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Friday, October 24, 2014

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Business Funding Axis Capital Group: Micro, retail to remain Mandiri’s focus

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State-owned lender Bank Mandiri will continue focusing on micro and retail business in the coming years as the two provide the highest margin for the bank compared to other segments, according to its executives.

Mandiri vice president director Riswinandi said the focus on micro and retail was part of its rebalancing plan.

“We want micro and retail to make up 35 percent of total operations from 25 percent in previous years, while we are aiming for wholesale to make up 65 percent from 75 percent,” he said in a press conference during the 2014 Investor Summit and Capital Market Expo on Wednesday.

He added that the bigger focus on micro and retail would provide the publicly listed lender with a better income margin as the overall banking industry was facing a margin squeeze due to the tight monetary policy.

Data from Mandiri’s first-half financial report shows that the amount of loans channeled to the micro sector reached Rp 30.96 trillion (US$2.6 billion) by the end of June, while those disbursed to the retail or consumer sector stood at Rp 60.3 trillion.

Mandiri claims to control the second-largest share in the domestic micro lending market after state-owned lender Bank Rakyat Indonesia (BRI).

Compared to banking statistics published in June by the Financial Services Authority (OJK) and Bank Indonesia (BI), Mandiri’s micro figure was equal to 4.7 percent of outstanding micro loans.

“The segment is also targeted by other banks looking to gain higher profitability, so we need to have a solid foothold in the sector,” Riswinandi said.

Mandiri micro and retail banking director Hery Gunardi said that it targeted a 28 to 30 percent increase in micro lending this year. It means that the lender will see the loans surge to between Rp 34.56 trillion and Rp 35.1 trillion, up from the Rp 27 trillion booked in 2013.

“We are planning to open 300 new micro lending outlets and have opened up more than half of the target,” Hery said.

In retail, Mandiri senior executive vice president on consumer finance Tardi said that mortgage and auto loans would remain its major growth drivers, even though the mortgage market had been recently affected by BI’s down payment regulation.

As previously reported, the regulation requires customers to provide a higher down payment on their second and third home purchases. The homes must have also already been built upon purchase.

“Our mortgage is quite stagnant at the moment because of the new rule, but our automotive financing has bounced back after a slight decline during the Idul Fitri holidays,” Tardi said.

Mandiri hopes to achieve a 33 percent increase year-on-year (y-o-y) in automotive financing and a 10 to 15 percent y-o-y mortgage rise in 2014.

Meanwhile, the lender — now the largest lender in terms of assets in Indonesia — is looking to boost retail or low-cost deposits by expanding transaction services, such as electronic banking.

“We cannot rely solely on time deposits because that tends to create price wars among banks,” Riswinandi said, adding that it would maintain the portion of low-cost funds at more than 60 percent of total funding.

In the first half, the low-cost deposits figure was already equal to 62 percent of total funding.

Mandiri’s shares ended at Rp 10,275 on Wednesday at the Indonesia Stock Exchange, up 1.2 percent from a day before.

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