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WAS A YEAR OF ECONOMIC AND POLITICAL TRANSITION We are delighted to report that BCA continued to post solid financial results in 2014 due to the realization of VARIOUS INITIATIVES DESIGNED TO MAINTAIN LIQUIDITY AND ASSETQUALITYWHILEPROVIDINGTOPQUALITYSERVICETOTHE
"ANKSCUSTOMERS
In response to the uncertainties of 2014, BCA’s Board OF $IRECTORS MANAGED THE BUSINESS WITH CAUTION AND SOUGHT TO STRIVE A BALANCE BETWEEN OPPORTUNITIES AND RISK'OINGFORWARD"#!WILLCONTINUETOMONITORCLOSELY developing economic and political conditions and will TAKEPROACTIVESTEPSTOASSURESOUNDBANKINGPRACTICES ANDASOLIDBALANCESHEET
REVIEW OF THE INDONESIAN ECONOMY
4HE )NDONESIAN ECONOMY HAS EXPERIENCED MAJOR CHANGESINRECENTYEARS&ROMTOTHEBUSINESS ENVIRONMENT WAS SUPPORTED BY STRONG FOREIGN CAPITAL INmOWSDUETOTHEEFFECTSOF1UANTITATIVE%ASINGINTHE 5NITED 3TATES RESULTING IN LOW DOMESTIC AND GLOBAL INTERESTRATES)NANDTHISENVIRONMENTBEGAN TO CHANGE )NDONESIA EXPERIENCED VOLATILITY IN FOREIGN CAPITAL mOWS IN THE EXCHANGE RATE AND IN DOMESTIC INTERESTRATESAS53&EDERAL2ESERVE1UANTITATIVE%ASING SLOWED AND lNALLY CAME TO AN END 4HE MARKETS WILL CONTINUE TO BE VOLATILE IN AS MARKET PARTICIPANTS MONITORINTERESTRATESINTHE53ANDTHEPOSSIBLEIMPACT
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of an increase in US interest rates on worldwide, and in PARTICULAREMERGINGMARKETSCAPITALmOWS
2ECENT CAPITAL mOW VOLATILITY COINCIDED WITH THE IMBALANCE BETWEEN EXPORTS AND IMPORTS IN )NDONESIA particularly in the oil and gas sector as Indonesia BECAME A LARGE NETIMPORTER OF ENERGY LEADING TO A SIGNIlCANT CURRENT ACCOUNT DElCIT )N ADDITION THE PROLONGED DOWNTURN IN THE GLOBAL ECONOMY WITH THE EXCEPTION OF THE 53 COMBINED WITH CONTINUED LOW commodity prices has adversely impacted Indonesia’s TRADEBALANCE4HESERAPIDCHANGESLEDTOLOWERGROWTH '$0 WAS REPORTED AT AT YEAREND COMPARED WITH THEPREVIOUSYEARS
As Indonesia faced uncertainty with a widening current account deficit, the Central Bank and the Government TOOK PROACTIVE STEPS TO ADDRESS ECONOMIC IMBALANCES These actions included raising interest rates, revamping the fuel pricing policy through the elimination of a large PARTOFTHEFUELSUBSIDYANDSTRESSINGPRUDENTLENDING These proactive measures are showing signs of leading to a reduction in the current account deficit and mitigating the risk of a hard landing from the recent strong growth YEARS "#! BELIEVES THAT THE 'OVERNMENTgS ACTIONS TO consolidate the economy for a soft landing were correct ANDESTABLISHASOLIDFOUNDATIONFORLONGTERMECONOMIC GROWTH
Dear Stakeholders and Valued Customers,
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Although 2014 was a year of uncertainty, it is worth noting that Indonesia remains among the top five G-20 COUNTRIESFOR'$0GROWTHSUPPORTEDBYARESILIENTLOCAL ECONOMY AND A LARGE DYNAMIC POPULATION 0OLITICALLY Indonesia closed 2014 with a well-managed and smooth presidential transition, an impressive milestone in the POLITICAL HEALTH OF THE COUNTRY 4HIS FAIR AND LEGITIMATE election puts Indonesia on a strong footing to move INTO THE NEXT PHASE OF ECONOMIC DEVELOPMENT "#! IS optimistic that the nation is on the right trajectory in FORASOLIDLONGTERMECONOMICGROWTH
2014 PERFORMANCE: MAINTAINING QUALITY GROWTH
BCA posted positive financial performance, generating ADDEDVALUEFORITSSHAREHOLDERS4HE"ANKMAINTAINEDA QUALITYLOANPORTFOLIOWITHIMPROVINGPROlTABILITYWHILE SUSTAINING SOLID LIQUIDITY AND A STRONG CAPITAL POSITION
"#! BOOKED %ARNINGS PER 3HARE OF 2P IN A INCREASE ON S 2P PER SHARE ! .ON 0ERFORMING ,OANS .0, CLOSED THE YEAR AT AND
#APITAL!DEQUACY2ATIO#!2 AT,OANTO$EPOSIT 2ATIO,$2 STOODAT
Focus on Liquidity
4HETIGHTBANKINGSECTORLIQUIDITYTRENDEVIDENCEDIN CONTINUEDINTO/VERALLSINCETHE)NDONESIAN BANKINGSECTORHASEXPERIENCEDASLOWERPACEOFGROWTH INTHIRDPARTYFUNDS)NPARTICULAR#URRENT!CCOUNTSAND 3AVINGS !CCOUNTS #!3! GROWTH HAS SLOWED EVEN AS LOAN GROWTH HAS REMAINED STRONG 4HE BANKING SECTOR ,$2PEAKEDATIN*ULY4OWARDSTHEENDOF THELIQUIDITYCONDITIONIMPROVEDSOMEWHATDUETO mAGGINGLOANDEMAND
$ESPITE TIGHTER LIQUIDITY CONDITIONS "#! MAINTAINED A STABLE LIQUIDITY POSITION DRIVEN BY EXCELLENCE IN TRANSACTION BANKING 4HIS ENABLED "#! TO HAVE A SUSTAINABLE POOL OF CORE FUNDS CONSISTING OF #!3!
Despite slower economic growth, BCA managed to GROW ITS #!3! ACCOUNT BALANCES TO 2P TRILLION
#!3! COMPRISED THE MAIN CONTRIBUTOR TO THE "ANKS FUNDING BASE ACCOUNTING FOR OF TOTAL DEPOSITS 7E ARE PLEASED TO REPORT THAT OUR TRANSACTION BANKING FRANCHISE REMAINED STRONG AS EVIDENCED BY RESILIENT CASA funds throughout 2014, even with no increase in
#!3!ACCOUNTSINTERESTRATES
Throughout 2014 and going forward, BCA will continue TO CULTIVATE CUSTOMER CONlDENCE BY PROVIDING HIGH QUALITYSECUREANDRELIABLETRANSACTIONBANKINGSERVICES
"#! HAS BEEN SUCCESSFUL IN PROMOTING EFlCIENT AND low-cost electronic delivery channels to strengthen TRADITIONALBRANCHBANKINGSERVICES4HE"ANKCONTINUES TO EXPAND BOTH ELECTRONIC DELIVERY CHANNELS AND THE TRADITIONAL BRANCH NETWORK )N SUPPORT OF THIS GROWTH we continue to improve the Bank’s infrastructure, and to develop the products and transaction services that will KEEPUSAHEADOFTHECOMPETITION
At BCA we continue to improve ease of access for CUSTOMERS BY ENHANCING THE BRANCH NETWORK AND ELECTRONICDELIVERYCHANNELSINPARTICULARBYINCREASING THE NUMBER OF BRANCHES %LECTRONIC $ATA #APTURES
%$#S AND CASH WITHDRAWAL AND DEPOSIT MACHINES Branch network development focuses on strategic LOCATIONS SUCH AS SHOPPING CENTERS BUSINESS CENTERS ANDRAPIDLYGROWINGRESIDENTIALAREAS
"#!ISEXPLORINGTHEPOSSIBILITYOFESTABLISHINGSMALLER BRANCHES EQUIPPED WITH ELECTRONIC BANKING CHANNELS The Bank remains in the forefront of innovation in the use of new technologies designed to improve customer EXPERIENCE AND TO MAINTAIN THE TRANSACTION BANKING BUSINESS AS THE PRIME MECHANISM FOR RAISING #!3!
FUNDS
4O MAINTAIN AN OVERALL STRONG LIQUIDITY POSITION IN THE face of slowing economic growth during 2014, BCA took proactive steps in collecting funds from time deposit PRODUCTS BY PROACTIVELY ADJUSTING INTEREST RATES AHEAD OFTHEMARKET7ITHTHISSTRATEGYTHE"ANKWASABLETO KEEPTIMEDEPOSITINTERESTRATESPAIDBY"#!LOWERTHAN market rates while keeping rates well within guidelines ESTABLISHED BY THE )NDONESIA $EPOSIT )NSURANCE Corporation and the Indonesia Financial Services
!UTHORITY 4IME DEPOSIT BALANCES INCREASED TO 2PTRILLIONATTHEENDOFFROM2PTRILLION ATTHEENDOF
4OTALTHIRDPARTYFUNDSGREWTO2PTRILLIONBY THEENDOFWITHA#!3!PORTFOLIOOF2PTRILLION AN INCREASE OF FROM 7E ARE PLEASED TO SEE the positive trend of total deposits which reinforced our STRONGFUNDINGPOSITIONANDLIQUIDITYBUFFER3HORTTERM
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placements and government bonds accounted for 20.7%
of total third party funds in addition to primary reserves, which stood at 8.7% of total third party funds. BCA’s LDR ratio was maintained at a healthy level of 76.8%.
Prudence in Lending
The banking sector experienced slower loan growth in 2014 when compared to 2013. Moderate GDP growth, tight liquidity conditions and a higher interest rate environment were seen as the chief constraints that limited loan growth in 2014. Consumer lending slowed dramatically due to higher market interest rates and more prudent government regulations for consumer lending. Rising banking sector NPLs indicated a weaker, though still tolerable, level of asset quality in 2014. In this environment, BCA adopted a cautious approach to lending, with an emphasis on quality and careful consideration both to the liquidity position of the banking sector as a whole and, specifically, to BCA’s own liquidity targets.
Relationship banking is central to the Bank’s approach to lending. Provision of credit focused on the development of the debtors’ businesses, particularly companies that have an established relationship with the Bank as well as established track records in their respective fields.
BCA closely monitored the activity of businesses and consumers in order to best align lending activities with changing risk tolerance. The lending process continues to be supported by established lending infrastructure in the branches and head office that is designed to support sustainable high quality loan growth.
Credit administration and real time credit portfolio monitoring capabilities continue to improve in support of sound lending practices. BCA also continues to develop the capacity and capability of its account officers through training and a focus on the balance between marketing skills and risk knowledge.
In 2014 BCA’s loan portfolio grew 11.0% to Rp 346.6 trillion, underpinned by growth in lending to the business sector. Thanks to the Bank’s prudent lending policy, credit quality was maintained with an NPL level of 0.6% of total loans.
Business Development Through Subsidiaries In order to enhance customer services, BCA is diversifying its financial services portfolio, offering a wider variety of financial products and services.
The Bank expects that this move will result in growing fee-based income, which will become a significant part of future revenue and profitability.
In recent years the Bank has developed a comprehensive range of new financial products and services, including the development of new business lines through subsidiaries in the fields of Sharia banking (BCA Syariah), securities (BCA Sekuritas), general insurance (BCA Insurance) and 2-wheeler financing (Central Santosa Finance).
These businesses are showing positive results and are expected to contribute to even greater profitability in the future. BCA Life (life insurance) began operations in the 4th quarter 2014 and will add to the Bank's ability to provide a greater array of financial products and solutions for BCA’s customers. BCA Life is owned by the Bank’s securities subsidiary. The established subsidiary BCA Finance (4-wheeler financing) continued to provide a significant contribution to the Bank's profitability.
BCA’s large customer base, built upon excellence in transaction banking and lending, provides a strong base for non-bank financial products growth. Going forward, new product lines will allow BCA to expand beyond its existing customer base and will provide a point of entry for Indonesians who are not yet BCA customers.
The development of these new business lines is essential for BCA in its endeavor to strengthen relationships with customers. With a growing middle class and their increasingly diverse needs, banking products & services are becoming inseparable from non-banking products and services.
Going forward, the Bank will continue to support the growth of the subsidiaries as well as continuing to strengthen synergies with the Bank’s main businesses.
We are optimistic that the subsidiaries will make greater contributions to BCA in the future.
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Subur Tan Director
Eugene Keith Galbraith Deputy President Director
Rudy Susanto Director
Dhalia Mansor Ariotedjo Director
Suwignyo Budiman Director
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Henry Koenaifi
Jahja Setiaatmadja Anthony Brent Elam Erwan Yuris Ang Armand Wahyudi Hartono
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CHALLENGES FACED IN 2014 AND TARGETS VS.
REALIZATION
!LTHOUGH SLIGHTLY LOWER THAN ORIGINALLY EXPECTED "#!
RECORDED POSITIVE LENDING GROWTH OF IN 4HROUGHOUTTHEYEAR"#!FOCUSEDONLENDINGTOEXISTING HIGH QUALITY CUSTOMERS WITH PROVEN ABILITY TO WEATHER UNCERTAIN POLITICAL AND ECONOMIC CONDITIONS /VERALL the corporate and commercial lending segments REPRESENTEDTHEBIGGESTPORTIONOFTHE"ANKSTOTALLOAN GROWTH IN ,OAN GROWTH WAS ACHIEVED WITHOUT A MATERIAL DETERIORATION IN ASSET QUALITY WITH THE .0, RATIOSTANDINGATATYEAREND"#!S.0,RATIO COMPARES FAVORABLY TO THE BANKING SECTORS .0, RATIO
As a proactive move to anticipate a modest CASA growth rate, BCA proactively raised funds from time deposit products through a series of staged interest rate ADJUSTMENTS!SARESULT"#!WASABLETORECORDTOTAL THIRDPARTYFUNDSOF2PTRILLIONATTHEENDOF AGROWTHRATEOFWELLWITHINTHETARGETEDRANGEOF GROWTH
Steady growth in lending and in third party funds SUPPORTED SOLID lNANCIAL PERFORMANCE AND PROlTABILITY GROWTH .ET INTEREST INCOME ROSE BY TO 2P TRILLIONINCOMPAREDWITH2PTRILLIONIN WITHANETINTERESTMARGINOFCOMPAREDWITH IN THE PREVIOUS YEAR /PERATING INCOME OTHER THAN INTEREST GREW BY TO 2P TRILLION DURING
#OSTEFlCIENCYRATIOMEASUREDATINSLIGHTLY HIGHER THAN S "#!S OVERALL NET INCOME GREW BY TO 2P TRILLION BY THE END OF The Bank generated sound returns throughout the year, WITH 2ETURN ON !SSETS 2/! AND 2ETURN ON %QUITY 2/% OF AND RESPECTIVELY EXCEEDING THE PREDETERMINEDTARGETS
BCA Financial Highlights INBILLION2UPIAH
2014 2013 ǻ %
Total Assets 552,424 496,305
,OANS 346,563 312,290
Third Party Funds 447,906 409,486
Net Interest Income 32,027 26,425
Operating Income other than Interest 9,024 7,947
/PERATING%XPENSES
)NCOME"EFORE4AX 20,741 17,816
.ET)NCOMEATTRIBUTABLETOEQUITYHOLDERSOFPARENTENTITY 16,486 14,254
%03IN2UPIAH 669 579
Key Financial Ratios NONCONSOLIDATED
2014 2013 ǻ bps
ROA 10
ROE -270
NIM 30
,$2 140
Cost Efficiency Ratio 130
.0, 20
#!2CREDITMARKETANDOPERATIONALRISK 120
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QUALITY IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE
In the midst of external challenges and the increasing complexity of banking operations, BCA believes that the implementation of Good Corporate Governance is the foundation for establishing both a solid banking infrastructure and a strong corporate culture that will contribute to sustainable performance while helping to minimize risks.
The Bank’s application of Good Corporate Governance continues to be refined with reference to the best practices and standards in Indonesia, and the ASEAN Corporate Governance Scorecard. In addition, BCA has reviewed the Company’s core values to be in accordance with the developments and demands of today’s businesses. All business activities are carried out based on the principles of Good Corporate Governance and are supported by strong internal control and risk management systems.
Measures taken to increase the quality of the implementation of Corporate Governance will strengthen BCA as an institution, making the Bank more adaptive to changes in an increasingly competitive business environment and ultimately providing added value for all our stakeholders. BCA has received numerous awards for Good Corporate Governance over the past years which is evidence that the community recognizes the achievements of the Bank and its efforts to increase the quality of Good Corporate Governance implementation.
CHANGES TO THE BOARD OF DIRECTORS
We would like to report that there were some changes to the composition of the Board of Directors in 2014. The Annual General Meeting of Shareholders (AGM) held on 7 April 2014 approved the resignation of Mr. Renaldo Hector Barros as a member of the Board of Directors.
We give the highest appreciation and thanks to Mr. Renaldo Hector Barros for his significant contribution in his career spanning 11 years with the Bank, first as a member of the Board of Commissioners and then as a member of the Board of Directors.
The AGM also appointed Mr. Rudy Susanto as a new Director. We would like to welcome Mr. Rudy Susanto as a member of the Board of Directors, effective as of 21 July 2014, the date upon which the Indonesia Financial Services Authority approved the appointment.
Associated with these changes and in accordance with the authority granted by the AGM, the Board of Commissioners established new roles and responsibilities among the members of the Board of Directors. Mr. Armand W. Hartono was designated Director of Information Technology and Operations, replacing Mr. Renaldo Hector Barros; and Mr. Rudy Susanto was designated Credit Director.
We further report that, in compliance with the new regulation as specified in the Decision of the Board of Directors of the Indonesia Stock Exchange and without reducing the independence of other Directors, the AGM also appointed Mr. Erwan Yuris Ang, as an Independent Director of the Bank.
CORPORATE SOCIAL RESPONSIBILITY
As a good corporate citizen, BCA is committed to supporting Corporate Social Responsibility (CSR) activities to make a meaningful contribution to development of communities. In particular, the Bank’s CSR activities were directed to areas fundamental to building a strong foundation for the future of the nation.
The Bank’s CSR focuses on education, health, and environmental and cultural preservation.
In the area of education, BCA has sponsored various scholarship programs in collaboration with a number of leading universities in Indonesia aside from operating its own learning center for banking and finance.
BCA has a policy of recruiting employees for the internship program to support the industry manpower needs in general. The interns are rotated throughout the Bank to maximize exposure to banking and to create skilled professionals. Part of the interns are recruited by BCA, and the remaining are recruited by companies in various developing industries throughout Indonesia.
We believe this healthy process contributes to the long-term growth of BCA and of Indonesia.
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In addition, the Bank is active in the empowerment OF 3-%S THE PRESERVATION OF THE CULTURAL HERITAGE OF )NDONESIAESPECIALLYTHATOFTRADITIONAL7AYANGPUPPETRY AND THE MEDICAL SUPPORT OF MANY COMMUNITIES "#!
was also a primary sponsor of the 2014 Indonesia Open, ABADMINTONCHAMPIONSHIPHELDIN*AKARTA
PROSPECTS AND STRATEGY REVIEW FOR 2015
!MIDST CONTINUING UNCERTAINTY IN THE GLOBAL MARKETS WE BELIEVE THAT THE )NDONESIAN ECONOMY WILL REMAIN INACONSOLIDATIONPHASEINBEFOREGROWINGMORE RAPIDLY THEREAFTER )NDONESIA MUST BE SENSITIVE TO THE potential threats that could arise from the current account deficit, the risk of weak commodity prices, and THE REVERSAL POSSIBILITY OF FOREIGN FUNDS mOWS IN LINE WITHTHE&EDSNORMALIZATIONOFINTERESTRATEPOLICY
.EVERTHELESSWEBELIEVETHATTHE'OVERNMENTANDTHE REGULATORS WILL BE EFFECTIVE IN GUIDING THE )NDONESIAN ECONOMYANDBUILDINGASOLIDFOUNDATIONFORSUSTAINABLE GROWTH INTO THE FUTURE 4HE 'OVERNMENT PRUDENTLY PLANS TO REALLOCATE A LARGE PART OF GOVERNMENT BUDGET FROM SPENDING ON FUEL SUBSIDIES TO OTHER AREAS SUCH as essential infrastructure projects that promise to STIMULATEECONOMICGROWTH2EALIZATIONOFGOVERNMENT SPENDINGANDINVESTMENTmOWSWILLPROVIDESIGNIlCANT LIQUIDITYTOSTRENGTHENTHEDOMESTICBANKINGINDUSTRY
4HE !3%!. %CONOMIC #OMMUNITY !%# TO BE implemented in 2015, will present many challenges AND OPPORTUNITIES FOR )NDONESIA "ANKING COMPETITION IS EXPECTED TO INTENSIFY IN )NDONESIA AS THE COUNTRY BECOMES ONE OF THE MAIN PILLARS OF THE !%# ECONOMY
"#!WILLCONTINUETOIMPROVEEXCELLENCEINTRANSACTION
BANKING AND STRENGTHEN LENDING INFRASTRUCTURE WITH A FOCUS INCOUNTRY )N ADDITION THE "ANK WILL DEVELOP BUSINESS ALLIANCES AND STRENGTHEN TIES WITH SELECTED BANKS IN !SIA TO CAPTURE BUSINESS OPPORTUNITIES FROM POTENTIAL!3%!.CUSTOMERSREQUIRINGBANKINGSERVICES IN )NDONESIA -EANWHILE SYNERGY WITH THE "ANKS SUBSIDIARIES WILL EVOLVE BOTH IN TERMS OF BUSINESS AND OPERATIONALSTRATEGY
With consideration to these factors as a whole, the work PLAN ACROSS THE VARIOUS "ANK BUSINESS LINES WILL BE ACCOMPANIEDBYAPRUDENTLIQUIDITYMANAGEMENTPLAN ASTRONGCAPITALBASEANDSOLIDCREDITRISKMANAGEMENT We will keep a close watch on macro developments and will proactively make adjustments to the work program ANDBUSINESSPLANIFNEEDEDPARTICULARLYINTHEFACEOF ANYUNEXPECTEDEVENTUALITIES
7E REALIZE THAT ALL BUSINESS STRATEGIES RELY ON THE SUPPORTOFCAPABLEEMPLOYEES4OTHATENDTHE"ANKWILL continue to work to improve the competency of human RESOURCESTHROUGHCOACHINGTRAININGANDLEARNING7ITH THESEMEASURESWEHOPETOMAINTAINAHIGHLYQUALIlED WORKFORCETHATEMBODIESINTEGRITYAND"#!SCOREVALUES
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Jakarta, March 2015 /NBEHALFOFTHE"OARDOF$IRECTORS
Jahja Setiaatmadja President Director APPRECIATION TO ALL STAKEHOLDERS
We are fully aware that the success of BCA in maintaining SOLIDBUSINESSPERFORMANCEINTHESEUNCERTAINTIMESIS DUETOTHETRUSTOFOURCUSTOMERS4HISTRUSTMOTIVATES BCA to work hard to maintain that trust and provide THE BEST POSSIBLE PRODUCTS AND SERVICES TO OUR VALUED CUSTOMERS
The role of the Board of Commissioners—the careful OBSERVATIONANDGUIDANCETHEYHAVEPROVIDEDISVERY important and allows the Bank to move with certainty amid the uncertainties that arise in the operating ENVIRONMENT
&INALLY ON BEHALF OF THE "OARD OF $IRECTORS AND the management of BCA, I would like to thank all stakeholders, including the Indonesia Financial Services Authority and Bank Indonesia, for all the support and TRUSTWEHAVERECEIVEDANDWHICHHASENABLEDUSTOLOOK AHEADWITHOPTIMISM
15.7 %
Solid business performance
translated into strong Net Income of Rp 16.5 trillion in 2014
Net Income Growth