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Individual
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BCA is optimistic about the long-term growth prospects of the Indonesian economy and developing middle class. Over the last several years, the Bank has established a solid business framework to service the changing banking needs of the Bank’s individual customers. The steady growth of Indonesia’s professional and middle income classes continues to support growing demand for consumer banking products including mortgages, vehicle loans, credit cards, insurance and wealth management products and services.
After posting 5 years of strong 32.9% growth in lending, BCA pulled back on consumer lending in 2014 in line with an overall slowdown in the broader Indonesian economy. In a year marked by challenging macroeconomic conditions, higher interest rates and tighter regulations, the Bank proactively tightened credit appetite and raised lending rates intended to manage the growth of consumer lending. Over 2014, BCA recorded consumer loan growth of 6.1% with credit quality comfortably maintained at a low Non Performing Loans (NPL) ratio of 0.7%.
The Bank focuses on developing infrastructure and enhancing the organizational structure of the work units in the Individual Banking Group. With improved infrastructure, BCA will be able to capitalize on cross- selling opportunities going forward while allowing the Bank to improve the quality of products and services. Overall, these efforts will solidify BCA’s
well-known position as the leading consumer lender in Indonesia offering a transparent and timely credit approval process with competitive rates.
Mortgages
Since fully developing its mortgage business in 2007, BCA has become a leader in the Indonesian mortgage market. By the end of December 2014, the Bank’s mortgage portfolio reached Rp 54.7 trillion, a 32.0% CAGR growth since 2007, contributing 59.2%
to BCA’s total consumer loans.
BCA understands the long-term strategic value of mortgage lending as it enables customers to purchase homes and provides the Bank with an opportunity to build long-term relationships with individual customers. Through the provision of mortgages, the Bank has succeeded in building greater customer loyalty thereby creating cross-selling opportunities and developing a future source of stable long-term funding. BCA’s mortgage strategy of concentrating on prime residential areas with high demand for housing results in low default risk.
BCA markets mortgage loans through the Bank’s extensive branch network and consumer loan centers in major cities throughout the country. The majority of mortgage applications originated from branch referrals with the remaining from property developers. The healthy flow of branch referrals provides key support for the mortgage business (in billion Rupiah)
2014 92,277
2013 86,984
(in billion Rupiah)
2014 8,772
28,853 54,652
Credit Card Vehicle Loans Mortgage
2013 26,630
52,949
7,405
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particularly in the midst of tighter regulation in the property industry. Since 2013, the regulator has restricted the national banking industry from providing mortgages for properties that are semi- completed or in the development process.
In 2014 BCA maintained its prudent mortgage lending standards reflecting the prevailing property market conditions. The growth rate of the mortgage portfolio stood at 3.2%, with mortgages outstanding reaching Rp 54.7 trillion. The majority of this growth occurred in the fourth quarter of 2014 following previous four quarters of relatively flat growth.
Throughout 2014, new mortgage bookings were approximately equal to the mortgage repayment run- off. Due to the unfavorable economic environment and higher interest rates in 2014, close attention was required to ensure that disbursement of mortgages was maintained at a sustainable and prudent level.
BCA maintained mortgages rates relatively high in 2014 compared to 2013. Rates of the flagship product, the 5 year fixed-rate mortgage, stood at 10.5% throughout most of the first 9 months of 2014, compared to 8.5% - 9.5% in 2013. Following the smooth presidential election, banking liquidity improved, allowing BCA to proactively reduce mortgage rates slightly in September 2014 by 50 bps to 10.0%.
While BCA recognizes the need for government action to prevent excessive growth in the property market through tightened Loan-to-Value restrictions, the Bank remains optimistic about the long-term potential of mortgages in Indonesia. With low penetration rates
and the increasing size of Indonesia’s middle-class, mortgages stand out as a promising business. The Bank believes that mortgages can and will continue to give significant contribution to the Individual Banking business and provide increased opportunities for the Bank in providing a range of other banking solutions to consumer banking customers.
Vehicle Financing
The economic uncertainty and new Loan-to-Value restrictions affected both the the automotive industry and the growth of the auto finance industry in 2014. BCA believes that the introduction of prudent Loan-to-Value rules designed to prevent excessive consumer finance growth in an uncertain economic environment, is the best course of action to establish a healthy consumer credit culture. New car sales nation-wide were recorded at 1.21 million units in 2014, down 2% from 1.23 million units in 2013.
Meanwhile, growth in motorcycle sales nation-wide had a slight increase of 2% to 7.9 million units in 2014.
BCA manages car and motorcycle financing through its subsidiaries, BCA Finance and Central Santosa Finance (CS Finance) respectively. Both BCA Finance and CS Finance offer financing through Joint Financing Agreements, with the majority of the loans booked directly at BCA and a smaller portion remaining on the books of BCA Finance and CS Finance.
In 2014, BCA Finance focused on enhancing the quality and efficiency of product and service delivery to ensure customers continued to receive the high service standards to which they are accustomed.
BCA Finance improved its online service to speed up applications for vehicle loans and complemented this with an on-site survey option to further expedite the credit process. This is part of BCA Finance’s strategy to maintain market share among its mass-affluent target.
BCA Finance continued to work closely with BCA branches to serve the Bank’s quality customers while continuing to maintain relationships with third party dealers. Marketing synergy with BCA branches distinguishes BCA Finance from its competitors in providing a high quality customer network for
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auto finance lending. BCA Finance aligns its credit risk management and risk appetite with the Bank’s prudent policies resulting in a relatively low NPL level. Benefiting from its multi sales channels, BCA Finance had more than 400 thousand customers in 2014, a growth of over 300% from 2008. In addition to BCA branches, BCA Finance maintains a standalone branch network of a total of 59 branches with 6 new outlets opening in 2014.
BCA Finance offers attractive, ‘top of mind’ financing products in the auto financing markets. BCA Finance’s flagship product, the ‘Fix and Cap’ loan, offers 3 years fixed-rate installment and 2 years installment at a capped interest rate. BCA Finance also has an attractive product, the ‘mini for max’ loan, which is a 3-year financing facility offering lower monthly principal installment with a 40% principal balloon payment on loan maturity. Customers may choose to pay off the facility, or to sign up for another financing facility after the 3-year tenor.
To minimize risk, BCA Finance prioritizes lending for the best-selling cars produced by leading auto makers while maintaining a relatively high down payment with competitive interest rates. BCA Finance also continued to penetrate the highly prospective second-hand vehicle market by lending against second-hand vehicles with evidence of maintaining value for an optimal risk-return trade-off.
In January 2014, BCA increased its effective stake in CS Finance to 70% from the previous 25% share ownership in line with overall strategic management objectives to strengthen the Bank’s presence in the two-wheeler financing market. Subsequently, BCA and other shareholders made a capital injection into Central Santosa Finance in the amount of Rp 200 billion, Rp 140 billion of which was contributed by BCA and BCA Finance. CS Finance continued to grow in 2014, albeit slowly, and contributed positive results to the Bank. CS Finance is focusing on strengthening its business platform through infrastructure development, risk management policy, human resource recruitment, branch expansion and close cooperation with dealers in Java and Sumatra.
Total loans for car financing at the end of 2014 stood at Rp 24.7 trillion on BCA’s book and Rp 5.2 trillion on BCA Finance’s. Total motorcycle financing stood at Rp 4.2 trillion on BCA's book and Rp 2.0 trillion on CS Finance’s at the end of 2014.
Credit Cards
In 2014, BCA’s outstanding credit card balances grew 18.5% to Rp 8.8 trillion, securing the Bank’s position as a leading provider of credit card services in Indonesia.
The number of BCA’s cards in circulation continued to grow throughout 2014, with an overall increase of 5.1%, amounting to a total of 2.6 million cards by the end of the year. The growth in the number of credit cards issued yields a market share of 16.1% in 2014.
The growth in cards was accompanied by consistently high credit card usage with an active usage rate of over 90%, resulting in an overall increase in BCA’s credit card transaction volume of 18.0% to reach Rp 46.1 trillion in 2014.
This positive performance was made possible by BCA’s solid brand image and focused promotional efforts. The Bank works to develop a better understanding of the changing customer needs in the various customer holding BCA credit cards.
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To this end, BCA works closely with many strategic urban merchants to facilitate customers’ lifestyle and spending behaviours. In 2014, the Bank continued its partnership with long-term strategic partners, such as Starbucks Coffee, Pizza Hut, Cineplex21, Haagen- Dazs, and other renowned brands.
The Bank continued to promote the successful Singapore Airlines co-branded credit card focusing on the middle-to-upper class market. The BCA Singapore Airlines card has recorded excellent growth, with an increase in the number and value of transactions in excess of 50% on a year to year basis. Further, to accommodate needs of the growing mass-affluent segment, BCA released the Black Visa and MasterCard in 2014 for highly mobile customers who require the widest range of services to facilitate global transactional needs. The lower risk middle-to- upper class segments are BCA’s main target market for credit card services.
BCA remains the only bank in Indonesia to have a private label or proprietary card, or the ‘BCA Card’, in addition to offering BCA Visa and BCA MasterCard options. The BCA Card can be used throughout Indonesia and in certain locations in Singapore. In recognition of the Bank’s achievement in the credit card business, BCA was awarded the Indonesian Best Brand Award 2014 from SWA magazine and the Top Brand Award from Marketing Magazine and Frontier Consulting Group.
As part of BCA’s integrated transaction platform, the Bank's credit card business focuses on both the issuing and acquiring sides with the support of reliable EDC network.
BCA has installed hundreds of thousands of Electronic Data Capture (EDC) as payment points in strategic locations, business centres, and at retail merchants across Indonesia. BCA’s extensive EDC network has constantly generated high transaction volume that augments BCA’s transaction and CASA accounts. Today, BCA’s EDCs can also provide Dynamic Currency Conversion (DCC), a service that allows cardholders to choose from Rupiah or the local currency of the card-issuing bank for convenient transactions. In 2014, BCA's EDC has been able to process transactions using UnionPay International and American Express (Amex) cards, in addition to BCA Card, Debit BCA, MasterCard, Visa, JCB, PrimaDebit and Flazz cards.
BCA enhances comfort by providing e-statements and other credit card information digitally, autopay registration via SMS, easy conversion of transactions into installment facilities and online credit card applications. In 2014, BCA prepared the infrastructure to introduce PIN security for credit card transactions and conducted training to educate and socialize this feature among merchants and cashiers.
Pre-paid Flazz Card
Complementing credit cards and debit cards, the Bank also offers the pre-paid Flazz Card. In 2014, BCA continued to contribute to the transportation infrastructure by providing Flazz Card services as e-ticketing for TransJakarta buses and commuter trains throughout greater Jakarta. In addition, the Bank has also developed self-service Flazz Card top-up machines. At the end of 2014, there were 6.5 million Flazz Cards in circulation, including BCA Combi cards (combined BCA credit card and Flazz Card).
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The use of Flazz Cards is expected to increase given the increasing needs for services to handle small-value transactions, such as parking facilities, highways, fast food outlets and food & beverage counters.
Furthermore, the Bank will continue to improve the Flazz Card network and infrastructure.
Priority Banking and Wealth Management Introduced in 1996, BCA Prioritas provides tailored service to the Bank’s mass-affluent clients. In 2014, BCA manages 152 Prioritas branches equipped with capable relationship officers to deliver quality services. BCA Prioritas customers can now enjoy the benefits of using exclusive services and programs, such as health services, exclusive communication bulletin, airport executive lounges, investment products, and other attractive offers as added service values. BCA’s Prioritas’ customers made a significant contribution towards growth in various BCA Individual Banking products.
In 2014, BCA Priority Banking Officers continued to focus on deepening relationships with priority customers, providing close contact on updating financial markets movements and expanding awareness of diversified investment alternatives including bonds and mutual funds.
In 2014, the Bank participated in the Retail Saving Bonds sales, a new investment instrument introduced by the Government. This floating rate non-traded instrument is intended for retail investors with a minimum purchase of Rp 5 million up to Rp 5 billion.
BCA seeks to take advantage of opportunities arising from the growth of Indonesia’s high net- worth segment through the development of Solitaire Banking services. Launched in 2009, Solitaire Banking aims to provide services through personalized touch for the Bank's customers who require Wealth
Management services. The Bank has set up exclusive facilities in selected BCA branches staffed with specially trained financial advisers to assist Solitaire clients in managing their personal finances.
In 2014 the Bank reorganized work units in the Individual Banking Division to facilitate improved cooperation between the different units.
BCA Prioritas and BCA Solitaire aligned their organizational structures for business integration and upgraded human resource capabilities to better satisfy the needs of their customers.
Going Forward
BCA will continue to develop the Individual Banking business in line with the promising growth prospects of Indonesia’s burgeoning middle class. The Bank sees its large customer base and extensive branch network as assets that can be used when designing and marketing Individual Banking products.
Synergy between work units will be further strengthened to allow for a more effective delivery of Individual Banking products. These efforts are intended to help increase product diversity for the Bank’s customers. BCA will also continue to enhance its Customer Relationship Management system to better understand customer behavior and needs as the basis for establishing effective strategies in product development as well as marketing and promotional activities.
BCA aims to improve the infrastructure and enhance the business of its subsidiaries. The Bank will establish synergies with BCA Life that began operations at the end of 2014.