IT was a Monday morning in downtown Jakarta and the start of another week for Datuk Khairussaleh Ramli, president director of PT Bank Internasional Indonesia Tbk (BII).
Khairussaleh, who was appointed the top executive at BII on January 2012 but started on the job in the middle of the year, walks in for the interview with StarBizWeek donning an all too familiar item of clothing.
Wearing a tie with the Maybank logo, complete with the bank's yellow trimming, he sits down to talk about how BII has progressed under the stewardship of Maybank.
The interview is being held at BII's new office in Senayan, in the entrance of which is a new designed branch that also sports the familiar colours of Maybank.
“I was shooting a video this morning to talk about our core values and I am trying to instill the tiger core value in BII,” says Khairussaleh.
Indonesia and BII are an important market and business for the Maybank group. It's classified as a home market for the group along with Malaysia and Singapore.
For Khairussaleh, instilling the values in BII that has been ingrained in Maybank is important. He feels the direction of BII, whose previous owner was Sorak Financial Holdings a company that was majority-controlled by Singapore's Temasek Holdings, under Maybank now is different.
Inculcating the values of Maybank within BII is an important step not only to improve the operations of the bank but also to send a message that Maybank is in it for the long term.
“It's a whole spectrum. It's trying to rally the people. We have a total of 15,000 full-time employees, including the subsidiaries BII Finance and WOM,” says Khairussaleh on what the message is.
“These employees are scattered across Indonesia. When I came in July, we started to review our strategies. I have gone through each of the 10 regions to communicate. But at the end of the day, there has to be a common rallying cry among our employees and tiger is one of them. It's about having teamwork, integrity, excellence, a relationship working together etc.”
“We need to realise we are not Maybank in terms of size and maturity. That will take a few years for us to be able to get the thinking like Maybank. We have to think of us being No. 9 and moving up instead of us being the No. 1 as the incumbent,” he says.
Maybank owns about 97% of BII, the ninth largest bank by assets in Indonesia. It's a market where the top four banks Bank Mandiri, Bank Central Asia, BNI and Bank Rakyat Indonesia have a large influence on the banking scene in the country.
The next six that round out the top 10 banks in the country are CIMB Niaga, Bank Danamon, Bank Permata, Panin Bank, Bank Tabungan Negara and BII.
“The banking business in Indonesia is divided into two categories. Commercial banks can do most of the things throughout the country and then there are regional banks. There are 121 commercial banks, and from that there is the top 15. And the top 10 manage 60%-70% of the assets, if not more,” explains Khairussaleh.
With loans to GDP in Indonesia now north of 30% compared with more than 100% in Malaysia, Khairussaleh feels the business in Indonesia is big enough.
And given the growth boom in Indonesia, and the prospects of future wealth creation in the republic, banks in Indonesia are booming.
BII, reported a 66% growth in pre-tax profit for the nine months to Sept 30, 2012.
Loans grew by 22% during that period and assets by 16%. Gross bad debts had declined to 2.08% and it has seen return on equity and return on assets by the bank grow.
Those lofty numbers indicate the ground swell that's taking shape in Jakarta and the rest of Indonesia. Businesses are growing and banks, like others in any such economy, are a proxy to the wealth being generated.
BII, which has 389 branches, aims for 400 by the end of this year. In 2012 alone, it plans to open 64 branches, more than one a week, and intends to have up to 500 branches throughout the country by 2015.
But what it is doing now under Maybank is to draw on the expertise the group has to aid in its development and in gaining market share in Indonesia.
Utilising Maybank's strengths
Khairussaleh says Maybank have started imputing its expertise and skills in the running of BII. From introducing a new risk management system to helping in account planning, those initiatives are designed to extract as much value from their franchise in Indonesia as possible.
“We are prepared to help in the process, infrastructure and even people. We have to keep reminding this to our staff here and create awareness to our culture. We are trying to have a similar culture and have put in place a programme where we will send people from here overseas so they can have a feel of how the other parts of Maybank and functioning and working,” he says.
Khairussaleh believes that BII is seeing better traction working with the client coverage of Maybank in KL and also Kim Eng in Indonesia, especially from the investment and wholesale banking perspective.
“We have now regular engagement to do account planning.
“Traditionally we have been just focused on lending but these clients may have a requirement for a bond issuance or maybe an IPO. We started getting traction working with the guys in KL because they have the product and expertise. We have the client base and Kim Eng will have the distribution network. This is how we are trying to tap the customer base,” says Khairussaleh.
All of these are done to see the profitability of BII improve and also its contribution to Maybank which now stands at 7% of profit.
“It's important. I feel that given the growth prospects, Maybank will be open to injecting more capital for growth. Now our contribution is only 7% of profit. Our intention is that will be double digit in the next few years given that the growth here is faster than the overall growth of Maybank,” he says,
As it stands, BII is ranked second behind Singapore with 14% in terms of profit contribution to the Maybank group.
But given the boom in Indonesia and the steps being taken to improve the operations and business of BII, it should be a matter of time before Indonesia climbs up the ladder.
“That's something I have always told our people. I tell my people that if we can be larger than Singapore, we can demand for more from the group.
One thing that's against us is we always measure our profit in ringgit. Singapore's currency has strengthened and the rupiah had depreciated by 9% this year alone.
“What we tell Maybank is always benchmark at the same rate,” he says. Khairussaleh predicts that in three years, BII should account for probably 13% to 15% of Maybank's profits.
BII wants to gain share against the six other banks in what it classifies as the league it operates in. Doing so will require new strategies and markets to tap.
Apart from leveraging of the strengths and clients of the Maybank group, BII has identified micro finance as a core business in the future along with growing Islamic finance. It also wants to de-emphasise on the business of financing used motorcycles undertaken under its subsidiary WOM.
“We have a return on equity (ROE) target of 17% by 2015. Hopefully by then our ROE will be same as the Maybank group and maybe higher. Our ROE in the last 5 years had been in single digit. Last year it was 9% and this year it has improved (to 16.2%),” he says.
Khairussaleh says that the current return on investment for Maybank, after the write-down of its investments in BII to north of RM6bil, is close to 6%. “The next three years I think it will go into double digit.”
“The ROE is already accretive from the cost of equity perspective. The cost of equity for us in Indonesia is about 13%. Our ROE now is about 14.8% to 14.9%.”
Such high growth will mean that BII will require more capital for future growth. It wants to grow its current account savings account segment and also has started a pilot programme to double productivity of its branches. Khairussaleh says the roll out of that productivity enhancing programme at all branches should be done by the end of next year.
“When I came in July, we put a transformation programme. We tried to see what we need to do differently and what are our burning issues,” he says.
This transformation programme is anchored on three aspects. The first is continuing to grow profitably its business; the second is building capability for sustainability and the third is on developing talent.
“That's from the part of the transformation programme and that is continuing. We have 28 initiatives we are implementing around these three pillars,” he says, adding that BII wants to also grow its syariah business.
“We are now only number 14th as far as assets are concerned. Our syariah assets is only less than 1% of total assets. We want to build the syariah components as a product provider to our business people and grow the assets over time,” he says.
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