20
2007 Annual Report PT Bank Mandiri Tbk.
flexible in pursuit of business opportunities and in anticipating the operational impact
of these and other external factors. National Banks must also focus on consolidation
strategies in line with the implementation of the Indonesian Banking Architecture API in
order to thrive in an increasingly competitive environment.
While the sub-prime mortgage crisis originating in US has had no direct impact
on our national economy, it should be seen as an opportunity to learn and early warning
for the need to manage our domestic portfolios properly and prudentially. Bank
Mandiri’s response, therefore, will be to adopt stricter standards and strengthen our
risk management systems, particularly in loan portfolio guidelines, risk analysis and
mitigation in order to anticipate increased market risk.
COMPLETING OUR CONSOLIDATION PHASE
After experiencing serious difficulties in 2005 and then commencing our consolidation
phase in 2006, Bank Mandiri has just concluded a defining year in our transformation process.
2007 saw the completion of our consolidation activities, as we achieved a number of major
financial milestones, most notably the reduction in our Net NPLs to below 5 as
well as significant gains several measures of profitability. All of the employees of the Bank
have exhibited praiseworthy commitment, cooperation and diligence on behalf of our
stakeholders, applying their best efforts to achieving the Bank’s Back on Track objectives.
Following are the achievements in the back on track phase:
1. Retaining Our Position as the Market Leader Among National Banks
Bank Mandiri’s business growth has accelerated even as we have been
completing our internal consolidation. Our low cost funds current and savings
accounts grew by Rp43.3 trillion during 2007 to reach Rp152.3 trillion at year- end,
driving growth in total deposits of Rp41.6 trillion, from Rp205.7 trillion at te end of
2006 to Rp247.4 trillion by the end of 2007. Our total assets exceeded Rp300 trillion for
the first time, growing by Rp51.6 trillion from Rp267.5 trillion to Rp319.1 trillion.
This asset growth resulted mainly from loan growth of Rp20.8 trillion, as loan balances
rose from Rp117.7 trillion to Rp138.5 trillion. These achievements have clearly
demonstrated the strong position and capability of Bank Mandiri as a leading
financial institution and transaction bank, acknowledged by an increasingly
wide range of customers. In light of this momentum, Bank Mandiri is well prepared
to face increasing domestic competition that is being exacerbated by the escalating
presence of foreign banks. Bank Mandiri’s current position as the
industry leader in terms of assets, loans and deposits remains unchallenged.
This strong position has recently been complemented by the achievement of the
1st rank in the annual survey of Banking Service Excellence conducted by Marketing
Research Indonesia MRI. This attainment has seen the fruition of several years of
focused and sustained effort in improving service quality throughout our branch
network, with Bank Mandiri steadily moving up the ranks from 11th in 2004, to 3rd in
2005, 2nd in 2006 and finally culminating in 1st place in 2007.
2. Net NPL Ratio Declining to Below 2
The resolution of the Bank’s sizeable stock of non-performing loans was an early and
continuing initiative in our consolidation process. By the first quarter of 2007,
Bank Mandiri ‘s NPL ratio had declined precipitously to 4.7, 9 months earlier
than our initial schedule. For the end of 2007, the Net NPL ratio had fallen even
further, to 1.51, while the Gross NPL ratio was reported at 7.2, compared to our
budget and guidance of 5 Net NPLs and 10 Gross NPLs. This progress was partly
due to collections from NPLs of Rp1.29 trillion and upgrades of to performing
loans amounting to Rp2.57 trillion. The Bank has not yet seen any benefits
in collections arising from providing principle forgiveness to borrowers due to
obstacles in implementation related to still- interpretations of the relevant legislation
and regulation.
3. Profitability increased 80
