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Treasury and
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(in billion Rupiah)
Other Marketable Securities Government Bonds
Bank Indonesia Instruments
2013 34,345
52,985
15,030
2014 22,412
29,018 60,633
(in USD billion)
Trade Finance Volume Remittance Volume
2014 9.0
82.0
2013 10.8
91.0
TREASURY BANKING
Throughout 2014, BCA safeguards its liquidity position by carefully managing the Bank’s investment portfolios and maintaining a balance between risk and return on investments through short and medium term placements. BCA also works to enhance customer relationships by offering products and services to meet a wide variety of foreign exchange and other treasury related needs.
Maintaining a Robust Liquidity Position
In 2014 the Indonesian banking industry faced the challenge of tightening liquidity and a rapid increase in cost of funds. Together with a decline in business activity and the general elections taking place in 2014, these events resulted in a slowdown in lending and increasing focus on loan quality. Faced with these market conditions, the Bank responded by managing its funding and assets with care.
In 2014 BCA successfully maintained a solid third party funds position and transaction account franchise. BCA’s strong transaction banking network allows the Bank to pay relatively low interest rates on Current Accounts and Savings Accounts (CASA).
Throughout the year, CASA funds remained stable and represented approximately 75.1% of total third party funds. BCA’s strategy to strengthen its liquidity position by being more aggressive in pricing for time deposit products had no significant impact on the increase of overall cost of funds. In 2014 cost of funds
In 2014 the Bank entered into short term loan agreements for USD 270 million with several of BCA’s correspondent banks. This step was intended to test both the market for USD borrowing by the Bank and the availability of USD to Rupiah hedging instruments.
The ability to borrow in USD and convert the borrowing to Rupiah is a possible source of liquidity for the Bank.
On the assets side, the Bank’s total earning assets amounted to Rp 483.9 trillion by the end of 2014, an increase of 11.2% compared with Rp 435.3 trillion at the end of 2013. The total investment funds managed by BCA Treasury reached Rp 112.1 trillion by the end of 2014, growing 9.5% from Rp 102.4 trillion at the end of 2013. Most of these investments were placed in low-risk Bank Indonesia and sovereign instruments such as Bank Indonesia Term Deposits, Bank Indonesia Certificates, Bank Indonesia securities purchased under agreements to resell, and short- term and medium-term government bonds. Treasury’s investment structure is designed to balance the Bank’s liquidity with optimum investment yield.
These high-quality investments represented 25.0%
of the Bank’s total third party funds as of December 31, 2014. This percentage reflects a continued strong liquidity position especially when compared to the overall banking sector. Investment assets managed by BCA Treasury and the Bank's loan portfolio enhanced overall earnings assets yield in 2014. Total earning assets yield increased 90 bps to 8.7% in 2014 from 7.8% in 2013.
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Increased yield on earning assets and a solid funding composition allowed BCA to generate a Net Interest Margin (NIM) of 6.5% in 2014, an increase from 6.2%
in 2013.
The Bank managed its balance sheet and liquidity position with careful consideration to cash flow forecasts and exchange rate risk. BCA’s balance sheet remained resilient against fluctuations in the value of the Rupiah against foreign currencies. At the end of 2014, the Bank’s Net Open Position (NOP) was recorded at 0.6% of the capital, far below the limit of 20% set by Bank Indonesia.
Facilitating Customer Needs
In addition to managing the Bank’s assets and liabilities, BCA Treasury also provides a variety of services to meet the needs of customers, including foreign exchange products, capital markets and custodian services. These services are provided to corporate, commercial, SME and individual customers in cooperation with front liners located in the Bank’s branches.
BCA capitalizes on technological advances by improving online forex services for corporate customers using BCA’s internet banking e-Rate application. There are currently 14 foreign currencies that can be traded through KlikBCA, BCA’s internet
banking facility. In 2014, BCA expanded the features of KlikBCA Bisnis, by offering a facility for USD sales at even better exchange rates compared to the regular e-Rate application. This feature is still in the early stages of a pilot project and will be further developed in accordance with customers' responses.
In 2014 the volume of customers’ foreign exchange transactions increased to 673.2 thousand transactions compared to 596.6 thousand in 2013. Despite the increase in the frequency of transactions, overall transaction value decreased to USD 36.8 billion in 2014 from USD 45.0 billion in 2013, due to the decline in domestic export and import activities.
In the bonds market, BCA is one of the official selling agents for Indonesia Retail (ORI) and Sukuk Retail (SR) bonds. BCA Treasury sold Rp 2.7 trillion ORI011 and Rp 1.4 trillion SR006 in bonds in 2014, an increase from 2013’s Rp 2.1 trillion ORI010 and Rp 857 billion SR005 bonds. In selling SR006, BCA collaborated with UNICEF to help the Early Childhood Development program in Aceh by contributing a percentage of every bond sold to the program. In addition, BCA Treasury participated in the launch of Retail Savings Bonds issued by the Government for retail investors, with total sales through BCA reaching Rp 260 billion.
In 2014, BCA Treasury received several awards, including Best Domestic FX Bank awarded by the Asiamoney Poll as well as awards for the previous year’s performance as one of the Best Selling Agent for ORI010 from the Ministry of Finance.
INTERNATIONAL BANKING
Remittance Services
Although faced with several challenges, owing to the uncertainty of the global economic recovery, BCA maintained its position as one of the main remittance service providers in Indonesia. Throughout 2014, BCA successfully processed remittances with a total value of USD 82.0 billion.
To support the business development of remittance services, foreign exchange, bank notes, and other cross-border settlements, the Bank's International Banking has access to a global network of more than
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2,000 correspondent banks. BCA’s representative offices in Singapore and Hong Kong support and enhance the cooperation between BCA and the Bank’s correspondent banks. BCA International Banking also manages remittance services through BCA Finance Limited in Hong Kong. BCA remittance services are currently available in 14 currencies.
Since 2007, BCA has facilitated money transfers for Indonesian Overseas Workers through its web-based Financial Institution Remittance Fire Cash BCA service. Supported by correspondent banks and offshore partners, Fire Cash BCA is present in more than 100 countries around the world, especially in the main destination countries of Indonesian migrants. In 2014, BCA’s Fire Cash system was updated to expedite the disbursement of cash remittances via EDCs, as well as transfers to BCA accounts, other banks in Indonesia and Post Office. BCA continues to develop the Fire Cash capacity in Indonesia to facilitate customers’ Fire Cash transactions throughout the country.
International Trade Finance Services
The slow recovery in commodity prices, particularly coal and palm oil (CPO), and slowing economic growth in Indonesia’s major trading partners, such as China, Japan and some European countries, have impacted Indonesia’s exports and affected demand for Indonesian commodities in 2014. In the midst of these conditions, the demand for BCA’s international trade services declined for both imports and exports products. The volume of international trade services managed by BCA fell 16.2% to USD 9.0 billion in 2014.
However, the decline in international trade volumes was partly offset by the increase in domestic trade transactions using Domestic Letters of Credit (SKBDN) with higher volume recorded in 2014 when compared to 2013. The domestic trade growth was mainly in the steel, coal, pharmaceuticals and chemicals industries. Volume of domestic trade transactions through SKBDN in BCA increased 9.2%
to USD 2.7 billion in 2014.
Despite the unfavorable conditions of 2014, BCA International Banking continued to develop a wide
range of trade finance products and services and improve the quality of human resources in order to increase competitiveness and to accommodate the increasingly complex trading service needs of BCA customers.
LOOKING AHEAD
We expect uncertainty in the global economy to continue in 2015. In these conditions, BCA Treasury will remain focused on managing liquidity prudently as well as optimizing the Bank’s profitability. BCA will continue to monitor economic developments and be ready to anticipate events before they arise.
As for international trade transactions and remittance business, the Bank will continue to explore opportunities to expand its partnership network and to improve the quality of its infrastructure and human resources. This is essential in anticipating the improving economic growth in Indonesia in the years to come.