New focus: PT Bank CIMB Niaga president director Tigor M
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Publicly listed lender CIMB Niaga plans to focus more of its business on the consumer and small and medium enterprise (SME) segments next year in a bid to improve its performance and boost earnings growth.
CIMB Niaga president director Tigor M. Siahaan said in Jakarta Thursday that the new strategy was part of consolidation measures made by the bank to minimize non-performing loan risks in the future.
'This is a good time to reflect and evaluate on what we want and want not to do, so that we can be more focused. We want all loans to keep growing, but consumer and SMEs will grow faster next year,' Tigor said during a visit to The Jakarta Post.
Tigor, the bank's new president director since April, said corporate and commercial segments would remain CIMB Niaga's 'bread and butter' as they contributed Rp 58.09 trillion (US$4.18 billion) and Rp 35.54 trillion, respectively, to the bank's coffers. The respective figures equaled 32 and 20 percent of its total loans, according to its first half financial report.
Consumer loans and SME loans, including micro loans, reached a total of Rp 51.25 trillion and Rp 35.94 trillion as of June, accounting for 28 and 20 percent, respectively, of total loans in the period, the report shows.
Tigor said the bank decided to shift its focus toward consumer and SME loans next year based on the fact that both segments had large potential but had not yet been fully tapped in past years.
Tigor said he strongly believed that consumer finance had the ability to become a growth engine for revenues in the future alongside rapidly growing digital transactions in the country.
'As many as 92 percent of consumer banking transactions are conducted electronically or outside physical branches, and we believe that it will continue to rise in the future,' Tigor said.
As for micro and SME segments, Tigor said companies from both categories would always be 'the backbone of Indonesia's economy' as they constituted at least 95 percent of all the country's firms.
Tigor said the bank had high hopes for micro and SME firms to be upgraded into larger ones, adding that 'we expect that the move will help us balance out big companies as the risk will be heavy if one of them is pummeled [by negative effects in the economy].'
'We also have a good base in the SME segment as the former Lippo Bank, which was merged with former Bank Niaga to become CIMB Niaga, had a strong presence in that market,' Tigor said.
CIMB Niaga suffered from a 45.3 percent year-on-year (yoy) profit decline in 2014, as well as 92.4 percent yoy and 91 percent yoy drop in the first and second quarters, respectively, due to sharp increases in non-performing loans (NPL).
The bank is now struggling with its rising NPL, partly due to delays in the debt payments from its corporate buyers, especially mining companies, which are suffering financial difficulties because of a plunge in commodity prices.
The bank's consolidated gross NPL ratio rose to 3.9 percent at the end of 2014 from 2.23 percent in the previous year.
The NPL ratio surged further to 4.1 percent and 4.28 percent in the first and second quarter of this year, forcing the bank to allocate large amounts of funds for loan-loss provisions that in turn squeezed its net profits.
'Indonesia stands as the world's third biggest coal exporter, and our customers are getting hit badly. However, we have raised our loan-loss coverage ratio to 103 percent from 88 percent,' CIMB Niaga finance director Wan Razly said.
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