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ublicly listed lender Bank Mandiri has gained approval from the Financial Services Authority (OJK) to begin the operations of its new automotive financing arm, Mandiri Utama Finance (MUF).

The OJK issued the approval on July 10, enabling the new subsidiary to commence business as early as September, according to Mandiri consumer banking director Hery Gunardi.

'€œWe need some time to do internal consolidation, including linking the bank'€™s system to that of the new company. So September will be the right time to kick off the business,'€ he said on Tuesday.

MUF is a joint venture created by Mandiri and automotive distribution companies ASCO Automotive and Tunas Group. The state bank holds a majority stake of 51 percent, while ASCO and Tunas hold 37 percent and 12 percent, respectively.

MUF became the latest addition to Mandiri'€™s list of subsidiaries following its establishment in January.

As of March, the list comprised 10 subsidiaries, including sharia lender Bank Syariah Mandiri, securities firm Mandiri Sekuritas and life insurer AXA Mandiri Financial Services.

Prior to creating MUF, Mandiri was already running an automotive financing firm, Mandiri Tunas Finance (MTF), which is a joint venture between Mandiri and Tunas Group.

Hery said that MUF and MTF would complement each other'€™s businesses, even though the two targeted similar market sectors.

At present, MTF provides financing for the purchase of cars, company fleets, heavy equipment and motorcycles; new and used. However, such motorcycle financing is currently only offered in Lampung and its surrounding areas.

MUF, meanwhile, will focus on new and used motorcycle and car financing. '€œTo avoid overlapping, we will separate their geographical business coverage,'€ Hery said.

Mandiri president director Budi Gunadi Sadikin said he was optimistic that MUF would be able to post positive results despite the recent sharp decline in automotive sales.

Latest data from the Association of Indonesian Automotive Manufacturers (Gaikindo) and the Indonesian Motorcycle Industry Association (AISI) show that domestic sales remained weak during the first six months of the year.

By June, car sales amounted to 525,458 units, 18.2 percent lower compared to the same period in 2014, and motorcycle sales stood at 3.17 million units, 24.5 percent lower than last year.

Budi claimed that the new entity could leverage the bank'€™s customer base, numerous branch offices and strong funding pool to its advantage.

'€œThat will distinguish the company from other automotive financing firms and help grow the business. It will have to sign partnerships with various automotive dealers to grab new customers beyond Mandiri'€™s existing clients as well,'€ he said, adding that it expected MUF'€™s revenue contribution to Mandiri would rise in the next two to three years.

Contacted separately, MUF president director Stanley Setia Atmadja '€” who co-founded major automotive financing firm Adira Dinamika Multi Finance '€” said it planned on opening between five and eight branch offices in the second half of the year.

'€œThey will mostly be located in major cities, such as Jakarta, Bandung and Surabaya. We are in no hurry because the situation is not wholly conducive yet,'€ he said during a telephone interview.