Mandiri earmarks Rp 2t for subsidiaries

BUKIT TINGGI. State-owned lender PT Bank Mandiri plans to inject Rp 2 trillion (US$155.09 million) in capital into its subsidiaries next year as part of its efforts to increase their contribution to its net profits.

Bank Mandiri finance and strategy director Pahala Mansury said the capital injection would help the bank’s subsidiaries boost their contribution to Mandiri’s profits to around 20-25 percent by 2020.

As of September, the contribution of Bank Mandiri’s five subsidiaries — Bank Syariah Mandiri, AXA Mandiri Financial Services, Mandiri Sekuritas, Mandiri Tunas Finance and Bank Sinar Harapan Bali — to the lender’s net profits stood at 11 percent, or Rp 1.6 trillion of the total Rp 14.5 trillion.

Pahala was convinced the target could be achieved in 2020 as the lender had seen a significant growth in contributions in the last five years.

“Five years ago, our subsidiaries’ contribution to net profits only stood at around 6-7 percent. So, the portion has doubled now to 11 percent. It reached 13 percent previously and then declined to 11 percent due to economic challenges,” he said.

The subsidiaries are expected to post around Rp 1.9 trillion-Rp 2 trillion to Mandiri’s total net profits by the end of this year, slightly decreasing from Rp 2.04 trillion at the end of last year, Pahala said.

According to Pahala, increasing the contribution would not be easy as it needed to create a special strategy to reach the long-term goal.

“Alternative channel and business integration through cross-selling between subsidiaries will be effective,” he said.

Pahala said that as of now, Bank Mandiri had 15 million customers that could be targeted by each subsidiary based on their needs such as insurance, automotive financing or other products.

The low penetration of insurance in Indonesia was the best reason for Mandiri’s life insurance subsidiary, AXA Mandiri Financial Services, to target the lender’s customers as the market grew, Pahala said.

Indonesia’s life insurance premium revenue is predicted to grow 6.3 percent between 2014 and 2024, while general insurance will increase by 8.4 percent, according to a 2014 Swiss Re’s survey he mentioned.

Pahala added that a lot of Bank Mandiri’s customers chose to receive loans from automotive financing companies other than Mandiri Tunas Finance, its own subsidiary.

“For Bank Syariah Mandiri, we will allocate a capital injection of around Rp 300 billion-Rp 500 billion each year if it plans to grow its financing by at least 20 percent,” he said.

Aside of the five subsidiaries, Bank Mandiri expects to witness the growth of three other new ones — general insurance firm PT Mandiri AXA General Insurance (MAGI), a still-unnamed joint-venture bank established with two state-owned firms, as well as Mandiri Utama Finance, a joint-venture automotive financing company.

Mandiri Utama Finance is Bank Mandiri’s newest inorganic strategy, with two local automotive distribution companies, ASCO Automotive and Tunas Group, tapping growing motorcycle demand and complimenting Mandiri Tunas Finance’s main business in car and other vehicle financing. (Grace D. Amianti)