01 Financial Highlights 02 Management Report Business Review 04 128 PT Bank Central Asia Tbk 03 Corporate Profile 04 Management Discussion and Analysis Business Support Individual banking 2016 Annual Report 05 Corporate Governance 06 Corporate Social Responsibility Financial Review 07 Consolidated Financial Statements
BCA achieved its position as the first choice for individual banking by providing a comprehensive range of attractive individual banking products and services. The wide range of individual banking products are designed to meet the needs of different market segments, particularly the growing middle-class. Consumer Loans Portfolio (in billion Rupiah) 59,415 63,959 31,612 34,817 9,483 10,779 2015 2016 Mortgage Vehicle Loans Credit Card BCA developed the Individual Banking business to serve various market segments. Over the last decade, BCA saw that the growing middle class and professionals have had a positive impact on the Indonesian economy as seen by growing consumption and higher demand for financial services. This trend has triggered the Bank to address the need for targeted individual banking products and services. The Bank reaches a wide community with its extensive branch network in Indonesia. BCA offers a range of individual banking products, such as mortgages, vehicle loans, credit card, bancassurance and investment products. The Bank works to study the characteristics and needs of its customers, offering customized banking solutions that are suited to specific market segments. For the affluent customer segment and high networth individuals, the Bank has developed specialized Prioritas Banking services at most BCA branches and Solitaire services at two exclusive lounges at premium locations of Jakarta. PT Bank Central Asia Tbk 2016 Annual Report 129
01 Financial Highlights 02 Management Report 03 Corporate Profile 04 Management Discussion and Analysis 05 Corporate Governance 06 Corporate Social Responsibility 07 Consolidated Financial Statements 04 Prioritas & Solitaire Services and Wealth Management In offering investment products, BCA pays careful attention to BCA Prioritas serves customers in the affluent market segment. the risk profiles and preferences of its customers. The Bank s This customer segment represents one of the most important mutual funds products are selected in collaboration with business segments for the Bank. BCA Prioritas is designed to reputable and proven Investment Managers. Working with a provide a relaxed and comfortable banking environment as number of insurance providers, including AIA, BCA Life, and well as specialized banking and investment products to meet BCA Insurance, the Bank offers a wide range of bancassurance the banking needs of this customer segment. products. Growing public awareness of the need for insurance and the relatively low market penetration rate, open up As of 2016, BCA operates 163 Prioritas branches at many of excellent opportunities for BCA to offer insurance products in the Bank s branches, offering banking products and services accordance with the needs of the Bank s customers. to affluent customers. In addition to the standard products and services, such as transaction services, mortgages, vehicle BCA also provides a Solitaire service to facilitate the growing financing and bancassurance, Prioritas customers have access needs of Indonesia s high net-worth individuals. Aside from to comprehensive wealth management solutions, including all of the services available to Prioritas customers, Solitaire mutual funds, government bond investments, premium credit customers have access to two exclusive lounges in premium cards, priority safe deposit box services and special foreign locations in Jakarta and are assisted by highly-trained and exchange rates. In collaboration with trusted business partners, competent personal financial advisors. Solitaire services BCA Prioritas is able to offer exclusive programs related to are offered to select clients and are based on face to face health, education, business networking, travel and lifestyle. gatherings to strengthen relationships with these customers. BCA Prioritas customers also have priority access to the 24hour HaloBCA Prioritas call center, BCA Prioritas website and In order to better understand the characteristics of these community magazine. customers and to recognize their financial needs, BCA continuously develops and improves its Customer Relationship 130 PT Bank Central Asia Tbk 2016 Annual Report
Management system. This system allows the Bank to offer the most suitable products and services while supporting crossselling efforts. BCA continues to focus on applying targeted marketing strategies in order to satisfy the specific needs of individual customers. Leading in Consumer Lending In line with the increasingly complex needs of the middle class, BCA has focused consumer lending on mortgages and vehicle financing. In the last decade, consumer lending, including credit card portfolio, has grown 29.2% CAGR and reached Rp 109.6 trillion at the end of 2016. Mortgages BCA constantly works to expand its mortgage portfolio and is the largest provider of non-subsidized mortgages in Indonesia. The Bank offers competitive rates on mortgages as a strategy to maintain its strategic position in the market and drive sustainable loan growth. In 2016, BCA reduced mortgage interest rates by 50 100 basis points to stimulate loan demand. The Bank re-launched the signature 6-year Fix & Cap mortgage product with competitive interest rates (3 years at 7.99% fixed interest plus a maximum 3-year cap of 8.99%) in addition to a 5-year fixed-interest product at 9%. These competitive products are made possible by the Bank s stable and low-cost Current Account and Savings Accounts (CASA) funds. The Bank s mortgage portfolio has grown 30.8% CAGR in the last decade and closed 2016 at Rp 64.0 trillion. In 2016, new mortgage bookings were recorded at Rp 22.0 trillion, compared with a rundown of Rp 17.4 trillion, resulting in total growth on the mortgage portfolio of Rp 4.6 trillion or 7.6% from last year s Rp 59.4 trillion. Mortgages contributed 58.4% to the Bank s total consumer loan portfolio and 15.4% to the overall bank loan portfolio. In the midst of a relatively weak property market, the Bank succeeded in growing the mortgage loan portfolio which contributed significantly to the overall growth of BCA s loan portfolio. The relaxation of Bank Indonesia s policies on Loan to Value (LTV) and mortgages on off-plan property developments had a positive effect on the Bank s mortgage growth. BCA manages a low-risk mortgage portfolio by prioritizing high quality borrowers and focusing on financing properties located in selected residential areas. These strategic steps have enabled the Bank to record positive growth while maintaining low probability of default risk. BCA maintains strict collateral PT Bank Central Asia Tbk 2016 Annual Report 131
01 Financial Highlights 02 Management Report 03 Corporate Profile 04 Management Discussion and Analysis 05 Corporate Governance 06 Corporate Social Responsibility 07 Consolidated Financial Statements Business Review Individual banking requirements and a conservative down payment policy. The quality of the portfolio is reflected in the low NPL ratio of 0.7%, which has remained relatively stable over the last several years. The low market penetration rate and the relatively small number of BCA mortgage borrowers when compared with the Bank s total customer base indicate great potential to further expand the mortgage portfolio. Aside from supporting interest income, the mortgage business also brings strategic opportunities for BCA to establish loyalty and build longterm customer relationships, including through cross-selling practices in the coming years. BCA markets mortgages through its extensive branch network and consumer credit branches in various cities throughout the country. The majority of mortgage applications originated from branch referrals with the remaining from property developers. In recent years, BCA has set up more consumer credit branches in several targeted major cities to strengthen the mortgage loan presence in those selected cities. In order to improve service quality, the consumer credit branches also function as mortgage administration centers. For increased efficiency and convenience, the Bank offers an online web-based mortgage application system which simplifies the processing of individual mortgage loans. provide solid and stable funding structures with low interest rates for both entities. Marketing synergy through BCA s branch network allows the two subsidiaries to increase their customer base and maintain a high quality, relatively low risk portfolio. Car financing is the second largest contributor to the Bank s consumer loan portfolio after mortgages. Although the automotive industry continues to experience weakness, BCA has grown the automobile financing portfolio systematically and in line with prudent risk management principles. Following a decline in the previous two years, new nation-wide car sales saw a slight increase in 2016 of 4.7% amounting to 1.1 million units. To maintain growth while also exercising caution, BCA Finance consistently offered top-of-mind car financing products. BCA Finance s flagship product, the Fix and Cap loan, offers 3 years fixed-rate installment and 2-or- 3 years installment at a capped interest rate. In 2016, BCA Finance developed a new facility that allows debtors to top up their loan and borrow against the vehicle at an agreed maximum ceiling. As a marketing strategy, the Bank continued to offer competitive interest rates to attract quality customers. In addition, BCA collaborated with car dealers to host a series of auto shows as an opportunity for the Bank to promote its vehicle loan products. BCA has received a number of awards for its achievements in the mortgage business, both from local and international institutions. The Bank was awarded Best Mortgage Business in the 2016 Indonesia Country Awards Programme for Retail Financial Services by Asian Banker as well as the 2016 Net Promoter Customer Loyalty Award for the Mortgages category by SWA magazine. Vehicle Financing BCA provides financing for cars and motorcycles through its subsidiaries BCA Finance and Central Santosa Finance (CS Finance), both of which offer joint financing schemes with the major portion of the loan recorded directly on BCA s balance sheet and the remaining portion of the financing on the balance sheets of the subsidiaries. BCA Finance and CS Finance work closely with BCA in providing vehicle financing and have improved operating synergies with the parent company. The ongoing joint financing schemes Customer acquisition is conducted in a disciplined manner, while maintaining collateral quality. BCA applies a policy of high down payments and low interest rates, and prioritizes financing for popular car models that have been widely accepted by the Indonesian automotive market. These policies helped sustain a low non-performing loan ratio and a high recovery rate on foreclosures, while also posting positive growth in the car financing portfolio. BCA Finance aims to improve its service in order to enhance customer satisfaction. Weekend service at Wisma BCA Pondok Indah and the service point at Artha Gading mall are provided to serve consumer needs on Saturdays. To speed up the application process, BCA Finance has developed several mobile technology applications, including mobile entry, mobile approval and mobile collection capabilities. To facilitate customers seeking product information, BCA Finance also offers a smartphone app with frequently asked questions and sample payment simulations. In collaboration with BCA, BCA Finance works 132 PT Bank Central Asia Tbk 2016 Annual Report
to accommodate various customer needs through the use of BCA s payment systems and invoice management as well as the HaloBCA call center. Due to these proactive marketing steps, the number of new car sales bookings financed by BCA and BCA Finance increased 11.7% to 199,565 units in 2016, with the Rupiah value growing by 16.6% to Rp 30.7 trillion. The Bank s total car loan portfolio (including BCA Finance) reached Rp 37.6 trillion at the end of 2016, an increase of 14.3% compared to Rp 32.9 trillion a year earlier. The portion of these loans recorded on BCA s balance sheet stood at Rp 30.9 trillion at the end of 2016, an increase over the previous year s Rp 27.3 trillion. BCA Finance s estimated market share in auto financing increased to 15.3% in 2016 compared to 13.2% in 2015. The motorcycle financing industry continued to face challenges marked by declining sales of new motorcycles in 2016. In response to this situation, CS Finance directed its focus towards internal consolidation efforts to maintain loan quality. CS Finance also improved the efficiency and effectiveness of sales through branch intensification, applied operational efficiency strategies, and optimized employee productivity and effectiveness. In 2016, CS Finance promoted a prudent approach to business and took proactive steps to minimize risk exposure. The portfolio was monitored with discipline so that the handling of arrears could be addressed at an early stage before any further deterioration. The billing system was enhanced for easier access by the collection team through mobile devices. Furthermore, CS Finance implemented aggressive policies to resolve the financing portfolio which had been classified as loss. In 2016 the Bank s total motorcycle loan portfolio (including CS Finance) reached Rp 5.7 trillion at the end of 2016, compared to Rp 6.4 trillion at the end of 2015. This decline was in line with CS Finance s strategic direction that prioritizes loan quality. The motorcycle financing recorded on BCA s book totaled Rp 3.9 trillion at the end of 2016, compared to Rp 4.3 trillion by the end of 2015. Credit Cards In credit cards, BCA is a leading credit card issuer in Indonesia. BCA managed about 3 million credit cards with a transaction value of Rp 53.7 trillion, one of the largest in Indonesia. At the end of 2016, credit card outstanding stood at Rp 10.8 trillion, 13.7% higher compared to 2015. BCA carefully manages credit card loan quality with NPL ratio maintained at a relatively low level in 2016. BCA continues to strengthen its credit cards business and to solidify its equity brand. BCA constantly expands its nationwide network of participating merchants and a number of outlets in Singapore via cooperation with the NETS network. BCA closely cooperates with various leading international networks for the acquiring/ acceptance of VISA, MasterCard, American Express, JCB and China UnionPay credit cards. BCA considers credit cards as one of key elements of overall BCA transaction banking franchise. Further elaboration on Credit Cards is available in this Business Review section under sub section Transaction Banking. Looking Ahead With the growing middle and professional classes, individual banking will play an important role in supporting the development of the Bank s overall business. The demand for banking services, such as mortgages, vehicle loans, bancassurance and wealth management services, will continue to grow in the coming years. BCA s large customer base provides an opportunity for the Bank to expand its individual banking business. BCA is optimistic that it will capture these business opportunities going forward. The synergy between the work units and between the subsidiaries and BCA will continue to be strengthened to increase the effectiveness of individual banking product offerings. The Bank continuously enhances the analytics capabilities of the Customer Relationship Management (CRM) system to better understand and identify the customers needs and behavior patterns as the basis for determining strategies in product development as well as marketing and promotional activities. PT Bank Central Asia Tbk 2016 Annual Report 133