Jakarta, 21 July 2014 – The dynamics of Indonesia’s macro-economy during the first semester of 2014 encountered various challenges. The growth of the economy slowed, the trade deficit failed to narrow and liquidity remained tight, even though inflation began to slow. It is predicted that these circumstances will prevail until at least the end of 2014.
“This year, 2014, is a period full of challenges for the banking industry. Performing the intermediary functions of a bank in a period of slowing economic growth represents a difficult challenge. In reacting to this challenge, SMBCI is focused on carrying out its fundamental affairs in a conservative and prudent fashion, applying the basic principles that a bank usually relies upon when faced with a situation like the current one,” said Jerry Ng, President Director SMBCI.
The steps being taken by SMBCI include raising liquidity reserves, maintaining good credit quality, as well as carefully managing both interest costs and operating costs.
By employing such a strategy, SMBCI is likely to remain in a healthy position. This is reflected by SMBCI’s credit disbursement in the first semester of 2014 which grew in a moderate and healthy manner, with its non-performing loan/NPL ratio kept low. As of 30 June 2014, SMBCI had recorded annual credit growth of 15% (year-on-year/yoy) from Rp 43,6 trillion on 30 June 2013 to Rp 50 trillion, with a gross NPL ratio of 0,9%. Also, if compared with the first quarter of 2014, credit disbursement in the second quarter of the year grew by 6,3% from Rp 47 trillion.
In line with the measures undertaken by the company to be more cautious in terms of credit disbursement, SMBCI also sought to balance its funding portion by paying attention to liquidity adequacy. As of 30 June 2014, SMBCI’s Third Party Funds (TPF) stood at Rp 52,7 trillion, an increase of 10% from Rp 47,7 trillion compared to the same period last year. This 10% growth of TPF (yoy) was also greater than the growth of TPF, of 6% (yoy), recorded in the first quarter of 2014. Meanwhile, the loan to deposit ratio (LDR) was maintained at a level of 95%. If funding from bonds is taken into account, our liquidity ratio reached 85%, which is considered a strong and healthy level,” Jerry continued.
The relatively moderate growth in terms of credit and TPF encouraged a 12% increase (yoy) in SMBCI’s assets, from Rp 63,9 trillion to Rp 71,4 trillion as of 30 June 2014, with a capital adequacy ratio (CAR) of 23,4%. In the meantime, net profit after tax (NPAT) in this year’s second quarter rose by 1,9% from Rp 493 billion in the first quarter of 2014 to Rp 502 billion. However, in comparison to the first semester of 2013, SMBCI’s net profit in the first semester of 2014 was 10% lower, dropping from Rp 1,1 trillion in the first semester of 2013 to Rp 996 billion in the first semester of 2014.
“Going into the future, we feel that macro-economic conditions will remain challenging. Nevertheless, our commitment to focus on working with lower income segments of the market remains undiminished,” Jerry underlined.
To date, SMBCI has focused its efforts on serving and empowering lower income segments of society as well as micro, small and medium enterprise entrepreneurs, including productive poor communities (mass market). SMBCI’s corporate strategy, of integrating its business and social missions by continually providing ongoing training and guidance to borrowers through its Daya program, is considered certain to support the performance of the company.
“SMBCI believes that mass market customers not only require financial access, but also training and mentorship to help them increase their business capacities,” Jerry explained.
During the first six months of 2014, SMBCI organized 76,659 Daya activities, an increase of 55% (yoy). Meanwhile, the number of participating customers in Daya reached 977,261, a rise of 114% (yoy).
This strategy of SMBCI, of focusing on working with lower income segments of the market, has received the full support of the Sumitomo Mitsui Banking Corporation (SMBC). SMBC is one of the controlling shareholders of SMBCI. On 14 March 2014, SMBC completed the process of purchasing SMBCI shares. This means that SMBCI now has two credible and trustworthy shareholders, namely SMBC (40%) and TPG Nusantara S.a.r.l (25,88%).
Jerry continued to explain how, in the second quarter of 2014, SMBCI had also completed the acquisition and conversion of Bank Sahabat Purba Danarta into an Islamic bank, which was followed by the separation (spin off) of the bank’s Islamic Business Unit, or Unit Usaha Syariah. The resulting emergence of SMBCI Syariah is expected to optimize SMBCI’s participation in raising living standards of lower income communities and productive poor families. “We are very grateful for having received permission to carry out the conversion and spin off that have resulted in SMBCI Syariah. We are also confident that the SMBCI Syariah business model will succeed in changing the lives of millions of Indonesians,” Jerry concluded.
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