PT Bank Mandiri, Indonesiaâ€™s largest bank by assets, will tackle rising bad loans as its top priority this year while setting a longer-term target to expand business abroad, said new Chief Executive Officer Kartika Wirjoatmodjo.
Non-performing loans will peak at around 3.5 percent of total credit this year, up from last yearâ€™s 2.5 percent, Wirjoatmodjo said in an interview at the bankâ€™s headquarters in Jakarta last week. Bad debts are still building up from the commercial sector while those from commodities are already accounted for, he said.
Wirjoatmodjo isnâ€™t alone in trying to rein in soured debts, which threaten to curtail profits of lenders from China to Southeast Asia amid a commodity bust and slowing economic growth. The new CEO also expects his state-owned bank will play a bigger part in financing local infrastructure projects like ports and toll roads as the government spurs an economy thatâ€™s rebounding from the weakest expansion since 2009.
â€œWe are still seeing the buildup of new NPLsâ€ even as the economy shows promising signs, said Wirjoatmodjo, who was the bankâ€™s top finance official before his promotion last week. He projects the bad-debt ratio will end the year below 3 percent. â€œWe hope that by 2017, the trend will revert to a more positive one. Thatâ€™s our first priority.â€
Mandiri shares gained 0.7 percent as of the trading break in Jakarta on Wednesday. The stock rose 11 percent this year, more than the Jakarta Stock Exchange Finance Indexâ€™s 1.8 percent gain. The lenderâ€™s net income is expected to climb for an 11th straight year to 21.4 trillion rupiah ($1.6 billion) in 2016, according to the median estimate of analysts surveyed by Bloomberg.
Mandiri is seeking approval from regulators in Singapore and Malaysia to expand in the two neighboring countries, Wirjoatmodjo said. In Singapore, the bank wants to obtain a license in capital markets including bonds as well as boost offshore deposits from Indonesians living in the city-state and explore opportunities in private banking, he said.
In Malaysia, itâ€™s looking to open between 10 and 15 branches initially, focusing on remittances for Indonesians working there, the CEO said. Vietnam and the Philippines are also among markets that the bank seeks to penetrate, he added. The lender is open to acquisitions at home and abroad and sees the next three years as â€œgood timingâ€ for purchases, according to Wirjoatmodjo.
Opportunities will come as owners of some banks seek to unload their holdings because of stricter capital requirements, he said. While Indonesia is the largest economy and most populated country in Southeast Asia, Mandiri is only the 11th biggest lender in the region.
, with about $66 billion in assets, according to data compiled by Bloomberg. Larger Singaporean and Malaysian banks have been expanding aggressively, including through acquisitions.
Wirjoatmodjo said he hopes that Mandiriâ€™s growing presence overseas will make it the â€œflagship bankâ€ for Indonesians abroad.
Wirjoatmodjo is also seeking to diversify the bankâ€™s funding base from short-term and local-currency financing. The shift is crucial for Mandiri to finance infrastructure projects, which are usually capital intensive and take years to complete, he said.
The bank aims to raise as much as $1 billion this year either overseas in dollars or by selling rupiah bonds at home, the CEO said.
Mandiri is boosting its ability to repackage financing for infrastructure projects such as ports and toll roads once they are completed and are generating cash flow, he said.