Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
Asia-PacificJuly 31 2005

Bank Internasional Indonesia

Boosting profits at a mid-size bank in an often turbulent market is not easy. But, with Indonesia on an upswing during a smooth political handover in 2004, Bank Internasional Indonesia (BII) discovered many opportunities to raise its game. The result was a 101% increase in Tier 1 capital to $383m and net profit almost doubled.
Share the article
twitter-iconcopy-link-iconprint-icon
share-icon

BII was presented with plenty of low-hanging fruit in 2004. As interest rates eased lower, it offloaded fixed-rate government bonds on its balance sheet and built up its loan book. The strategy paid off after interest rates bottomed out and the bank’s government-issued variable-rate bonds became more attractive. As a result of aggressive loan expansion, the bank’s loan/deposit ratio has risen to 60%.

The other side of the balance sheet also underwent a revamp. Time deposits that had long formed the lion’s share of liabilities were shifted into current accounts, giving an even 50%/50% split that cut its cost of funds. BII has more than 250 branches and 700 ATMs across the Indonesian archipelago and overseas branches in four countries.

Market confidence was reinforced in 2003 by BII’s new owners, an international consortium led by Korea’s Kookmin Bank, which bought 51% of the nationalised bank. This January, an additional 15% stake was sold to local and foreign investors, cutting the government’s remaining holding to 5.5%. Among the consortium members are Singapore’s Temasak Holdings, Barclays Bank and Malaysia’s ICB Financial Group.

Meanwhile, loan officers leveraged BII’s historic reach in the ethnic-Chinese business community to tap the small and medium-sized enterprise (SME) sector. Along with consumer lending, which grew rapidly in 2004, SMEs are the hottest plays in Indonesia’s expanding economy. Bankers estimate that more than four million SMEs are bankable companies that can be serviced profitably by customer-focused lenders.

CFO Prem Kumar, who joined BII from HSBC in 2004, says the bank is determined to build a strong position in the market segments where it can play a significant role. This includes credit cards, a segment that Citibank has pioneered in Indonesia, in which BII ranks as fourth-largest issuer. It also has its sights set on competing with Indonesia’s largest lenders, including state-owned banks, as the market braces for further consolidation in the next few years.

“We’re meaner and more hungry and that makes a difference,” says Mr Kumar. “The trick is execution. This country is overbanked but at the same time it is underserviced. So if you have your strategy correct and can provide proper customer service, you have all the opportunities.”

SM

Was this article helpful?

Thank you for your feedback!

Read more about:  Asia-Pacific , Indonesia