Indonesia’s Biggest State-Owned Bank Embraces Disruption of Digitalization


As president of Indonesia’s Bank Mandiri, Kartika Wirjoatmodjo has spent most of the past two years tackling a mountain of bad loans that has squeezed the state-owned lender’s bottom line and hampered expansion plans overseas.

The grueling efforts, led by the 44-year-old former consultant at a U.S. firm, paid off when Mandiri reported on Feb. 6 a 49% increase in net profit for 2017 to a record high of 20.64 trillion rupiah ($1.52 billion). He is now gearing up for a growth strategy to realize the company’s vision of transforming Indonesia’s biggest bank by assets into Southeast Asia’s largest.

“In the next one to two years we still have to focus partly on the level of nonperforming loans,” Wirjoatmodjo told the Nikkei Asian Review in an interview held on the sidelines of the bank’s annual investment forum in Jakarta the day after the earnings report. “But we will also put more energy, 70-80% of energy for future growth,” he said.

The upbeat comments come against the backdrop of an industry in recovery. Indonesian banks saw their nonperforming-loan ratio creep up to 2.9% in 2016 — higher than Singapore, Malaysia and Thailand — after years of falling commodity prices. But the economy is finally improving.

Strong exports and investment helped the country’s economic growth increase slightly to an expansion of 5.07% in 2017 compared with the previous year. Expecting the momentum to accelerate, the government is targeting 5.4% growth this year.

At the same time, Wirjoatmodjo knows that it will take much more than riding the commodities wave to grow in a rapidly changing industry.

While banking in Indonesia still means officers traveling on minivans and boats to reach far-flung regions, it is quickly catching up to a new era of digitalization and open competition.

The efforts of the sharp-suited, rapid-fire speaker — a lawmaker told Wirjoatmodjo to “please speak more slowly” at a recent parliamentary session — may shape the course of the country’s broader reform of state-owned enterprises. He joined Mandiri in 2015 as director of finance and strategy, and was elevated to president the following year.

Indonesia’s banking industry is fragmented, with 115 banks spread across the archipelago. Total assets stood at 7,387 trillion rupiah ($537.3 billion) as of December 2017, lower than Singapore’s top two  banks combined. Yet, Indonesian banks have been enjoying the highest profitability among their Southeast Asian peers, thanks to robust demand for credit and limited access to capital.

Mandiri, established in 1999 by a merger of four troubled Indonesian lenders hit by the Asian financial crisis, was one of the largest beneficiaries. As Indonesia’s economy recovered in the subsequent years, it rapidly expanded its corporate loan business.

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