Dear Respected Shareholders and Stakeholders,
On behalf of the Board of Directors of Bank Resona Perdania (“the Bank”), please allow me to present the Annual Report of Bank Resona Perdania for the 2023 fiscal year as our commitment to the Shareholders. In 2023, the Bank designated it as a “Reposition Year,” focusing on highlighting the Bank’s unique value and establishing a strong reposition in the niche market. The capital injection conducted in 2022 contributed to an increased capital capacity in 2023, so that the Bank is more capable to develop business capacity and larger market share including income diversification of the largest portion of current interest income.
2023 is a year full of challenges for banking in general and the Bank in particular with conditions The Board of Directors have made optimal efforts in running business and managing risks. The Bank recorded losses related to prudent strategic policies by recording high loan impairment expense. This action was taken to mitigate credit risk/secure future risk, so that it is expected that in the following years the Bank’s financial performance will improve significantly.
Macroeconomy Overview and Industry Segments
As quoted from the December 2023 Monetary Policy Review released by Bank Indonesia, the global economy is experiencing a deceleration, although financial market uncertainties are gradually diminishing. The forecast for global economic growth in 2023 was 3.0%, with a further slowdown to 2.8% anticipated in 2024. The economic performance of the United States (US) and India in 2023 exceeded initial estimates, supported by household consumption and government expansion. In contrast, China’s economy faced challenges, in line with constrained growth in both household consumption and investment.
On the other hand, the Indonesian economy continues to exhibit robust growth, driven by strong domestic demand. The sustained expansion of household consumption and investment aligns with increased public confidence and the ongoing completion of National Strategic Projects (PSN). Bank Indonesia projected economic growth in the range of 4.5-5.3% for 2023. Bank Indonesia also stated the banking liquidity still adequate to strengthen the banking lending capacity. As of December 2023, the Liquid Assets to Third Party Funds (AL/DPK) ratio remained notably high at 28.73%, supported by accommodative macroprudential policies, including the implementation of the Macroprudential Liquidity Incentive Policy (KLM).
Banking resilience remains well maintained, as reflected in strong capital and low credit risk. Capital Adequacy Ratio/CAR is recorded at a high level of 27.86% in November 2023. Moreover, credit risk remains controlled, reflected by Low Non-Performing Loan (NPL) ratio of 2.19% (Gross) and 0.75% (Net) in December 2023. Bank Indonesia’s stresstest results showed banking resilience remain strong in the face of global pressure.
Strategy Implementation and Strategic Policy
Despite the lingering uncertainty surrounding global economic conditions and the ongoing election preparation process in 2023, Indonesia’s economic growth remained positive. According to Statistics Indonesia (BPS) data, the country experienced robust economic growth of 5.05% in year 2023, and based on Bank Indonesia’s projections, economic growth for the entire year was in the range of 4.5-5.3%. Notably, most business sectors continued to exhibit positive growth in the fourth quarter of 2023, with significant contributions coming from the manufacturing industry, wholesale and retail trading, and construction.
In 2023, the Board of Directors focused on improving and strengthening the internal of the organization, particularly the credit system and Bank business, processes and procedures simplification to achieve efficiency and effectiveness, namely through improving/simplifying credit processes, improving the quality of internet banking, and increasing Bank’s information security. In year 2023,the Bank has taken prudent strategic policy to book high loan impairment expense, that cause Bank booked loss, but this action was taken as credit risk mitigation/secure future risk so that it is expected in the following next year will be more sound and better financial performance.
Bank implemented a strategy of not being too expansive, but focus more on improving loan quality through prudent loan disbursement, strict monitoring low quality loan and non performing loan. In the year of 2023, the Bank has a target market for lending, namely corporate segment for both Japanese corporations and local corporations. The Bank still maintains the model business with a portion of the loan portfolio to both segments in a balanced composition. Loan disbursement was mainly made to the manufacturing sector and wholesales trading sector. Bank also implemented diversification of loan disbursement to other industrial sectors.
From the funding side, the Bank has a third party fund market target, namely Japanese corporations and local corporations. Bank optimize existing funding by minimizing the amount of idle funds and reducing the high cost funding. Earning strategy was done by increasing fee based income and foreign exchange income, other than interest income which is Bank’s main income.
Kaizen program which is continuous improvement in 4 (four) main aspects, namely: products, people, processes and procedures continue to be implemented consistently every year. In 2023, one of the Bank’s biggest initiative is improving the credit process/simplifying the credit process, both including reviews internal credit policy, simplification and improvement internal approval processes and administrative processes such as the frequency of customer ratings.
In order to fulfill the Republic Law Indonesia No. 27 of 2022 concerning Data Protection Personal, namely processing/ sharing customer personal data with Bank affiliates must obtain prior approval from customers, in 2023 the Bank has started asking customer approval through a consent letter in accordance with the law. By signing consent letter, customers will be protected from use unauthorized customer data. The implementation of sustainable finance is carried out by priority scale on alignment between social, environment, and governance risks in business activities, as well as continuing to develop the Bank’s internal capacity through continued development training to increase capacity and capability of human resources.
In 2023, the Bank relocated its head office to a new location in Jakarta Mori Tower on Jl. Jend. Sudirman Kav. 40-41,Central Jakarta. This relocation is anticipated to enable the Bank to deliver improved service quality to its customers.
Comparison between Target and Achievement
In 2023, the Bank did not revise its business plan, despite the mid-year achievements falling significantly below the set targets. Recognizing the formidable challenge posed by the 2023-2025 Bank Business Plan, the Bank remains committed to putting forth its best efforts to attain the established goals. On the other hand, the Bank creates an Internal Plan that will be used as a realistic picture of the Bank’s achievements during the year 2023, and will be reviewed periodically with remains primarily based on achieving the Business Plan Banks 2023-2025.
A comparative analysis between planned and realized outcomes in 2023 is detailed below:
-Gross Profit
In 2023, the Bank booked a gross profit of IDR746,425 million or 95.24% of the planned gross profit of IDR783,737 million. When compared with 2022, gross profit has increased by 17.55% from 2022 (2022 was recorded at IDR635,003 million).
-Net profit
In 2023, the Bank booked loss after tax amounting to IDR243,496 million or far below from the plan with a profit target of IDR58,313 million and also experienced a significantdecrease in comparison with year 2022, that was booked profit after tax amounted IDR40.32 billion. This loss is due to the higher loan loss impairment expense amounting to IDR689,968 million compared to the plan of IDR268,324 million. The formation of impairment expense is caused by the Bank carries out mapping and analysis of all debtors and estimates all possibilities related to the debtor’s financial performance.
- Net Loan
In 2023, the Bank booked net loan amounting to IDR9,901,545 million or 77.28% compared with the plan and experienced a decrease of 12.21% if compared to 2022. The unachieved of loan was due to the Bank carried out risk mitigation more prudent in disbursing loan. Apart from that, the Bank also needs to review several business strategies in order to implement the strategies can be more effective and allign with the target. Determination a more focused strategy will be able to provide positive contribution to achieving Bank’s business performance.
-Total Assets and Liabilities
In 2023, total assets was reached at IDR16,410,225 million or 93.99% of the plan and experienced a decrease of 7.01% in comparison by 2022. Lower achievement, mainly came from loan asset achievement that was below from the plan. Total liability was achieved amounting to IDR11,412,711 million or 93.81% of the plan and experienced a decrease of 7.92% in comparison by 2022. Lower achievement is mainly derived from the achievement of third party funds and acceptance liability that were lower than the plan.
-Total Equity
In 2023, the Bank booked total equity amounting to IDR4,997,514 million or 94.40% of the plan and experienced a decrease of 4.85% when compared with year 2022. The booking of losses caused the achievement of total equity was below from the plan.
Comparison between targets and achievements is one of the aspect that was considered in preparing business targets and future strategies. Supported by its capacity and prospects, the Bank is optimistic to be able to achieve sustainable excellence performance in the future.
Bank Problems and Solutions
The economic climate, both on a macro and micro level, displayed dynamic movements throughout 2023, this creates its own challenges in line with the impact of corporate performance across various business segments, including the banking sector.
The biggest challenges and obstacles faced by the banking sector in this VUCA (Volatility, Uncertainty, Complexity,and Ambiguity) era require a significant transformation in financial services, emphasizing the need for digitalization. In 2023, the Bank improved its internet banking quality by introducing the BI-FAST transfer service as well as reconstructing the credit organization structure to make it more “agile” and support business growth.
Four key aspects are currently experiencing rapid evolution: data, business models, regulations, and technology. In the realm of data, banks are transitioning from mere fund storage spaces to comprehensive data hubs, serving customers holistically. Data is not only instrumental for regulatory compliance but also crucial in serving customers effectively. Business models and technology advancements have led to the emergence of new competitors, such as fintech. However, in the future, customers are expected to have unrestricted choices in selecting a financial service provider that aligns with their preferences. Another aspect is regulation, the banking industry is closely monitored, the regulation is predicted to be based on the product in which the institution operates. Lastly, the technological advancement is expected to be a game changer, with the presence of artificial intelligence (AI), blockchain and 5G internet. In the future, collaborative efforts between banks and various entities, including fintech companies, can be facilitated through open APIs, promoting synergy and innovation.
Overview of Business Outlook
The government has formulated an expansive, targeted, and measurable draft of the 2024 State Revenue and Expenditure Budget (RAPBN). The fiscal policy for 2024 is designed to expedite the accomplishment of national development targets and priorities. The ongoing economic transformation agenda, encompassing the downstreaming of both mining and food products from natural resources, will be maintained. Additionally, there will be continued emphasis on safeguarding and enhancing the welfare of the community, particularly those with lower incomes, to support essential structural improvements.
Despite global challenges, Indonesia’s economic resilience and recovery are strengthening. The economic recovery has successfully elevated Indonesia back into the category of Upper Middle Income Countries in 2023. Over the past seven quarters since the end of 2021, economic growth has consistently surpassed 5.0%. The first semester of 2023 witnessed a recorded national economic growth of 5.1%. Furthermore, the economic recovery has been evenly distributed throughout Indonesia.
Meanwhile, according to the World Economic Outlook from the International Monetary Fund (IMF) in July 2023, global economic growth in 2024 is anticipated to reach 3.0%. Concurrently, economic growth in developing countries across Asia is forecasted to expand by 5.0% in 2024. Considering both economic global and domestic conditions, the Government projects that the Indonesian economy will experience a growth rate of 5.2% in 2024. Despite the increasing momentum in national economic recovery, the Government remains cautious about the potential risk of a global economic slowdown, attributed to various factors such as geopolitical shifts, the climate crisis, and the rapid advancement of disruptive digitalization.
The Bank is unwavering in its commitment to delivering optimal performance while considering future trends. Conversely, the business model for 2024 will remain unchanged compared to previous years, with a focus on loan distribution in the manufacturing, wholesales trading, as well as finance and insurance sectors. In this context, the Bank is implementing the following strategic policies:
a. Strengthening business strategy
The Bank will execute a plan to attract new debtors employing 5 (five) strategies, namely concentrating on Large Commercial & Corporate, Syndicated Loan, SME (Small and Medium Enterprise), Referrals from Customers, and Collaboration with shareholders. Additionally, the optimization of existing customers will be pursued through two strategies, namely Facility Increment and The Utilization of Unused Facilities.
b. Launching New Products/Activities
• Supply chain financing;
• Bancassurance Business Model Reference Not Related to Bank Products;
• Interest Rate Swaps;
• DPLK’s (Financial Institution Pension Fund) reference.
Bank’s direction and policies in 2024:
a. Continuing the alignment of the Bank’s direction, policies and strategies with the Corporate Plan for the 5 (five) year period (2022-2026) that has been previously planned;
b. Continuing to implement the ‘KAIZEN’ or Continuous Improvement philosophy in 4 (four) main aspects, namely: Product, People, Process and Procedure;
c. Continuing the plan that have not been achieved in 2023 as the second year of the 5 (five) year Corporate Plan stage with the theme ‘Reposition Year’, especially in growing Business Capacity and Larger Customer Coverage, considering that there has been a decline in the Bank’s outstanding loan, which constitute the Bank’s main business;
d. Continuing the third year of the 5 (five) year Corporate Plan stage with the theme ‘Reinforcement Year’, which focuses on the following efforts:
- Strengthening Sustainability and Profound Customer Base; it is expected that with the Bank’s steps and efforts to form a ‘Unique Value Proposition’ through developing a loan portfolio to Local Corporations that have business relations with Japan, the Bank will be able to strengthen business sustainability and expand market share;
- Deepening products and transactions; deepening and diversifying banking products, services and transactions with the objective of obtaining a steady income.
e. Committed to achieving predetermined targets with an emphasis on maintaining asset quality, through:
- Conducting loan disbursement with the principle of prudence;
- Maintaining the quality of the loan portfolio with a prudent approach to credit risk management;
- Selecting the economic sectors in accordance with established industry boundaries and taking into account the Industry Outlook analysis for 2024;
- Maximizing the rate of return for non-performing loans;
- Improving credit quality by reviewing processes and procedures related to credit activities;
- Monitoring the implementation of the Legal Lending Limit (LLL) and credit ceilling.
f. Continuing the Bank’s efforts to meet the Macroprudential Inclusive Financing Ratio (RPIM), is pursued through:
- Distributing loan to micro, small, and medium enterprises (MSMEs) and conducted in line with the Bank’s capabilities as a corporate bank;
- Implementing sustainable finance with a priority scale emphasizing the alignment of social, environmental, and governance risks in business activities. The Bank will persist in increasing internal capacity through training and human resource development as well as managing the Loan Categorized Sustainable Business (KKUB) ratio and the green taxonomy loan ratio in relation to the total loan.
g. Strengthening the human resources aspect, which is achieved both by conducting training and by reorganizing the Business Development Division and other work units;
h. Maintaining and improving the composite rating of the Risk Based Bank Rating (RBBR) at a minimum of Rank 2 or Sound, which includes the risk profile composite rating and the rating of the implementation of Good Governance both individually and in consolidation with the subsidiary, PT Resona Indonesia Finance (PT RIF);
i. Increasing the amount of Bank capital through:
- Achieving an increase in Bank earnings and profits;
- Improving credit quality thereby reducing the loan impairment expense.
j. Increasing loan disbursement, which is estimated to experience a growth of 7.00% when compared to the projections for the end of 2023, escalating from IDR10.8 trillion to IDR11.5 trillion;
k. Aligning funding originating from Third Party Funds (TPF) with total loan by the end of 2024, aiming for an estimated 2.21% growth in TPF from IDR10.1 trillion to IDR10.4 trillion;
l. Maintaining and increasing the risk awareness that has been built so that the Bank’s Non-Performing Loan (NPL) Gross and NPL Net ratios are still in line with the Bank’s Risk Appetite and Risk Tolerance, with the Bank also estimating an impairment expense of IDR 87.9billion;
m. Booking operational profit obtained from the ability to increase loan interest income accompanied by maximum management of interest costs, company expense and allocation of impairment expenses;
n. Continuing the development and/or launching new products and/or activities as an effort to diversify the business and services provided by the Bank;
o. Continuously updating and/or developing Information Technology and Systems to improve the quality of service to customers and comply with applicable regulations;
p. Continuing synergy and cooperation with shareholders, particularly Resona Bank, Ltd., Japan, The Bank of Yokohama, Ltd., and Daido Life Insurance Company to develop the existing business potential, which is also reflected in one of the collaborative business with shareholders.
q. Committed to participating in supporting economic sectors that are the priorities in Indonesian Government policy;
r. Ensuring the direction of Management policies, plans and strategies for improvement that have been determined can encourage the Bank’s business growth and in line with the Bank’s Vision and Mission.
Implementation of Bank Governance
The Bank continues to strengthen the implementation of the principles Bank Governance and maintaining Bank Governance rating at minimum rank 2 or (Good) with active supervision of all management, improving risk awareness culture and compliance culture, reducing operational risk events, as well as ensuring no audit findings that are repetitive from the Internal Audit Division, OJK and external auditors. Bank is also improving compliance function at PT Resona Indonesia Finance (RIF) as a subsidiary company by holding discussions periodically from various aspects.
Governance holds a pivotal role for the Bank, serving as a crucial foundation in promoting sustainable business growth. This is achieved by strengthening governance structures and mechanisms and adhering to statutory regulations and a code of conduct that generally apply to the banking industry. To optimize the outcomes of governance implementation, all key components of the Bank, including shareholders and subsidiary companies, collaborate synergistically, and play an active role with one common goal, which is protecting the rights of all stakeholders.
Assessment of Committees Under the Board of Directors
In conducting its management functions, the Board of Directors is assisted by 6 (six) committees, which are the Credit Policy Committee, Information Technology Steering Committee, Product Research and Development Committee, Credit Committee, Assets and Liabilities Committee, and Risk Management Committee. Throughout 2023, the Board of Directors has evaluated that all committees have effectively fulfilled their duties and responsibilities.
Changes in Composition and Members of Board of Directors
In 2023, there were changes to the members of the Board of Directors in accordance with the Unanimous Circular Resolution of The Shareholders of PT Bank Resona Perdania in lieu of Extraordinary General Meeting of Shareholders (EGMS), with the following chronology:
Thus, there are 7 (seven) members of the Board of Directors which include 1 (one) President Director, 1 (one) Deputy President Director, and 5 (five) Directors with the following members:
The Board of Directors is always committed to managing and developing the Bank by prioritizing the principles of good corporate governance for the interests of Shareholders and other Stakeholders.
Bank Organizational Structure in 2023
As of October 25, 2023, in order to strengthen the Bank’s credit system, there were changes to the organizational structure of credit as follows:
Bank Main Activities in 2023
Throughout 2023, the main activities of the Board of Directors encompassed overseeing the day-to-day operations of the Bank and leading the Company towards achieving its aims, objectives, and specified business activities as outlined in the Articles of Association. The Board of Directors is also responsible for managing the Bank’s business and realizing the Bank Business Plan that has been determined in 2023. In year 2023, the Bank launched new products/services, namely Bancassurance Reference Business Model collaboration with 3 (three) well-known insurance companies, namely PT Asuransi Tokio Marine Indonesia, PT Asuransi MSIG Indonesia, and PT Sompo Insurance Indonesia.
Information Technology Support Initiative
To support business and operational needs, the Bank is committed to continue developing information systems through automation systems and digitalizing various internal processes. This initiative aims to enhance efficiency and boost employee productivity. The Information Technology Development in 2023 was focused on several strategic directions, including:
1. Continuing business process efficiency, to speed up information processing, transactional processes, and save company resources, including the utilization of Robotic Process Automation (RPA) applications;
2. Improving business processes by implementing IT solutions in accordance with the plans outlined by each Business Unit;
3. Continuing the transfer of the Head Office’s IT infrastructure to Jakarta Mori Tower, Jl. Jend. Sudirman Kav. 40-41, Central Jakarta.
In the future, the Bank will continue conducting the efficiency concept with a focus on the largest portion of IT capital expenditure (CAPEX) to become IT operating expense (OPEX). The activity program to be undertaken includes:
- Cyber Security Data Privacy Protection: Improving cyber resilience by implementing Data Privacy Protection solutions;
- Cyber Security Extended Detection and Response (XDR): Improving cyber resilience with the implementation of Extended Detection and Response (XDR) solutions;
- Internet Banking Replacement – Phase 2: Replacing the existing internet banking system with a new system based on managed services. Phase 2 – in the stage of developing and implementing the solution;
- Finastra Fusion Trade Innovation (FBTI) Upgrade: Improved version of FBTI to align with SWIFT MX format.
Products and Services
Products and services offered to corporate customers include third-party funds, loans including MSME loans,treasury, trade finance, interbank payments, internet banking, and others. Details of the Bank’s products and services are presented in the Company Profile chapter of this Annual Report.
Interest Rates of Funding and Lending
Throughout 2023, the Bank applied the following average interest rates of funding and lending:
Employment Network and Office
The Bank’s Head Office is located in Jakarta. To reach a wider customer base, the Bank has 2 (two) branch offices, each located in Surabaya and Bandung as well as 4 (four) sub branch offices, located in Cikarang, Karawang, MM2100, and Deltamas. Throughout 2023, the Bank did not expand its network, business partners, or open new office.
Ownership of Board of Directors, Board of Commissioners, and Shareholders in Bank Business Group
Discussion regarding the ownership of the Board of Directors, Board of Commissioners and Shareholders in the Bank’s business group is presented in the Bank Profile and Corporate Governance chapter in this Annual Report.
Important Changes in Bank and Bank Business Groups in Current Year
Throughout 2023, there were no material changes in the Bank and the Bank’s business groups that had a significant impact on both financial and operational performance.
Future Important Events that are Likely to Occur
The Bank’s business development is intricately tied to the dynamics of the economy and its future trajectory will depend on the dynamics or events that occur in the current year. Materially, the Bank has not been able to convey important events that are likely to occur in the future.
Human Resources Development
As of the end of 2023, the Bank had 337 employees.
In 2023, the Bank was dedicated to enhancing HR capacity by offering employees opportunities for both technical and soft skills training. The Bank also boosts employee credibility through participation in certification programs, whether mandatory or voluntary. The total of training costs in 2023 was IDR3.47 billion.
On the other hand, the Bank continually adapts its remuneration system and policies for Bank management and employees in accordance with applicable regulations.This ongoing adjustment aims to increase motivation, enhance productivity, and serve as a form of recognition for services rendered, aligning with the Bank’s conditions, regulations, and market conditions. The Bank follows a performance-based remuneration system and policy to uphold fairness in its approach.
Appreciation
Finally, the Board of Directors expressed its gratitude to the Board of Commissioners for cooperation, advice and recommendations given. To all employees, the Board of Directors also express its appreciation for all dedication that has been given. Not to forget, on behalf of the Bank, The Board of Directors also expressed appreciation to all customers and work partners for the cooperation that has been established with goodwill and trust that has been given to the Bank. To Shareholders, the Board of Directors would like to thank you for the trust that have been givenand to Regulator for implemented policies and directions that has been given. Hopefully this spirit of togetherness become the foundation for the Bank to be able to grow in the future.