DEAR VALUED SHAREHOLDERS AND STAKEHOLDERS,
On behalf of the Board of Directors of Bank Resona Perdania (“Bank”), allow me to convey the achievements of the Bank’s performance for the book year of 2019. I am grateful to be able to expand this year by turning all the challenges and obstacles into a great opportunity for growth. Armed with the full support of shareholders and other stakeholders, the Bank has succeeded in a positive performance to realize sustainable business growth. The Bank’s strategic steps to achieve this include maximized loans disbursement to customers, improved quality of human resources, issued new activities namely Reference Activities for the Bancassurance Product, and acquisition of non operational income. The shareholder changes process has been carried out, whereby The Bank of Yokohama, Ltd. (“Bank of Yokohama/BOY”) and Daido Life Insurance Company (“DAIDO”) joined as shareholders replacing East Asia Indonesian Holdings, Ltd. and Vision Well, Ltd. This shareholders change is expected to broaden customer expansion and accelerate business growth.
ECONOMIC AND BANKING CONDITIONS IN 2019
The uncertainty of the global economy continued with a growth rate of 2.9% which was the lowest growth since the 2008 crisis. The decrease in global economic conditions caused central banks in various parts of the world, especially the United States Central Bank (“The Fed”) to lower Federal Funds Rate (“FFR”) interest rate 75 bps from 2.50% to 1.75% to anticipate the impact of a global economic slowdown on the US economy.
The Indonesian economy in 2019 also faced significant challenges, both from external and internal factors. The decrease that occurred in the global economy impacted to economic activities in many countries, including Indonesia such as the pace of investment, export and import activities as well as domestic business activities.
In terms of loans demand, corporate loans especially, experienced a weakening in 2019. This has slowed the pace of loan growth in 2019 where banking loan growth was recorded at 6.08%. Similar conditions also occurred in the growth of Third Party Funds (“TPF”) which experienced a decrease and recorded 6.54%. Nevertheless, the condition of banking in Indonesia was still well maintained. This was indicated by the capital adequacy ratio (“Capital Adequacy Ratio/CAR”) of the average banking industry at the level of 23.31% with a ratio of non-performing loans (“Non-Performing Loans / NPL “) of 2.53% for NPL gross and 1.18% for NPL net.
Facing the dynamic and challenging conditions of the Indonesian economy, the Bank took a prudent approach in which loan disbursement was very selective. In 2019, the Bank focused on settling its non-performing loans and optimized the recovery rate from non-performing loans and written off loans. Despite the decline, debtor business performance is inevitably going to cause the formation of high allowance for impairment losses, the Bank is striving to minimize the decline in financial performance through efficient management of company expenses and management of the Bank’s funding costs.
BANK PERFORMANCE IN 2019
In 2019, strategic policies to support the achievement of operational performance and financial performance of the Bank are fairly good. The Bank was able to take effective steps to minimize the decline in financial performance in these difficult economic conditions. The Bank booked profit after tax of IDR7.0 billion and booked an operational loss of IDR86.6 billion. This operational loss was due to the formation of impairment expenses and a decline in net interest income performance where in 2019 it was recorded at IDR457.6 billion from 2018 of IDR474.0 billion.
Total assets and total net loans each amounted to IDR17.4 trillion and IDR11.9 trillion, respectively, when compared with the achievement in 2018, total net loans grew by 1.22% while total assets decreased by 4.03%.
The performance of the Bank’s financial ratios were maintained well, where the Bank’s capital adequacy ratio (“CAR”) reached 21.27%. This achievement was still far higher than required by the regulator. The liquidity ratio was also quite good even though there was a slight decline in 2019 compared to the achievement in 2018 where the LDR ratio was recorded at 109.18%. The asset quality ratio was also still below the provisions of the regulator, NPL gross and NPL net were recorded at 2.68% and 1.83% respectively.
The optimization of recovery for non-performing loans of the Bank is inseparable from the strategic management steps in maximizing the function of the Ad-hoc Team of Monitoring and Immediate Recovery for Credit (“ATOMIC”) which has the main duties and functions of improving the Bank’s assets quality. ATOMIC is led directly by the President Director. In connection with the importance of role ATOMIC was considered to have had very effective results. In July 2019, the assignment of ATOMIC was extended until the end of June 2020. In detail, ATOMIC aims to: (1) maximize the recovery of loans from non performing loans and written off loan, (2) maintain and manage NPL gross and NPL net, (3) prevent the potential of new non performing debtors.
In addition to optimizing the ATOMIC function, effective in 2019 the Bank also formed a Special Working Team for the Realization of Advance Credit Management (“STREAM”) which is also led by the President Director and has the function of improving and better realizing the Banks loan management. STREAM’s activity is to reviews the process of loan disbursement and work flow and the structure of the Bank’s credit organization.
On July 24, 2019, the Bank carried out shareholder changes where The Bank of Yokohama, Ltd. effectively become a shareholder of Bank Resona Perdania by taking over 30.00% shares owned by East Asia Indonesian Holdings, Ltd. On the same date, Daido Life Insurance Company and Resona Bank, Ltd. effectively took over respectively 14.90% and 5.02% shares of Bank Resona Perdania from Vision Well, Ltd, resulting in a total Resona Bank, Ltd share ownership become 48.44%. The establishment of cooperation with The Bank of Yokohama, Ltd., and Daido Life Insurance Company is expected to increase the Bank’s business expansion.
In order to improve the quality of product and services to loyal customers, on December 5, 2019, the Bank in collaboration with Panin Dai-ichi Life launched Bancassurance under the name Smart Infinite Protection. In this new activity, the Bank’s role is to refer the Bank’s customers to Panin Dai-ichi Life as an insurance company by requesting prior approval from the customer. It is expected that this new service can complement the range of financial solutions provided by the Bank to its customers.
At the end of 2019, the Bank took corporate action to increase the equity value of the subsidiary PT Resona Indonesia Finance (RIF) amounting to IDR50 billion through a shareholder perpetual loan. The equity addition is one of the efforts made by the Bank to strengthen the RIF capital and liquidity in conducting and developing its business activities. This corporate action was also carried out in compliance with OJK regulations No.35/POJK.05/2018 where finance companies, in this case RIF, are required to have equity of at least IDR100 billion as of December 31, 2019.
CHALLENGES FACED IN 2019 AND COMPARISON BETWEEN TARGET AND ACHIEVEMENT
Throughout 2019, the Bank went through various challenges in the banking industry, including global and national economic conditions that are not yet fully conducive as well as the challenges of asset quality decline. The pressure of non-performing loans originating from a decline in loan quality in several economic sectors resulted in the formation of impairment expenses.
Compared to the individual Bank Business Plan, the performance achievement in 2019 was quite good with total assets achievement at 91.10% of the target, profit after tax reached 45.75% of the target and total Minimum Capital Requirement Liability (“KPMM”) reached 109.91% of the target.
As a Bank with a vision of “Becoming the most reliable bank in Indonesia for local and Japanese companies by providing the best quality financial services”, receiving input from business partners and customers is very important and the Bank will commit to any improvement recommendations for improving the quality of service to customers.
In 2019, the Bank made various efforts to realize strategic steps to support the achievement of the Bank’s business performance, including:
Implementing funding to suppliers (supply chain financing) by optimizing business relationships with existing customers by looking for opportunities to develop new business relationships with buyers and suppliers of existing customers.
Expanding the customer base by increasing customer contacts and effective marketing systems. In addition, we collaborated within the Resona Group network and new shareholders namely The Bank of Yokohama, Ltd. and Daido Life Insurance Company.
Optimizing the use of unused loan facilities.
Becoming a liaison between Customer to Customer (C to C) by facilitating them to build a new business alliance.
Increasing the amount of syndicated loans, especially in the infrastructure sector through arranger banks that have a good reputation (private banks, government and Multilateral Financial Institutions).
Increasing third party funds by: (i) making the Bank transaction banking for debtors to receive customers’ sales receivables payments through customer’s current accounts at the Bank as well as increasing the deposits portion minimum accordance to the portion of loan provision; and (ii) providing competitive interest rates to existing and new customers.
Maintaining the consistency of the Bank’s profit growth achievement.
Improving credit quality so as to reduce the loan impairment expense.
Changing the composition of shareholders.
Controlling dividend payments at a level that is reasonable and acceptable to shareholders.
Service Strategy to Customers
Improving internet banking features according to customer needs.
Improving quality of service systems at call centers such as automatic attendant systems.
Human Resources Strategy
Improving the quality of human resources.
Placing key successors in each division or work unit.
Improving the effectiveness of the Bank’s organizational structure.
Developing a reward system for employees who make the best contribution.
Non Performing Loan and Written Off Loan Settlement Strategy
Conducting loan restructuring.
Selling debtor collateral assets for the loan settlement process.
Information Technology Strategy
Carrying out updates, development and/or implementation of systems to improve the quality of service to customers and to comply with applicable regulations. Application PSAK 71 started parallel in the second semester in 2019.
Risk Management Strategy
Consistently improving the quality of earning assets by implementing a culture of risk awareness, including those related to internal control of credit risk by improving the credit analysis skills, credit ceiling mechanism, and conducting credit risk awareness training continuously to all employees, especially marketing, Credit Examination Division and Credit Division.
Consistently implementing a compliance culture including the implementation of Anti-Money Laundering-Combating Financing Terrorism (AML-CFT).
Business Development Strategy
Directing all account officers from the Business Development Division and dealers from Treasury Division to increase the number of customers and implementing an effective marketing system in the context of sustainable business growth.
Improving the function of branch offices as profit centers so that they can support the achievement of the Bank’s business plan.
Participating in supporting economic sectors that are a priority in Indonesian government policy.
Issuing new activity of Bancassurance referrals which are expected to increase the Bank’s fee based income.
Sustainable Financial Strategy
This is in order to increase the Bank’s resilience and competitiveness so that it is able to grow and develop in a sustainable manner as well as contribute to the national commitment to the problem of global warming. Implementation was carried out through developing the Bank’s internal capacity, organizational adjustment, risk management, governance, standard operational procedures and/or developing sustainable financial products/services.
Head Office Relocation Plan Strategy
Relocation of the Head Office to the new building in Jalan Sudirman is expected to assist in providing a better quality of service to customers. In 2019, the Bank contacted a selection of vendors able to renovate the new building.
In 2019, PT Bank Resona Perdania received 3 (three) awards, namely:
Indonesia Best Bank Award 2019 from Warta Ekonomi as the “SOUND” Predicated Bank in the BUKU 2 Category with Assets Between IDR10 - 20 Trillion. This award is a form of high appreciation to banks with an optimal performance that can positively impact the Bank’s soundness. The award was based on an assessment of the Risk Based Bank Rating (RBBR), which includes variables of risk profile, good corporate governance, capital and intermediary performance consisting of loan growth and growth of third party funds. The award ceremony took place at the Balai Kartini Ballroom, Jakarta and Mr. Iding Suherdi as Director of Bank Resona Perdania received the award. Through excellent cooperation between management and employees, Bank Resona Perdania will continue to strive to become a bank that is trusted, advanced, and developing with customers.
Bank Resona Perdania for the second successive year received the Tax Payers Award from the Directorate General of Tax Regional Office of the DGT Central Jakarta for its participation as a Big Tax Payer in 2018 at Madya Tax Service Office Central Jakarta.
Bank Resona Perdania received the 2019 Elite Quality Recognition Award for Extraordinary Achievement as the Best-in-Class MT 202 STP Rate 99.79% from J.P. Morgan Chase Bank, N. A. This proves the consistency of Bank Resona Perdania in implementing high quality and standardized money transfer management.
IMPLEMENTATION OF CORPORATE GOVERNANCE, INTEGRATED GOVERNANCE, AND INTEGRATED RISK MANAGEMENT
The Bank believes that the implementation of corporate governance is needed to promote sound and transparent banking practices in compliance with the prevailing laws and regulations. The Bank consistently implements all Good Governance principles. The Board of Commissioners, the Board of Directors, and all employees are committed to implementing good governance principles and the principle of prudence in its business activity. This is carried out as a key part in the “governance structure” that is supported by the availability and readiness of other infrastructures in implementing governance processes. All functions and duties in the implementation of corporate governance are grounded in the principle of morality and ethics as well as sound banking practices pursuant to the prevailing regulations for the generation of a governance outcome that meets the corporate governance principles.
In order to ensure the implementation of 5 (five) basic principles of Integrated Governance, known as TARIF (Transparency, Accountability, Responsibility, Independency, and Fairness), the Bank has conducted a self-assessment on the 13 (thirteen) evaluation factors of Integrated Governance, assessing the management quality of the Financial Conglomeration of Resona Bank Group including the Main Entity and the Members of Financial Conglomeration in the implementation of Good Corporate Governance. The assessment is done by evaluating the importance or materiality of an issue to the overall implementation of Corporate Governance in the Financial Conglomeration Resona Group, based on the scale, characteristics and complexity of its business.
The Financial Conglomeration Resona Bank Group has established adequate Integrated Governance structure and infrastructure in the implementation of Good Corporate Governance principles to generate the outcome desired by the stakeholders of the Financial Conglomeration of Resona Group.
The implementation of duties and responsibilities of the Board of Commissioners, the Board of Directors, the Bank’s Committees and Working Units, as well as the policies, systems, and procedures, and the management information system, along with the core duties and functions of each division of the Bank have been running well and effectively to generate the outcome desired by the stakeholders of the Financial Conglomeration of Resona Group.
It is reflected in the qualitative and quantitative Integrated Governance outcome, including sufficiently transparent financial and non-financial reports, compliance with the prevailing laws and regulations, customer protection, audit results, and the Bank’s maintained good performance.
In general, the Financial Conglomeration of Resona Bank Group is rated 2 (GOOD) in its application of the Integrated Governance principles.
As the Main Entity, the Bank has implemented an integrated risk management pursuant to POJK No.17/POJK.03/2014 and SEOJK No.14/SEOJK.03/2015 on the Implementation of Integrated Risk Management for Financial Conglomerations.
The Integrated Risk Management Committee has carried out its duties properly guided by the 4 (four) main principles prescribed by the FSA, including:
Risk Management Framework;
Risk Management Process; and
Internal Control System.
The Bank ranked 2nd in the category of Integrated Intra-Group Risk as of December 31, 2019.
CHANGES TO THE BOARD OF DIRECTORS COMPOSITION
In year 2019, there was no change in composition of the Board of Directors of Bank Resona Perdania.
WELCOMING YEAR 2020
Bank Indonesia projects that world economic growth in 2020 will decline to only 2.5%, due to restrained optimism about global economic recovery due to the outbreak of COVID-19 (Corona Virus Disease-2019). Meanwhile, Bank Indonesia also revised the forecast for Indonesia’s economic growth in 2020, which predicted will not be lower than 2.3% in 2020 with the exchange rate of the Rupiah against the US dollar likely to strengthen to around IDR15,000 per US dollar at the end of this year. Bank Indonesia predicts low inflation will continue and remain under control in 2020 within the target range of 3.0±1%. In year 2020, loan growth and TPF growth are also forecasted to decline respectively by only 8-10% and 6-8%.
Year 2020 will be an important year for the Bank, together with all shareholders, the Bank needs to prepare a business plan and clear strategic steps to attract additional investment to the Bank. The Bank aims to become the number 1 Japanese Bank in Indonesia in terms of Japanese Corporate Customer Base and Local Corporate Customer Base, that relates with Japanese customers and the supply of products and services.
For more than 61 years of operation in Indonesia, the Bank has a strong customer base. The Bank is very optimistic about the increasing customer base. An increase to the Bank’s customers is a realistic occurrence in the coming years as a positive impact of the new shareholders namely The Bank of Yokohama, Ltd. and Daido Life Insurance Company.
Considering the Bank’s achievements in 2019 and the targets set for 2020 in the Bank’s business plan for 2020-2022, there are several
strategies that will continue in 2020:
Maximizing the management and loan business growth of the portfolio by remaining oriented to the business development/growth from new customer base (both Japanese and local corporate customers). The Bank will further enhance contacts and visits to customers, as well as intensify supply and value chain analysis through the business community where customers or potential customers increase the new customer base.
Managing the growth of third party funds, both in terms of the number of depositors and portfolios optimally, and intensively collaborating with shareholders to maximize the Bank’s funding sources.
Diversifying the Bank’s revenue sources through developing a variety of products and services accompanied by improving the quality of service to customers.
Supervising the subsidiary company, PT Resona Indonesia Finance (RIF) through regular monthly meetings between the Board of Directors and the Board of Commissioners of the Bank with the Board of Directors and the Board of Commissioners of the subsidiary company.
Optimizing synergies with the Resona Group, The Bank of Yokohama, Ltd. and Daido Life Insurance Company as shareholders which will later broaden the customer base.
Conducting intensive communication with shareholders in order to increase the capital size.
In closing, on behalf of the Board Directors, I would like to convey my deepest gratitude to shareholders, the Board of Commissioners, and other stakeholders for the trust that has been given. I also convey my gratitude for the hard work, dedication and commitment of employees in providing the best efforts to support the achievement of the vision and mission of Bank Resona Perdania. I always believe, the trust and support gained will be a motivation for the Bank to produce a better performance going forward. The Bank will always be fully committed to achieving maximum results based on quality performance and good service.
I also express my sincere gratitude to OJK and BI for supervising and supporting Bank Resona Perdania and the banking industry throughout 2019.