 June 2013.
With these new appointments, we believe that CIMB Niaga is in a better position to face the challenges ahead.
Prospects for 2014
The gloomy Indonesian economic environment in 2013 is anticipated to spill over into 2014. Our analysts forecast that the country’s gross domestic product (GDP) growth rate will slow to 5.4%. The impending general and presidential elections in 2014 may see lower business activity in the fi rst half of the year. Furthermore, fi nancial markets will likely remain quite volatile this year as investors closely watch and react to each economic data release to gauge the prospects for the country’s current account and fi scal position.
For the longer term, I remain optimistic about Indonesia’s prospects. Indonesia, together with Mexico, Nigeria and Turkey (MINT countries) have been tipped to join the ranks of the emerging world economic powers, following on the heels of Brazil, Russia, India, China and South Africa (BRICS countries).
Our view on CIMB Niaga’s Business Plan formulated by the Directors
We have advised the Directors with respect to the targets for 2014 and will consistently provide guidance in order to achieve targets. We are confi dent that the Directors will lead the Bank in the right direction with its calculated and feasible business plans.
Report of the President Commissioner
Appreciation
On behalf of the Board of Commissioners, I would like to record our appreciation for the efforts of the Directors and all employees in navigating a challenging year. Your commitment has enabled the Bank to retain its position as one of the leading banks with sound financial performance in Indonesia.
We would like to also extend our gratitude to the country’s regulators for their persistent efforts in sustaining the Indonesian economy and in particular, thank our customers for their strong support and trust of the Bank.
Jakarta, March 2014
On behalf of the Board of Commissioners
Dato’ Sri Nazir Razak President Commissioner
Hamidah Naziadin Commissioner
Glenn M. S. Yusuf Vice President Commissioner
Joseph Dominic Silva Commissioner
Pri Notowidigdo Independent Commissioner
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CIMB Niaga’s business has grown strongly within the last half decade, represented by total assets, distributed credit, customer funds and inexpensive funds, which at the end of 2013 have about doubled in size compared to its position in 2008 when PT Bank Lippo Tbk completed its merger into PT Bank CIMB Niaga Tbk. Fee Income and PBT each have increased respectively more than 3-fold and 4-fold respectively over the same period. This remarkable growth was achieved in part due to our aggressive efforts in expanding the offi ce network and through the development of digital touch points with the intention of securing service excellence for our customers.
Dear Shareholders,
the President Director
Report of
Arwin Rasyid President Director
Report of the President Director
Becoming A Leading Digital Bank
CIMB Niaga has fi rmly embraced its grand strategy to reach its vision to become the most trusted bank in Indonesia. This strategy entails a goal of becoming a leading digital consumer banking provider. To achieve this, CIMB Niaga has fully utilized the most recent sophisticated technology by giving priority to customer experience as a distinguishing element. This effort has made the digital banking we offer to our customers the most complete among the national banking industry.
CIMB Niaga’s digital banking comes with many features that make it not only easy and secure, but also innovative and accessible 24/7 from wherever customers are. We hope that these sweeping advantages will enhance the customer experience and customer satisfaction in making banking transactions, which in turn will eventually improve our income and secure a more developed and sustainable business.
To reach this objective, CIMB Niaga has decided to make Operations and IT the forerunners of its business, by building a stronger enhancement system and IT infrastructure and developing branchless banking touch points. To support its strategy in advance, CIMB Niaga has prepared a long-term initiative to regenerate its banking system under the 1Platfrom Kita Satu in 2013.
Through this improved system, it is expected that we can enhance our service and experience to all stakeholders at every CIMB Niaga branch and digital touch point.
Business Environment in 2013
The year of 2013 turned out to be a tough and challenging year for CIMB Niaga as Indonesia suffered a decline in GDP growth to a level of 5.8% compared to the average of above 6% during the previous years. While the growth was still one of the highest among the emerging economies, its slower pace has become a common concern of many since Indonesia had been predicted to experience an equally strong growth for the year.
The issue about the US Government tapering policy in the second half of 2013 stimulated massive withdrawal of capital from emerging economies and has caused the Indonesian GDP growth to decline.
In mid-year 2013, the Indonesian government issued a policy to reduce the subsidy on fuel, which eventually was followed by a rise of infl ation. This combination of fuel price rise and QE tapering were quickly sensed by the country’s market players. The value of the Rupiah depreciated 26% YoY against the US Dollar; the rate of infl ation reached 8.38% YoY, and capital liquidity in money markets became more restricted.
This condition forced the Indonesian Central Bank (BI) to adjust its benchmark rate fi ve times from June 2013, reaching a high of 7.5% toward the end of the year. This strategic move was intended to narrow the country’s trade defi cit and bring the value of the Rupiah back to an expected level.
Growth of Domestic Banking Industry
A change in the BI benchmark rate is bound to trigger reactions from market players, which in this particular year impacted on the growth of loans that grew at 21.6%, or slowing quite noticeably compared to the previous years. Total assets of the banking industry grew 16.2%
with an LDR ratio of 89.9%. The NPL rate was 1.8%, which is indicative of a sound level of financing.
Challenge of 2013
By the end of 2012, we estimated some challenges we were likely to deal with in 2013 and their impacts to CIMB Niaga’s performance. However, we found that the challenges that we faced were tougher than our predictions.
The declining price of certain commodities since 2012 has slowed down the growth of the mining industry, including companies in our corporate and commercial segments. This decline has given a fairly big impact to the rate of credit growth in that segment.
The reduction of the fuel subsidy led to a much higher inflation rate and generally took a part in influencing all industries, particularly those in the commercial and SMME segments, in such a way that we must pay close attention to credit quality.
Besides this, other challenges to CIMB Niaga in 2013 were new regulations to restrict the liquidity level of the banking industry in the consumer segment.
Other than that, the policy of QE tapering in the US, as described above, also became a significant challenge that was experienced widely by the Indonesian economy and the national banking industry. This policy gave serious impacts, i.e. the sinking value of the Rupiah against the US Dollar, and tighter liquidity.
What is more, competition in the money markets continued and became more competitive, not only in the banking business, but also for other professionals.
Strategic policy 2013
In the 2012 Annual Report, we stated that in 2013 CIMB Niaga would carry on “Transformation 2” with Six Pillar of Growth, and focused on six aspects, encompassing shortening the credit process as end-to-end; building a cross-selling culture; continuing innovation in branch and branchless banking; increasing the transaction banking business; focusing on low cost funds (CASA) and SMMEs; and enhancing synergy between corporate banking and investment banking to extend business opportunity.
In dealing with the challenging 2013, management applied a strategy to improve efficiency in order to maintain profitability, maintain asset quality through a more confining risk management policy and more prudent credit policy, and selectively optimize asset growth in some of our business lines.
To increase customer funds, CIMB Niaga continued to establish infrastructure for digital and branchless banking service for consumer, commercial and corporate segments. Approaching the end of 2013, CIMB Niaga again issued bonds which were a part of CIMB Niaga ongoing public bid I, phase II, of Rp1.45 trillion. This effort was conducted to reduce a maturity gap between assets and payables.
CIMB Niaga Financial Performance
Facing this challenging macro economy situation, we are gratefully satisfi ed that CIMB Niaga achieved an ROA of 2.76%, and CAR of 15.36% and favourable credit with NPLs of 2.23%.
The Bank’s total operational income reached Rp13.52 trillion, rising 5% from the previous year. This relatively low growth was due to a very signifi cant rise of fi nancing expense following the rise of BI benchmark rates and tight liquidity in the national fi nancial industry. Net interest income and fee-based income respectively rose 4% and 8% YoY, while operational expenses grew 9% YoY.
The Company’s total assets grew 11% to Rp218.87 trillion, along with the growth of the credit portfolio of 8% to Rp156.98 trillion by the end of 2013. The Company succeeded in maintaining the quality of credit at 2.23%
which is 6 basis points lower than in previous year.
In liabilities, total customer funds rose equally to credit demands i.e. 8% YoY. The Company’s inexpensive funds such as savings and demand deposit accounts respectively rose 7% to Rp35.23 trillion and 13% YoY to Rp36.80 trillion.
2013 Achievement vs Target
In light of the national economic condition, business environment, and challenges dealt with in 2013, we assert that CIMB Niaga’s fi nancial performance was healthy with net profi t before income tax of Rp5.8 trillion and net income of Rp4.28 trillion.
Some of the achievements were below their stated targets such as distributed fi nancing (gross) and Net Interest Income, both only reaching 97%, while PBT reached 99%. These achievements were in line with the Company’s strategy to anticipate a worse economic condition in 2013 by restricting the line of credit and maintaining healthy credit.
Nevertheless, the Company also succeeded in achieving high performance and reaching or even beating other stated targets such as; Loans to Deposit (LDR that reached 90.34%, BOPO Ratio that reached 73.97%, Gross NPLs that reached 2.23%, and CAR that reached 15.36% higher than stated targets.
2013: The Development of Stronger Foundation for Future Growth
Within its business lines, CIMB Niaga concluded the year with satisfactory growth in some businesses, namely the Sharia Business Unit, personal Loans, credit cards, merchant business, PPWM, CCS, Cross Border Business, Transaction Banking, Forex Income, Bancassurance, CIMB@Work, and Branchless Transactions.
We are fully aware of such potentials and are enthusiastic about boosting these segments’ performance in the years to come and promote them to contribute more to our total revenues.
Human Resources Development
Another challenge faced by the Company in 2013 was that in fulfi lling the needs for the best talents with high skills in human resources as there is tight competition for talent.
Aware of this need, the Company made integrated efforts to ensure the availability of highly committed, deeply involved, innovative, and high performing talents that always uphold the Bank’s core values.
Moreover, the management responded to this threat with some initiatives to support our existing HR programs in the future. These included initiatives to increase employee engagement and encourage them to be more productive and effi cient to allow the Bank to reach its stated targets going forward.
Good Corporate Governance
In dealing with this challenging year of 2013, CIMB Niaga remained committed to the implementation of GCG and made greater efforts to keep it in conformity to the best practice in the industry.
The principles of GCG and ethics code that have arisen within employees and management will always be maintained and will become a line item in performing all Company activities.
CIMB Niaga has established a GCG Committee that will play its role to assist Directors in performing GCG as an effort to achieve the Company’s objectives. Besides this, the Company also has executive committees to assist Directors to ensure the integrity of GCG principles in all aspects of its operations, namely IT operations, human resources and risk management.
Our GCG implementation was focused on consolidating and improving internal communication besides mapping out our organization based on a thorough review of customer expectations.
Furthermore, efforts to keep the Bank more sheltered from potential hazards were continuously made and improved through a whistle blowing system, anti-money laundering and KYC programs. In risk management, one of the focuses was how to minimize impacts from legal cases filed against the Bank. The Bank has also consistently aligned its corporate actions with prevailing rules and regulations.
CIMB Niaga actively makes an assessment on its GCG implementation that is monitored regularly by involving management committees and executive functions through self-assessment questionnaires using the framework from Bank Indonesia. In 2013, the self- assessment conducted returned a very satisfactory result.
In respect of its commitment in applying the best GCG practices, the Company received some awards i.e. The Best Responsibility of the Boards 2013 in “The 5th IICD:
Corporate Government Awards” and The Most Trusted Company based on Corporate Governance Perception Index in “Corporate Government Awards 2013”.
Furthermore CIMB Niaga also took first rank in “Annual Report Awards 2013” as a Listed Private Finance Company.
CIMB Niaga will keep making serious efforts in self improvement by strengthening good corporate governance in line with prevailing standards as one of main directives in GCG practice.
Corporate Social Responsibility
The most recent development of the Indonesian economy has made us more aware of the important role of the community - as one of the Bank’s stakeholders - to our business. To that end, CIMB Niaga during 2013 kept running CSR programs with heavy focus on education and community empowerment, environment preservation and philanthropy with the intention of improving the quality of life while making efforts to produce a smarter generation through a series of educational aids in the form of scholarships, such as Khazanah Asia scholarship, CIMB Foundation Scholarship, a program of scholarship in collaboration with Sampoerna, and Scholarship for CIMB Niaga Employees in collaboration with the Faculty of Economy of the Universitas Indonesia.
CIMB Niaga earned several awards in the respect of CSR activities conducted throughout 2013 such as
“Indonesia Green Awards 2013” that was held by La Tofi School of CSR, Anugerah Peduli Lingkungan (Education Care Awards) category of Corporate/BUMN held by the Ministry of Education and Culture of Republic of Indonesia. Moreover, CIMB Niaga also achieved the 1st Runner Up Best Sustainability Reporting Awards 2012 that was held by the National Center for Sustainability Reporting (NCSR), appreciation on good SR reports.