Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 PT Bank Andara INVESTOR QUARTERLY REPORT 3 nd Edition 2015 July Sep 2015 3 nd QUARTER 2015 HIGHLIGHTS Indonesia Macro Economy CNY depreciation, uncertainty in FED rates and continued weakness in global economy as well as political issues significantly affect Indonesian economy. Q2 growth rate was approx. 4.64% (lowest in 6 years) vs. 4.7% in Q1. Growth target for 2016 is now at 5.3% Inflation per September was 6.83%. PMI contracted to about 47.4 (12 month contraction), Consumer Confidence index dropped to 97.5 in Sept vs. 112.6 in Aug. Exports dropped by 12.3% while imports dropped by 17% from previous year. August trade surplus dropped to USD 630 mio from USD 1.3 bio in July. Domestic auto sales dropped for 12 months continuously while motorcycle sales dropped 4.92% by 21.2% as of July. Expected fiscal deficit 2.23% in 2015 Reserves dropped to about USD 103 billion in Sept from USD 108 bio in June partially due to currency intervention Exchange rate weakened from IDR 13,300 /USD in July to about IDR 14,800/USD in September before recovering to about IDR 13,600/USD currently. Jakarta Stock Index dropped from 4,900 in June to 4,100 in September before recovering to about 4,400 currently BI kept its main interest rate unchanged at 7.5% in Sept 2015 Government reshuffled cabinet, issued several deregulations & initiatives. Bank Indonesia issued a new instrument (Short term SBI) to improve liquidity and issued new restriction on USD purchases. Fuel price & electricity price adjustment announcement are anticipated in the near future. BI expected economy to rebound in the 3 rd Q 2015 with projected growth rate of 4.9% on the back of stronger cement sales, improving credit growth and increasing steel imports Source: SCB Global Market Indonesia,Maybank Indonesia & CIMB Niaga Investor Relations Plaza Bapindo, Citibank Tower 28 th Floor Jl. Jend. Sudirman Kav.54-55 Jakarta 12190 Tlp: +62-21-526-0707 Fax: +62-21-526-6003 Email:investorrelations@bankandara.co.id Website: www.bankandara.co.id Our issue this quarter From Management 2 Finance and Operations Loan and Deposit Portfolio 2 5 Pro-poor Information Electronic Banking Service 6 7 Corporate Governance 7 About Bank Andara Bank Andara is a wholesale banking institution with social and financial bottom lines. Bank Andara obtained BI s approval to run the businessin January 2009, and currently serves as a strategic banking partner to the Indonesian microfinance sector (MFI) in providing loans and services. Established by a trusted international investment consortium, Bank Andara s shareholders are Mercy Corps, IFC, KfW, Hivos- TriodosFonds, and Developing World Markets Fund S.C.A SICAV SIF, global investors in microfinance. The Bank currently works with more than 700 MFIs throughout Indonesia and intends to reach 1,200 MFIs in the next 3 (three) years. The microfinance sector in Indonesia is one of the world s largest, with estimated of 50,000 MFIs operating in the country. 10.00% 5.00% 0.00% Indonesia Inflation and BI Rate Vision To serve as catalyst to reach millions of Indonesians that lack access to the financial sector by providing financial products and services through financial institutions as well as through direct means. Mission Inflasi Rate BI Rate To provide access to wide-ranging financial services directly or through financial or non-financial institutions in a sustainable and accountable manner.
From the CEO s desk Dear Friends of Bank Andara, With the close of third quarter, it is a good time for us to review the progress that we have achieved, our successes and our failures which will help us plan for 2016. The slowdown in economic activity was felt significantly in the 3 rd Quarter of 2015. Demand from our BPR clients dropped significantly as our BPR customers became more cautious on lending activity. To overcome this, we have started extending financing to multifinance segment as well as started marketing to SME segment. To develop and maintain good relationship with clients, on September 16 th, 2015, the bank hosted Jakarta Client Gathering. We intend to roll out this activity to other branches in Q4 2015. To optimize our Asset and Liability Management, our treasury has been very active in the interbank market which improves yields on excess liquidity and visibility of bank Andara. We are seeing an uptick trend in past due payments and we are making sure that we take proactive actions as well as setting aside sufficient provision for potential NPLs. Deterioration of credit quality is also apparent especially on previously restructured cooperative loans. We have conducted a comprehensive review of Makassar and cooperative portfolios of bank Andara. Based on our reviews, our loan portfolio is still relatively sound. Monitoring the performance of our clients is also becoming more important under current economic conditions. We are increasing our efforts to improve portfolio monitoring and identify clients that exhibit early warning signals as well as manage our watchlist accounts. In August 2015 Bank Andara conducted a townhall meeting to provide update on 1 st H 2015 performance. From Human resources aspect, the bank completed its midyear performance review for all employees. Bank Andara conducted Financial Literacy by its Denpasar branch on September 21 st, 2015, in cooperation with 4 BPRs, attended by 60 college student and 15 lecturers. We would like to thank for your trust and continued support for the Bank. We will maintain our focus on improving the Bank s performance, profitability, success in financial inclusion, and strengthening of organization and human resources as a strong platform for future growth. Enclosed you will find the highlights of Bank Andara s second quarter 2015 performance. If you would like to get more information, please e-mail to:deasy.wulaningsih@bankandara.co.id. Warm Regards, The Management Finance and Operations Finance INVESTOR QUARTERLY REPORT Page 2
BALANCE SHEET (IDR million) Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 ASSETS Cash & Short-term Investment 273,557 308,241 262,901 201,792 187,482 144,936 133,639 166,680 164,936 Marketable Securities 109,528 75,368 106,116 102,741 100,120 98,698 96,211 93,113 127,588 Total Loans (Net) 628,254 603,740 603,285 617,963 644,077 681,012 658,560 640,471 619,249 Fixed Assets (Net) 9,636 9,374 9,223 8,843 8,398 7,965 7,521 7,088 6,741 Other 18,016 17,426 16,741 16,813 16,875 15,621 16,498 18,810 16,794 TOTAL ASSETS 1,038,991 1,014,150 998,266 948,152 956,953 948,231 912,428 926,162 935,308 LIABILITIES Third Party Funds 721,664 703,081 693,753 651,376 665,897 669,110 637,603 658,668 675,350 Fund Borrowings 101,687 98,982 96,279 93,575 93,585 88,167 88,178 88,189 88,199 Other Liabilities 32,356 30,665 31,969 32,557 27,479 28,067 26,639 24,315 23,872 TOTAL LIABILITIES 855,708 832,729 822,001 777,508 786,961 785,344 752,420 771,171 787,421 EQUITY Total Paid Up Capital 330,103 330,103 330,103 330,103 330,103 330,103 330,103 330,103 330,103 Other Comprehensive Income 4,505 (509) (4,072) (7,427) (10,028) (11,431) (13,898) (16,975) (22,477) Retained Earnings (151,325) (148,173) (149,766) (152,031) (153,853) (155,784) (156,196) (158,138) (159,740) TOTAL EQUITY 183,283 181,421 176,265 170,645 166,222 162,887 160,009 154,991 147,886 TOTAL LIABILITIES & EQUITY 1,038,991 1,014,150 998,266 948,152 953,183 948,231 912,428 926,162 935,308 Cash and short term Investment increased to IDR 164 billion. There was placement to money market mutual funds in the amount of IDR 20 bio to improve yield on excess liquidity. The Bank also allocated 20bio to buy retail government bonds with remaining tenor less than 3 months. In Sep 2015, the Bank s loan portfolio closed at IDR 619billion due to the slowdown in demand as well as delay in drawdown of approved facilities in our BPR segment. The NPL gross ratio was at 3.89%, and NPL net ratio was 0.35%. Third party funds acquisition was maintained at IDR 675billion in order to strike a balance with lending needs. During this time, the bank was able to lower its cost of funds for time deposit to 9.5%. Financial highlights: YTD Net Loss Sep 2015 is IDR 9.58bio, better than revised budget loss IDR 13.7bio. YTD Net Interest Income for Sep 2015 is IDR 32.5bio, slightly higher than budget. YTD OPEX as of Sep 2015 is IDR 48.3bio compared to revised budget IDR 52.5bio. YTD Loan loss Provision Expenses for Sep 2015 is IDR 4.5bio compared to budget IDR 3.7bio, due to the deterioration of credit qualityfrom restructured cooperative loans. Net Interest margin 4.71% slightly lower from Aug 2015 at 4.75% and higher from Jun 2015 at 4.46%. OEOI ratio as of Sep is 111.08 % is higher than Aug 2015 110.32% and Jun 2015 109.69%, slightly higher than OEOI full year budget of 109.48% due to the lower operating income of the month. NPL gross as of Sep 2015 is 3.89%, an increase compared to Aug 2015 at 3.75%, due to additions in the NPL accounts from restructured cooperative loans. INVESTOR QUARTERLY REPORT Page 3
INCOME STATEMENT (IDR million) Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Total Interest Revenue 10,054 8,806 9,438 9,178 9,285 9,267 9,691 9,556 8,930 Total Interest Expense (6,352) (5,830) (6,211) (5,758) (5,570) (5,375) (5,395) (5,548) (5,622) Interest Income - Net 3,702 2,976 3,227 3,420 3,715 3,892 4,295 4,008 3,308 Total Other Operating Revenues 190 166 177 151 187 133 168 157 115 Total Operating Expenses (5,250) (4,492) (4,993) (5,860) (5,728) (6,021) (4,874) (6,103) (5,025) Net Operating Income/Loss (1,358) (1,350) (1,589) (2,290) (1,826) (1,997) (411) (1,939) (1,601) Net Non Operating Revenue/Expense 193 4,502 (4) 25 5 65 (1) (2) (1) EBIT (1,165) 3,152 (1,593) (2,265) (1,822) (1,932) (412) (1,941) (1,602) Tax Benefit/ Expense - - - - - - - - - NET INCOME (LOSS) MTD (1,165) 3,152 (1,593) (2,265) (1,822) (1,932) (412) (1,941) (1,602) NET INCOME (LOSS) YTD (1,165) 1,987 394 (1,871) (3,692) (5,624) (6,036) (7,977) (9,580) RATIOs Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Capital Adequacy Ratio 44.62% 46.63% 46.68% 41.14% 38.61% 35.78% 36.19% 35.51% 34.26% Loan to Deposit Ratio (LDR) 90.28% 89.18% 90.29% 98.53% 99.84% 105.59% 107.35% 101.35% 95.76% Loan To Total Funding 79.13% 78.17% 79.29% 86.15% 87.54% 93.30% 94.30% 89.39% 84.70% ROA -1.35% 1.16% 0.16% -0.56% -0.90% -1.14% -1.06% -1.24% -1.33% ROE -8.10% 6.87% 0.91% -3.25% -2.74% -6.99% -6.51% -7.62% -8.27% NIM 4.48% 4.10% 4.10% 4.20% 4.33% 4.46% 4.65% 4.75% 4.73% Ops Expense to Ops Income 112.70% 93.09% 99.74% 105.07% 107.64% 109.69% 108.95% 110.32% 111.05% Yield Of Lending 13.84% 13.83% 13.73% 13.82% 13.79% 13.75% 13.75% 13.77% 13.38% COF (Cost Of Fund) 8.73% 8.84% 8.77% 8.60% 8.37% 8.19% 8.18% 8.20% 8.25% NPL gross 3.27% 3.32% 3.39% 3.77% 3.61% 3.34% 3.45% 3.75% 3.89% NPL net 0.28% 0.25% 0.29% 0.59% 0.49% 0.38% 0.32% 0.30% 0.35% >30 days 3.08% 3.19% 3.19% 2.99% 2.89% 3.16% 3.70% 3.87% 3.91% The Early Warning report is produced on a monthly basis to highlight potential problem loans and to discuss necessary actions to resolve potential credit issues. The Bank continues its efforts to obtain better insights into clients conditions and assists them during difficulties where possible. Portfolios Cumulative Loan & Deposit Portfolio Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Amount of Wholesale Loans (IDR million) 650,089 625,579 625,019 640,691 663,751 705,435 683,425 666,431 645,624 Amount of Monthly Loan Disbursement (IDR million) 24,288 18,000 43,039 55,000 64,500 84,500 19,500 21,250 19,650 Number of Deposits Account 1,466 1,437 1,410 1,387 1,382 1,333 1,318 1,300 1,292 Amount of Third Party Funds (IDR million) 721,664 703,081 693,753 651,376 665,897 669,110 637,603 658,668 675,350 Non-Bank Deposits Outstanding (IDR million) 96,191 97,099 94,586 88,002 83,229 96,298 94,215 90,205 85,309 % of Non-Bank Deposits Outstanding 13.33% 13.81% 13.63% 13.51% 12.50% 14.39% 14.78% 13.70% 12.63% Bank Deposits Outstanding (IDR million) 614,534 608,795 628,636 597,812 563,156 521,222 530,096 555,324 578,403 % Bank Deposits Outstanding 85.16% 86.59% 90.61% 91.78% 84.57% 77.90% 83.14% 84.31% 85.64% Slowdown in demand as well as delay in drawdown of approved facilities were evidenced in our BPR segment. INVESTOR QUARTERLY REPORT Page 4
Operations The following is the current headcounts of our permanent staff: Operations Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Offices 5 5 5 5 5 5 5 5 5 Total Staff 145 146 145 146 147 145 149 148 144 BOD 2 3 3 3 3 3 3 3 3 Head Office 75 75 75 75 77 78 79 80 75 Jakarta 17 17 17 17 18 17 17 16 17 Bali 22 22 22 23 23 23 23 22 22 Semarang 14 14 12 11 11 10 13 13 12 Surabaya 15 15 16 17 15 14 14 14 15 AO (Account Officer) 21 22 22 19 17 16 18 18 18 FO (Funding officer) 8 7 8 10 17 16 17 16 16 FBO (Fee Based Business Officer) 5 5 5 6 0 0 0 0 0 started May 2015 FBO combine as FO The organization structure was changed in May 2015. Some positions were eliminated and some people were reshuffled to increase productivity. A new department was created to focus on non MFI business including SME, multifinance segments. The fee based business officers were rotated to the funding officers. The treasury division head position was filled in July 2015. To improve human resources quality, the Bank arranged several training workshops for employees. There were a total of 21 trainings conducted between January to September 2015, covering risk management certification, operational and liquidity risk, internal audit skill, building asset management, asset valuation, legal aspect and legal risk, financial modelling, tax course, ALM, debt restructuring course, IT security based on ISO and other workshops. INVESTOR QUARTERLY REPORT Page 5
Pro-poor Information Coverage and Pro-Poor Portfolio Geographic Coverage Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Sumatra 43 40 40 38 37 37 37 34 31 Jakarta &Banten 47 47 46 47 44 46 45 48 56 West Java 83 79 79 78 74 74 71 72 62 Central Java 59 61 60 57 55 56 54 51 52 Jogjakarta 11 10 8 7 8 6 6 6 6 East Java 104 102 102 99 100 101 98 96 90 Sulawesi 51 51 51 49 48 46 46 46 44 Bali, NTB (West Nusa Tenggara), NTT (East Nusa Tenggara) 90 85 83 85 85 85 84 83 81 Kalimantan 1 1 1 1 1 1 1 1 1 Pro-Poor Portfolio Number of Pro-Poor Lending MFI 270 261 254 245 248 243 233 228 224 Number of Non Pro-Poor Lending MFI 182 179 177 176 167 167 169 166 154 Pro-Poor Percentage 60% 59% 59% 58% 60% 59% 58% 58% 59% Growth of Transaction Volumeof AndaraLink Transaction volume of Andaralink kept on increasing. The biggest volume growth is in the deposit solution (Solusi Setoran) feature of Andara link. The number of active users of Andara link using Solusi Setoran increased from 28-37 users. Transactions volume increased by 13% from 178,000 transactions in June to 201,000 transactions as of Sep 2015. This is the highest no of transaction for Andaralink-Solusi Setoran within the year. We also initiated Andaralink promotion using Bank Andara s Anniversary to distribute 5 units of Andaralink to new users. Another program that has been launched is AndaraLink Optima promotion. This program has been received 60 confirmed mobile device from 14 MFI, increasing the number of device used from 103 units as of Aug to 163 units (60% increase). Target additional transaction with 60 additional devices is 90,000 transactions per month. INVESTOR QUARTERLY REPORT Page 6
Corporate Governance and Risk Management The Bank worked to strengthen all aspects of risk management. In Q3 2015, the Bank continued to improve the implementation of the watchlist conducted a comprehensive review of its South Sulawesi and nationwide cooperative portfolios, and continued to implement consistent standards for individual action plans to reduce risks and exposures for the identified MFIs. To maintain liquidity and market risk at levels approved by the Bank s ALCO, the Bank improved its implementation of liquidity monitoring by utilizing daily liquidity policy zones (red: up to IDR21bio, orange: IDR21bio 42bio, yellow: IDR43bio 54 bio, green: IDR54bio 97bio) and limits on liquidity and market risk maturity gaps. At Q3 2015 the Bank s liquidity remained in or above green zone means the Bank has more than enough liquidity to cover the volatile deposit until IDR60bio. The Q3 2015 risk composite rating is moderate, no changes from the previous quarter. Note: Volatile Balance Reserve IDR 40 Bio. Maximum Green Zone IDR 97 Bio, Maximum Yellow Zone IDR 54 Bio, Maximum Orange Zone IDR 42 Bio and Maximum Red Zone IDR 21 Bio (All maximum levels are in addition to the Volatile Balance Reserve.) INVESTOR QUARTERLY REPORT Page 7