PETALING JAYA: Malayan Banking Bhd’s 80%-owned Indonesian subsidiary PT Bank Internasional Indonesia Tbk (BII ) saw its net profit surge by 33.5% in the first three months of this year amid weakening asset quality, signalling that the outllook for banks in Indonesia remains cautious.
BII recorded a net profit of 255.6 billion rupiah (RM53mil) for the first quarter ended March 31, from 191.5 billion rupiah a year ago.
The higher earnings recorded by BII were as a result of the bank’s discipline in pricing its deposits and lending coupled with an intensified strategic cost management programme, it said in a statement.
BII, one of Maybank’s key overseas subsidiaries and the ninth largest commercial bank in Indonesia by assets, also posted a higher gross operating income, which rose by 13.8% to 2.207 trillion rupiah from 1.940 trillion rupiah previously.
Despite the commendable earnings, non-performing loans rose 2.80% (gross) and 1.91% (net) compared with 2.05% and 1.43% respectively in the previous corresponding period due to a slowdown in the country’s economy and rising prices.
“We remain cautious over loan quality as some businesses were still impacted by the weakening of the commodities and mining sectors, economic slow-down, and weakening of the rupiah,” Maybank said in a statement. As a precaution to the current economic condition and to ensure prudent banking practices, BII had set aside a higher loan provisions of 426 billion rupiah during the period compared with 335 billion rupiah previously.
Apart from Maybank, CIMB has a large presence in Indonesia through PT Bank CIMB Niaga which is among the top five financial institutions in Indonesia. Maybank depends on BII for only 5% of its group contribution while PT Bank CIMB Niaga makes up almost 20% of CIMB’s group profit before tax last year.
PT Bank CIMB Niaga results for the first quarter was also up albeit marginally and its bottom line was impacted by loan loss provisions. CIMB Group chairman Datuk Seri Nazir Razak had alluded earlier this week that it expected to see improved performance and asset quality in Indonesia in the second half of this year.
Maybank BII’s subsidiaries namely PT BII Finance and PT Wahana Ottomitra MultiarthaTbk (WOM), which specialises in consumer finance for two-wheeled vehicles, also recorded improved performance for the first three months.
Maybank said prudent risk management practices had resulted in improved asset quality with net non-performing loan (NPL) level standing at 1.09% compared with 1.30% previously and gross NPL at 2.81% compared with 3.05%. WOM recently completed its rights issue and raised 1.5 trillion rupiah in new capital, a corporate exercise that saw BII increase its shareholding in the finance company to 68.55%.
BII Finance also recorded strong growth of 39.7% in profit before tax (stand alone) to 102.8 billion rupiah from 73.6 billion rupiah. Asset quality also too remained strong with gross NPL only at 0.37% and net NPL at 0.30%.
Since the bank‘s strategic cost management programme in 2013, BII has shown a significant progress in addressing productivity by improving its cost structure and streamlining its processes resulting in the bank lowering its operating expenses at 7.4% during the period despite the challenging conditions in Indonesia.
BII president director Taswin Zakaria said: “The bank’s effort to re-profile its corporate customers towards higher corporate credit quality to enhance cross-sell and liquidity management business has started to bear fruits. The strategy aims at ensuring alignment to BII’s re-enhanced risk appetite and complement its payment solution business and generation of fee-based income.
“The focus on large local corporations also allows the bank to grow assets in a capital-efficient manner. To date, we have successfully completed landmark financing, cash management and liability risk management transactions to a number of large corporations and state-owned enterprises”.
Taswin said that to further expedite the growth in the retail and business banking, the bank recently embarked on Indonesian Regional Transformation which empowers its regional offices to expand and capture business potentials in the respective regions.
BII’s loans growth was slow in the first quarter at 6.2% due to the challenging business environment.
Its business banking segment recorded the highest loan growth of 15.3% followed by retail banking which grew 14.7%. Both businesses exceeded the industry loan growth of 12.3% as of February 2015.
Loans from global banking, however, declined by 16.1% as BII continued to re-profile its corporate portfolio toward higher quality credits to improve cross-selling and the bank’s liquidity management business.
Mortgage loans grew 17.8% on sound asset quality while unsecured loans increased by 25.3% with personal loan up by 76.8%. Electronic banking also showed robust development with 81% retail transactions using BII’s electronic channels, propelling the growth of e-channel’s volume.
Total deposits increased by 42.5% from 3.2 trillion rupiah to 4.6 trillion rupiah while the loan-to-deposit ratio (LDR) for the bank stood at 91.89% for the said quarter. Its modified consolidated LDR which includes borrowing, securities issued, sub debt and customer deposits remained at a healthy level at 82.64%.
