Bank Mandiri aims higher 

Aloysius Unditu | February 22, 2012

As Indonesia’s biggest bank by assets, state-owned Bank Mandiri is set to continue to grow with the Indonesian economy and with a series of moves to expand into regional banking.

After years of waiting, Zulkifli Zaini, president director of Bank Mandiri, the country’s largest lender by assets, sighed a long sigh of relief at the end of last year when the Malaysian central bank approved the lender’s plan to open a branch in the neighboring country.
The approval is a major step forward on Bank Mandiri’s ambitious long-term plan to extend its reach in the region. Malaysia is seen as a stepping stone to expand Bank Mandiri’s reach in the Asia-Pacific region before leaping into developed markets.

“We grow along with Indonesia. We grow along with domestic business, we grow with Indonesian entrepreneurs and we grow with Indonesians working overseas,’’ Zulkifli, who was installed in May 2010 as president director of the bank, told GlobeAsia.

Zul, as he is commonly known, took over the helm at Bank Mandiri from Agus Martowardojo when he was installed as finance minister by President Susilo Bambang Yudhoyono nearly two years ago.

Opening branches in Malaysia and China’s Shanghai is expected to take the lender into full-speed growth this year and the coming years, analysts and economists said in Jakarta.

“We want to become (one of) the top-five biggest banks by value in the region by 2013 and among the top three banks by 2020,’’ Zulkifli states.
Bank Mandiri’s market capitalization stands at Rp159 trillion ($17.6 billion), making it the third biggest lender by value in Indonesia. Bank Central Asia, controlled by the Djarum Group, ranks first with total market value of Rp200.9 trillion ($22.3 billion) and Bank Rakyat Indonesia, another state lender, at Rp170.2 trillion ($18.9 billion).
Bank Mandiri is also catching up with three lenders in Singapore: DBS Bank with $29 billion in market capitalization, Overseas Chinese Banking Corporation (OCBC) with $27.35 billion and United Overseas Bank with $25.12 billion.


Foreign ventures

Bank Mandiri expects to open its first branch in Malaysia before the end of this year after the Malaysian central bank agreed to provide the Indonesian lender with incentives late last year.

The central bank, Bank Negara Malaysia, reduced the minimum initial capital requirement for Bank Mandiri to 100 million ringgit ($32 million) for the first year, from 300 million ringgit, Budi Gunadi Sadikin, a director of Bank Mandiri, said early in January. 
Bank Negara also allowed Bank Mandiri to offer saving accounts and deposits to retail customers. The Indonesian bank also won permission to operate cash machines outside its branch or in public areas.
The approval for Bank Mandiri to open a branch in Malaysia would meet the so-called “reciprocal principle,” which means that Indonesian banks may open branches in Malaysia as Malaysian banks have opened branches in Indonesia.

Malaysia’s move to allow foreign banks to own bigger stakes in local lenders, grant more licenses and ease short-selling rules comes as it seeks to triple the size of its finance sector by the end of the decade. It forms part of the country’s plan to make financial institutions more competitive, one fund manager said.
Under Malaysia’s first 10-year Financial Sector Master Plan published in 2001, local banks and brokerages were encouraged to merge as rules were gradually eased and more licenses granted. 
No other Indonesian banks currently operate in Malaysia.

Malaysian banks, meanwhile, have been opening in Indonesia for some time. Maybank, the biggest lender in Malaysia, operates in Indonesia through its 97%-ownership in Bank Internasional Indonesia.
Bank Mandiri also plans to open a full-fledged branch in Shanghai in April this year after a soft opening in November last year. The Chinese authority has given approval for Bank Mandiri to operate in the country.
“We grow in the domestic market and at overseas markets including in Shanghai,” says Zulkifli.

Bank Mandiri, he says, is trying to cater to the growing number of Indonesian businesses operating in mainland China. Several companies like diversified Sinar Mas Group and Raja Garuda Mas have operations there.
“We serve Indonesian business overseas,’ Zulkifli notes. Bank Mandiri is also capitalizing on accelerating economy in Indonesia to boost its business. Indonesia’s central bank,

Bank Indonesia, forecasts the economy to expand by 6.3% this year from an estimated 6.5% last year. Private consumption typically accounts for 60% of the country’s economy.

Cautious tone 
Mandiri’s Zulkifli remains cautious as the global slowdown continues. The euro debt crisis coupled with a possible retraction in global trade has pushed Bank Mandiri to set a relatively modest lending growth target this year.

The bank targets its lending to grow in the range of 20-23%, slowing from last year’s target of up 25%.
“We expect the government to start spending on infrastructure,” Zulkifli states, confirming a recent Deutsche Bank report that said that Indonesian banks including Bank Mandiri would benefit from the government’s aggressive move to boost infrastructure projects including seaports, airport and water systems.

Deutsche Bank said Bank Mandiri has already disbursed Rp15 trillion for infrastructure development in the country. “The bulk of the loans relate to electricity,” the bank said. 
Shares of Bank Mandiri rose 5.6% last year. Based on January 12 trading price of Rp6,800, shares of the bank have exceeded  the price target set by Deutsche Bank. The German bank, which rated the stock as a buy, set the price of Bank Mandiri at Rp6,750. GA

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