PT. BANK RAKYAT INDONESIA (PERSERO) Tbk. Full Year 2005 Financial Result 1
2005 Performance
Indonesia s Macro Economy in 2005 Early 2005 was full of optimism on the prospects of Indonesian Economy Global Oil Price hike on August 2005 from US$ 41/barrel to US$ 70.85/barrel : - Fuel subsidy was abolished - Domestic oil price increased by 126% - Inflation increased, from 9.06% in September 2005 to 17.89% in December 2005 - BI Rate had been increased 7 times, from 8.5% in July 2005 to 12.75% in December 2005 Banking Industry : the implementation of PBI no 7/2/2005 NPL in the banking system increased from 5.96% in March 2005 to 7.30% in June 2005 3
BRI in the Year 2005 4
Highlights of BRI Performance in 2005 Loan still grew 20%, driven by Micro and Small Commercial Loan s NPL (gross) maintained at around 5 % Better valuation of Govt Bonds since October 2005 Funding mix of + 70% Low Cost Funds and +30% high cost funds Net Interest Margin maintained at around 12% Operating Cost to Opr Income ratio still at around 70% 5
Balance Sheet IDR billion Description Full Year Growth 2001*) 2002 2003 2004 2005 YoY Total Assets 76,195 86,345 94,710 107,040 122,776 14.7% - Gross Loans (incl. syariah) 33,529 39,373 47,599 62,368 75,533 21.1% - Government Bonds (Recap) 28,436 28,394 27,579 22,686 17,722-21.9% Total Earning Assets 70,015 79,864 84,165 97,962 111,731 14.1% Earning Assets Provision (3,244) (4,189) (4,403) (5,172) (5,478) 5.9% Total Non Earning Assets 10,104 10,394 14,858 14,250 16,523 16.0% Total Liabilities & S.E 76,195 86,345 94,710 107,040 122,776 14.7% Total Customer Deposits 57,759 69,627 76,316 82,400 97,046 17.8% - Demand Deposits 7,516 11,459 14,112 13,364 17,384 30.1% - Saving Deposits 26,529 28,673 35,803 44,569 49,372 10.8% - Time and Certificate Deposits 23,714 29,495 26,402 24,467 30,290 23.8% Other Interest Bearing Liabilities 8,596 5,655 5,726 6,384 5,597-12.3% Non Interest Bearing Liabilities 9,840 5,269 5,466 5,806 6,779 16.8% Tier I Capital 3,446 4,133 7,532 8,506 10,519 23.7% Total Shareholder's Equity 4,814 5,794 8,454 12,450 13,353 7.3% 6
Asset and Liabilities : Highlights of Growth, Composition and Quality
Loan Portfolio : Consistent Focus to MSMEs Loan Portfolio Composition 100% 50% Micro, 29.4% Small Consumer, 23.1% Small Commercial, 18.4% Micro, 30.5% Small Consumer, 25.5% Small Commercial, 22.9% Micro, 30.6% Small Consumer 23.5% Small Commercial, 26.7% Micro, 30.8% Small Consumer 23.1% Small Commercial, 28.0% Micro, 30.0% Small Consumer 21.8% Small Commercial, 28.8% As of end of Dec 2005 : Loan to MSMEs : 86.8% of total Loan Portfolio Corporate, 22.9% Corporate, 17.4% Corporate, 14.7% Corporate, 13.6% Corporate, 13.2% 0% 2001 2002 2003 2004 2005 Note : Medium Loans to Total Loans Corporate Medium - Small Commercial Small Consumer Micro 2001 2002 2003 2004 2005 Medium 3.7% 3.7% 4.6% 4.6% 6.3% Size of Loans Micro loan up to Rp 50 mio (US$ 5,000) Consumer Loans up to Rp 200 mio (US$ 20,000) BRI s Commitment : Maintaining Loans to MSMEs at least 80% of Total Loan Maintaining Micro Loans at least 30% of Total Loans Small Business Loans : up to Rp 5 billion (US$500,000) Medium Scale Loans Rp 5 bio to 50 bio (US$ 500,000 US$ 5 mio) Corporate Loans > Rp 50 billion(us$ 5 mio) Assumption : 1 US$ = IDR. 10,000 8
Loans : High Growth Maintained idr trillion 80.00 40.00 - Loans Growth : Trend 47.60 39.37 6.99 32.36 2.2 6.86 1.5 12.8 7.41 1.2 9.5 6.1 11.1 9.5 7.8 9.8 12.0 14.5 62.37 8.46 2.9 75.53 9.94 4.7 21.5 17.5 16.5 14.4 19.2 22.8 2001 2002 2003 2004 2005 Micro Small Consumer Small Commercial Medium Corporate Total Loan CAGR 2000-2005 Micro 23.82% Small Consumers 24.10% Small Commercial 36.97% Medium 8.72% Corporate 13.51% During 2005, total loan grew by IDR 13.2 trillion or 21.1% (YoY) Loan Expansions by Business Segment (YoY) 2004 2005 (IDR trillion) Micro Small Consumer Small Commercial Medium Corporate 1.5 1.9 2.2 3.6 4.1 The driver of growth is Small Commercial and Micro Loans which grew by IDR 7.7 trillion, constitute 58.2% of total loan growth Expansions in the corporate segment in 2005 were all in the agribusiness sector In Q4 2005, BRI s loan growth reached 3.84%, while banking industry growth was 1% (source banking industry data : Bank Indonesia) 0.0 2.5 5.0 IDR Trillion 9
Loan Quality : High Quality Growth Total Loan vs Total NPL : Trend Classified Loans to Ttl Loans 80.00 6.74% 6.03% 62.37 75.53 8.0% 100.0% 21.2% 15.3% 13.2% 12.2% 11.5% idr trillion 40.00 4.93% 32.36 39.37 47.60 4.19% 4.68% 4.0% 50.0% 78.8% 84.7% 86.8% 87.8% 88.5% - 2001 2002 2003 2004 2005 Total Loan (LHS) NPL (RHS) Composition of Classified Loans 0.0% 0.0% 2001 2002 2003 2004 2005 Current Classified Loans 100% 50% 2.2% 14.4% 6.6% 9.2% 13.6% 12.6% 10.1% 8.5% 9.4% 6.0% 5.0% 25.7% 10.3% 7.5% 14.4% 21.3% 23.8% 14.2% 17.5% 13.8% 21.8% 9.5% 9.1% 13.3% By end of Dec 2005, NPLs in the banking Industry reached 8.7% (source : Bank Indonesia-Kinerja Sektor Moneter, Perbankan dan Sistem Pembayaran Triwulan IV 2005) 76.7% 56.0% 54.3% 65.7% 67.4% 63.4% 59.8% 57.0% 0% Dec 01 Dec 02 Dec 03 Dec 04 Mar-05 Jun-05 Sep-05 Dec-05 Special Mention Substandard Doubtfull Loss 10
NPLs by Business Segments and NPL Coverage : Trend NPL BY SEGMENT (%) Dec 01 Dec 02 Dec 03 Dec 04 Mar-05 Jun-05 Sep-05 Dec-05 Micro 1.03 1.55 2.79 2.1 2.32 1.95 1.73 1.55 Consumer 0.74 0.96 1.19 1.22 1.33 1.93 1.84 1.62 Small Commercial 2.4 3.4 3.0 3.2 4.35 5.45 4.96 4.00 Medium 19.5 15.8 14.2 6.8 6.85 9.73 8.95 7.48 Corporate 14.28 26.59 23.43 15.08 15.75 19.01 17.6 16.93 NPL Coverage 199.8 147.53 150.39 196.00 183.47 148.65 147.12 153.09 During the second half of 2005, NPL in all segments had been decreasing 11
Government Bonds : Portfolio Govt Bonds (Recap Bonds and Other Govt Bonds) by Type of Holdings IDR Trio Portofolio Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Nominal % to Ttl Nominal % to Ttl Nominal % to Ttl Nominal % to Ttl Nominal % to Ttl Hold to Maturity 11.34 46.2% 11.34 48.0% 11.34 51.7% 11.34 56.7% 11.34 53.8% Available for Sale 9.96 40.6% 7.81 33.1% 6.53 29.8% 5.56 27.8% 6.27 29.7% Trading 3.22 13.1% 4.46 18.9% 4.05 18.5% 3.08 15.4% 3.48 16.5% Total 24.52 100.0% 23.62 100.0% 21.92 100.0% 19.98 100.0% 21.09 100.0% Recap Bonds to Ttl Assets, Ttl Earning Assets and Ttl Loans Government Bonds (Recap and Other Govt Bonds) By Type of Rate 100.00% 87.9% 100% 23.2% 26.0% 27.8% 28.1% 30.4% 33.2% 32.8% 72.1% 57.9% 50.00% 40.5% 35.4% 32.7% 36.4% 37.3% 23.2% 23.5% 32.9% 29.1% 15.7% 21.2% 14.3% 0.00% 2001 2002 2003 2004 2005 Recap Bonds to Ttl Assets Recap Bonds to Ttl Earning Assets Recap Bonds to Ttl Loans 50% 0% 100.0% 76.8% 74.0% 72.2% 71.9% 69.6% 66.8% 67.3% Dec-01 Dec-02 Dec-03 Dec-04 Mar 05 Jun 05 Sep-05 Dec-05 Fixed Rate Variable Rate 12
Deposits : Grew at Low Cost BI Rate, BRI's COF and the Growth of Deposits % 16.0 12.0 8.0 4.0 79.7 78.6 25.2 24.5 7.34 7.39 39.9 41.1 4.73 4.67 82.4 82.8 24.5 24.8 7.43 7.44 44.6 43.4 4.60 4.29 89.5 24.9 8.25 44.4 4.31 90.2 27.2 10.00 46.3 4.39 97.0 30.3 12.75 49.4 4.73 90 50 idr trillion 0.0 14.6 13.0 13.4 14.6 20.2 16.7 17.4 Jun-04 Sep-04 Dec 2004 Mar-05 Jun-05 Sep-05 Dec-05 Demand Savings Time Total BRI SBI Rate (LHS) COF BRI (LHS) 10 In Q4 2005, BRI s total deposits grew by 7.8%, while total banking industry growth s was 1.3% (source : Bank Indonesia) BRI s COF can be kept in a low level as more than 70% of the Deposits are in the low cost fund deposits (demand and saving deposits), with an interest-rate-insensitive customer base 13
Profitability 1
Income Statement : Highlights IDR billion Description Full Year Growth 2001*) 2002 2003 2004 2005 (YoY) Interest Income 10,968.0 13,454.0 15,069.0 15,531 17,254 11.09% Interest Expense (6,006.0) (7,373.0) (7,043.0) (4,273) (4,817) 12.72% Net Interest Income 4,962.0 6,081.0 8,026.0 11,258 12,437 10.48% Fee & Other Opr. Income 1,153.0 1,045.0 939.0 1,447 969-33.05% Gross Operating Income 6,115.0 7,126.0 8,965.0 12,704 13,406 5.52% Other Operating Expenses (3,396.0) (3,908.0) (5,810.0) (5,887) (7,680) 30.46% Pre Provision Operating Profit 2,719.0 3,218.0 3,155.0 6,817 5,726-16.02% Provision (1,603.0) (1,755.0) 75.0 (1,328) (413) -68.89% Non Operating Profit/Loss 25.0 8.0 406.0 444 296-33.44% Profit Before Tax n Minor. Int. 1,141.0 1,471.0 3,636.0 5,933 5,608-5.48% Net Profit 1,064.0 1,525.0 2,502.0 3,633 3,809 4.83% EPS 306.6 321.7 4.92% 15
Sources of Income Idr billion Source of Income 2000 2001 2002 2003 2004 2005 Growth (YoY) Interest income 7,616.2 10,967.7 13,453.6 15,069.3 15,530.8 17,253.7 11.1% Other Opr.Income 754.3 1,153.2 1,044.7 938.5 1,446.8 968.6-33.1% Non Operational Income (net) 8.0 24.8 7.7 405.6 444.2 295.6-33.4% Total Income 8,378.5 12,145.8 14,506.0 16,413.4 17,421.8 18,518.0 6.3% Other Operating Income Idr billion Other Operating Income Dec-04 Dec-05 Growth Gain Fr Value Increase of Securities 189.0 - -100.0% and Govt. Recap Bonds (net) Gain from sale of Securities and 523.6 231.6-55.8% Govt Recap Bonds (net) Fees and Commissions 502.2 568.5 13.2% Gain fr Forex (net) 130.2 49.5-62.0% Others 101.8 119.0 17.0% Total 1,446.8 968.6-33.1% 16
Main Sources of Income Interest Income vs. Interest Expenses idr trillion 20 18 16 14 12 10 8 6 4 2 0 10.8 7.60% 6.0 13.2 15.5 14.8 12.16% 11.44% 12.12% 8.12% 9.54% 7.4 7.0 4.3 4.0 1.2 17.3 12.29% 12.17% 12.6 8.2 4.8 3.3 2.2 Dec 01 Dec 02 Dec 03 Dec 04 Mar-05 Jun-05 Sep-05 Dec-05 NIM (%) (RHS) Interest Income (LHS) Interest Expenses (LHS) 16.0% 8.0% 0.0% The main source of interest income is Loans Interest income is increasing steadfastly as the driver of growth of loans are Micro and Small Commercial Loans, which are loans of a high yield and in high quality 17
Over Head Expenses IDR billion Dec 2001 Dec 2002 Dec 2003 Dec 2004 Dec-05 Growth YoY (2004-2005) Personnel 1,961.9 2,644.1 3,666.0 3,717.5 4,407.2 18.6% General and Administration 949.6 1,081.8 1,330.0 1,835.0 2,126.4 15.9% Losses fr decrease of Securities - - - - 566.0 and Govt. Bonds value Premium Paid on Govt Guarantee 183.4 199.3 8.6% Others 81.0 133.0 738.0 352.8 381.2 8.1% Total 2,992.4 3,858.9 5,734.0 6,088.8 7,680.1 36.6% 18
Financial Ratios Description Full Year Growth 2001 2002 2003 2004 2005 YoY Classified Loan Ratio 22.66% 15.31% 13.19% 12.23% 11.55% -5.56% NPL ratio - Gross 7.30% 6.74% 6.03% 4.19% 4.68% 11.69% NPL Coverage ratio - Gross 162.30% 147.50% 150.39% 196.00% 153.09% -21.89% Tier I CAR 10.70% 10.30% 16.30% 12.49% 12.52% 0.24% Total CAR with market risk n.a n.a 18.94% 16.19% 15.29% -5.56% Loan to Deposit Ratio 58.10% 56.50% 62.37% 75.69% 77.83% 2.83% Net Interest Margin (NIM) 7.60% 8.12% 9.54% 12.16% 12.17% 0.08% Return on Assets (ROA) - b.t 1.62% 1.83% 4.02% 5.77% 5.04% -12.65% Return on Assets (ROA) - a.t 1.52% 1.90% 2.77% 3.66% 3.42% -6.56% Return on Equity (ROE) - Tier I 30.36% 38.81% 43.41% 42.76% 37.92% -11.32% Return on Equity (ROE) - B/S 21.27% 26.99% 35.68% 34.41% 30.63% -10.99% Cost of Fund (COF) 9.14% 10.04% 7.86% 4.60% 4.73% 1.28% Min. Reserve Requirement 7.82% 6.05% 10.92% 9.39% 9.55% 17.76% Net Open Position 11.40% 7.80% 12.46% 10.77% 5.23% -59.39% Opr. Expense to Opr. Income 90.81% 89.92% 79.82% 68.86% 70.45% 4.35% Cost Efficiency Ratio (CER)*) 50.13% 57.48% 65.33% 51.33% 54.26% 14.84% *) CER : (Employee expense+ G&A+Other Op. Expense)/(NII+Fee&Commision+Other Op. Income) 19
Outlook 2006 20
Economic Outlook 2006 Inflation an easing trend Dec 2005 YoY inflation stood at 17.1%, below forecasted inflation of 18% % 20 10 Consumer Price Index 7.42 8.33 9.06 7.84 17.89 18.38 17.11 BI Rate stands at 12.75%, bellow end of year market expectation of 13%, indicated BI Rate is nearly its peak Tight money policy will be pursued in the first semester of 2006, but will be relaxed in the second semester 2006 0 June 05 Jul 05 Aug 05 Sep 05 Oct 05 Nov 05 Dec 05 Bank Indonesia targets of inflation in 2006 is to bellow 10%, in the range of 7% - 9% There are expectations that BI will lower interest rate in the second semester of 2006 21
Changes in Regulatory Environment Aimed at boosting banks Intermediary function Adjustments on: -One Debtor One Project policy -Statutory Reserve Requirement -Risk weighting for SME Loans Increasing Public Access to Syariah banking Implementation of Banking Landscape towards consolidation of banks (from 130 to 50 banks) 22
BRI in 2006 : Outlook Maintaining high loan growth (+ 20% in 2006) Maintaining high loan quality Lower interest rate will give more advantage to BRI : High net interest margin can be maintained: - Better mix of funds resulted in a lower cost of funds - High quality of loans ( both above qualities had been proven resilient in tougher economic condition of 2005) - Further bonds selling to fund loan growth better valuation of government bonds Changes in risk weighting for SME loans will benefit BRI,as more than 80% of BRI s loan portfolio are SME Loans There will be more opportunities as well as competitions in servicing MSMEs 23
Thank You 24