hired externally. The fact that the majority of the board are women makes us quite unique, especially in the banking industry, but it seems to be serving us well.
The Board of Commissioners is pleased that the Board of Directors successfully implemented a prudent loan growth strategy in the face of extremely tight competition and after enduring relatively high NPLs.
CIMB Niaga’s loan portfolio stood at Rp185.1 trillion, up by 2.8% year-on-year, supported by Indonesia’s improved economy, and was mostly driven by the loan growth in Corporate Banking and SME Banking segments. In our hire purchase loan portfolio, we saw a tactical 40.8% shrinkage, excluding which the group’s total loan growth would have been 6.7%, compared with 8.4% of the industry as a whole. Our NPL ratio improved, but only marginally to 3.75% from 3.89% in 2016.
Third-party funds saw outstanding growth as indicated by the rise in the CASA ratio to 52.6% over the previous year’s 50.8%, significantly enhancing the Bank’s funding balance. Our CAR also improved to 18.60% from 17.96% a year earlier.
We are also appreciative of the Board of Directors’
efforts in driving CIMB Niaga’s milestone upgrade from a BUKU III bank to a BUKU IV bank, the highest category for banks with the most complete business activities and core capital above Rp30 trillion. We made history as the first bank to “graduate” into the highest category.
As at end-2017, CIMB Niaga remained Indonesia’s fifth-largest bank by asset, with total assets of Rp265.7 trillion. Although we are proud of this “league”
position, the pace of growth of others means that we may drop a notch this year. We have advised the Board of Directors that we must continue to grow at our chosen pace and not take on undesired levels of risk just to defend market share.
SUPERVISION OF STRATEGY EXECUTION
We constantly supervise the execution of strategies by the Board of Directors. In 2017, the Board of Commissioners supervised the implementation of the five-pillar strategic policy that concentrated on 1) focus on core competencies, 2) increase in CASA, 3) cost management discipline, 4) capital preservation and balanced risk culture, and 5) utilization of information technology. These five pillars have been key to strengthening the foundations of the firm.
In carrying out its supervisory duties, the Board of Commissioners provides the Board of Directors with the necessary support, input and recommendations. In 2017, these recommendations included more prudent credit processes, better governance, higher integrity to eliminate frauds, agility and flexibility to cope with the digital challenges, asset recovery, and input relating to increasing low-cost funds and revenues through the development of quality services across all business segments as well as the enhancement of service features, such as mobile banking and internet banking.
During the year under review, the Board of Commissioners also provided recommendations to improve efficiency and cost discipline to further reduce the Bank’s cost-to-income ratio. We instituted new governance processes for procurement and conducted in-depth analyses of our cost structures.
In a bid to be at the forefront of digital banking, we continue to support the intensification of the application of information technology in business processes, and the automation of manual processes to enable our staff to focus more on serving our customers, and to mitigate risks, even in mundane tasks.
OPINION ON BUSINESS PROSPECTS AS PREPARED BY THE BOARD OF DIRECTORS
In 2018, the growth in global and domestic economies is expected to strengthen. The International Monetary Fund has raised its global growth forecast to 3.9%
for 2018 and 2019, and we expect ASEAN to grow by 5.1%, with Indonesia at 5.3%.
The Board of Commissioners believes that the business prospects as stated in the Bank Business Plan (Rencana Bisnis Bank or RBB), which is prepared by the Board of Directors, have properly considered the various assumptions in global and domestic growth risks. We are optimistic that CIMB Niaga will perform even better in 2018 based on, among others, our assessments of improving asset quality and lower impairment of loss provisioning. The expected continuing improvement in economic conditions as well as the adoption of various measures, including the five-pillar strategic policy, will provide the Bank with more opportunities to grow in terms of asset and revenue. The outlooks for the consumer and SME segments are especially promising.
HUMAN RESOURCES
Proper and sustainable human resource management is key in driving CIMB Niaga towards achieving its vision and mission. We believe that the Board of Directors has established effective human resources development initiatives, with due consideration in priority areas, including organizational planning and talent development.
Furthermore, we fully support the internalization of the Bank’s values and the risk awareness culture programs.
Conducted intensively and consistently, these efforts play a big role in building human resources with high integrity and professionalism.
OPINION ON GOOD CORPORATE GOVERNANCE CIMB Niaga has consistently implemented the principles of Good Corporate Governance (GCG) in order to maintain alignment and balance between the interests of the Bank and those of its stakeholders, all towards achieving an optimal and sustainable performance. The implementation of the GCG principles enables the creation of mechanisms that organize relationships between the Bank and its stakeholders in a transparent manner.
In 2017, we believe that the Board of Directors was successful in effectively implementing the GCG, not only based on the standards and benchmarks as set by regulators, but also based on global measures.
The GCG at CIMB Niaga includes, but is not limited to, ensuring 1) protection of shareholders’ rights, 2) equal treatment of all shareholders, 3) role of stakeholders, 4) transparent, complete, accurate and timely disclosure of information, and 4) responsible implementation of the duties of the Boards of Commissioners and Directors.
On risk management, CIMB Niaga has implemented the Enterprise Wide Risk Management (EWRM) framework on business activities and decision-making.
We believe the Board of Directors has been successful in implementing the EWRM as an ongoing initiative, with the support of an adequate risk management infrastructure. In 2017, the Board of Directors carried out risk management processes at CIMB Niaga, which covered 1) identification of significant risks in the Bank’s business activities, 2) measurement and aggregation of risk using adequate methodology, 3) management, control and ongoing risk reporting to evaluate and manage risk, and 4) assurance that risk exposure is in line with the Bank’s risk appetite.
With the assistance from the Risk Oversight Committee, we continue to monitor the implementation of risk management initiatives undertaken by the Board of Directors in its efforts to mitigate the Bank’s key risk factors as well as safeguard the long-term sustainability of the Bank.
For our work in ensuring good corporate governance, CIMB Niaga has won several awards, including 1st Winner Annual Report Award 2016 in the Private Finance Listed Category, Best Overall at the 9th IICD Corporate Governance Award 2017, and Top 5 GCG Issues on Banking Sector at the Indonesian Corporate Secretary Award 2017.
OPINION ON IMPLEMENTATION OF WHISTLEBLOWING SYSTEM
CIMB Niaga operates a Whistleblowing System (WBS) as a manifestation of the Bank’s overall internal controls in every aspect of its business activities.
The Board of Commissioners, with the assistance of the Audit Committee, plays a role in monitoring the proper implementation of the WBS.
The Bank’s reporting mechanisms under the WBS at CIMB Niaga have been gradually improved. The Board of Commissioners, together with the Audit Committee and other units, conduct in-depth evaluation and follow-up actions on the reports received.
ASSESSMENT ON COMMITTEE PERFORMANCE AND FREQUENCY AND METHODS OF GIVING ADVICE TO THE BOARD OF DIRECTORS
The Board of Commissioners is of the opinion that, in 2017, the Audit Committee, Risk Monitoring Committee, Nomination and Remuneration Committee, and the Integrated Corporate Governance Committee ably performed their respective duties and responsibilities, as evidenced by, among others, the recommendations given by each committee to the Board of Commissioners during our meetings.
REPORT OF THE BOARD OF COMMISSIONERS
Based on the recommendations of the Board’s committees, the Board of Commissioners provided advice and guidance to the Board of Directors during joint meetings of the Board of Commissioners and Board of Directors. In 2017, the Board of Commissioners held seven meetings and five joint meetings with the Board of Directors. Over the course of the year, the Board of Commissioners submitted important recommendations relating to the strategic policy implementation by the Board of Directors and other recommendations relating to the Bank’s management.
These include guidance in the preparation of the RBB, recognizing now that CIMB Niaga is in the BUKU IV category and is, therefore, expected to contribute more to the Indonesian banking industry.
CORPORATE SOCIAL RESPONSIBILITY
CIMB Niaga’s success in executing the RBB depends on our engagements with both internal and external stakeholders. The Board of Commissioners appreciates the implementation of Corporate Social Responsibility (CSR) programs, which help to improve the welfare of the communities that we serve.
The Board of Commissioners is of the opinion that the performance of CIMB Niaga Peduli for 2017 was in accordance with the plans and direction given by the Board. Going forward, the strategy will be to further enhance the activities aimed at improving the communities’ well-being. CIMB Group has taken a big step in this direction, with our commitment to spend 1% of the Group’s pretax profit on CSR, along with other initiatives that will be gradually rolled out across the region.
CHANGES IN BOARD COMPOSITION
The Extraordinary General Meeting of Shareholders (EGMS) of CIMB Niaga held on 24 August 2017 decided on changes to the composition of the Board of Commissioners. The EGMS approved the appointment of Tengku Dato’ Sri Zafrul Tengku Abdul Aziz as Commissioner of CIMB Niaga, replacing the
outgoing Ahmad Zulqarnain Onn. We would like to thank Ahmad Zulqarnain for his services to the Board.
As at end-2017, the composition of the Board was as follows:
• President Commissioner: Dato’ Sri Nazir Razak
• Vice President Commissioner: Glenn Muhammad Surya Yusuf
• Independent Commissioner: Zulkifli M. Ali
• Independent Commissioner: Pri Notowidigdo
• Independent Commissioner: Armida Salsiah Alisjahbana
• Independent Commissioner: Jeffrey Kairupan
• Commissioner: David Richard Thomas
• Commissioner: Tengku Dato’ Sri Zafrul Tengku Abdul Aziz
APPRECIATION AND CLOSING WORDS
With the ongoing implementation of various strategies, the Board of Commissioners is optimistic of CIMB Niaga’s growth prospects in 2018. At the same time, we will continue to provide support for the efforts made by the Board of Directors and staff in creating performance improvement. Our key advice to the Board of Directors and staff is to focus on the five strategic pillars in order to achieve sustainable performance.
We would like to thank our shareholders for their support and trust. We would also like to extend our gratitude to our business partners, regulators and all other stakeholders.
26 March 2018
Dato’ Sri Nazir Razak President Commissioner
Board of Commissioners
standing from left to right