Friday, 7 July 2017

(The Star) Indonesia's Bank Mandiri to start operations in Malaysia by year-end

KUALA LUMPUR: Indonesia’s largest bank by asset size, PT Bank Mandiri Tbk, will start its banking operations in Malaysia by year-end, making it the first Indonesian bank to carry out full-fledged banking activities in the country.

The move would also pave the way for the lender to further penetrate the Asean market. Unlike other foreign banks operating in the country, Bank Mandiri will be accorded Qualified Asean Bank (QAB) status under the Asean Banking Integration Framework, and will have operational flexibility and be treated as a local bank here.

As a QAB, the bank would also be able to provide a broader range of products and services like other domestic banks operating in the country.

The bank’s president director and CEO Kartika Wirjoatmodjo said Bank Mandiri Bhd would open its first branch within the vicinity of the Kuala Lumpur City Centre, and was currently awaiting approval from Bank Negara to commence operations.

“We expect to start operations by year-end and before that, we need to build up our presence here in terms of people and management, the IT set-up, premises, etc. In terms of head count, we will start with 20 first, before increasing it at a later stage.

“In terms of capital requirement, we need RM300mil to start operations. We will initially set aside RM50mil and raise the amount in stages.

“Hopefully, by year-end or early next year, we will reach the capital requirement target,” he said at an informal briefing following a meeting with Bank Negara.

The move by Bank Mandiri to set up full banking operations in Malaysia is a result of a bilateral agreement signed last year allowing greater access to lenders from both countries to fully operate in the respective jurisdictions.

To recap, the Malaysian authorities issued commercial banking licences to five foreign banks, including Bank Mandiri, in 2009-2010 in line with the country’s liberalisation of the financial services sector.

Apart form Bank Mandiri, the other recipients were Sumitomo Mitsui Banking Corp of Japan, National Bank of Abu Dhabi, BNP Paribas SA, France, and Mizuho Corporate Bank.

Currently, Bank Mandiri, which is majority-owned by the Indonesian government, has a licence to operate remittance services in Malaysia to cater to the Indonesians working here. It has 13 offices for such services.

Kartika noted that it was timely for the bank to have a full-fledged banking licence here as there were many of its clients with significant operations in Malaysia like the Wilmar Group. Salim Group and Sinar Mas Group.

He added that the focus for Bank Mandiri’s operations in the country would be in corporate banking and later expanding to retail banking.

Meanwhile, Indonesia’s financial services authority, Otoritas Jasa Keuangan chairman Muliaman D Hadad said the setting up of a full-fledged bank was to facilitate the growing bilateral trade between Indonesia and Malaysia.

For example, the year-on-year value of bilateral trade between the two countries in the first quarter of this year (Q1’17) had increased by 33.08% to US$4.42bil from US$3.32bil in Q1’16.

This increase stems from the significant hike in export and import volumes. Indonesian exports to Malaysia reached US$2.14bil, while Indonesian imports from Malaysia reached US$2.28bil.

As for Bank Mandiri’s strategy for 2020, Kartika noted that the bank’s core business would still be focused on the Indonesian market, as it is a huge market and its profitability is also fast-growing.

As for regional expansion, he said the bank’s focus would mainly be on Indonesia, Malaysia and Singapore, while the Philippines and Myanmar were secondary markets. He added that for these five markets, Bank Mandiri has allocated US$1bil in investments.

As for total contribution from overseas markets to the bank’s revenue, he said it was still relatively small, about 10%.

Meanwhile, at a luncheon hosted by Bank Mandiri, Bank Negara governor Datuk Muhammad Ibrahim in his speech said that the operationalisation of the Asean Banking Integration Framework represented the dawn of a new era of banking relationship between Indonesia and Malaysia.

“As an Asean bank embodying the Asean spirit, and the largest bank in Indonesia, Bank Mandiri can bring much experience and leadership across the region.

Bank Mandiri’s current scope of activities covering trade financing, SME and micro banking products is highly relevant towards advancing the interests of both Malaysia and the broader Asean region.

“The entry of Bank Mandiri into Malaysia via the framework would also provide an opportunity to further enhance the regional integration in payment systems between Malaysia and Indonesia,” he noted.

The current collaboration between the ATM switches in Malaysia (MEPS) and Indonesia (ATM Bersama) to facilitate cross-border cash withdrawals can be enhanced to facilitate cross-border remittances leveraging on over 11,000 ATMs in Malaysia and 17,000 ATMs in Indonesia, Muhammad said.

This, he said, could be leveraged upon by both the Malaysian and Indonesian population including the diaspora groups to undertake safe and efficient cross-border remittances.

“Such collaboration can also be extended to facilitate retail payment card transactions via the domestic debit card schemes of both countries.

Eventually, I envision ATMs in Malaysia and Indonesia will be linked seamlessly. This will reduce cost, enhance safety and expanded outreach,” he said.