Bank Mandiri's Transformation

Bank Mandiri was established on 2 October 1998, as part of the bank restructuring program of the Government of Indonesia. In July 1999, four state-owned banks - Bank Bumi Daya, Bank Dagang Negara, Bank Exim and Bapindo - were amalgamated into Bank Mandiri. The history of these four banks can be traced back to over 140 years, and together they had contributed to thebeginning of the Indonesian banking sector.

Consolidation and Integration

Following the merger, Bank Mandiri immediately embarked on a comprehensive consolidation process - beginning with the closure of 194 overlapping branches and a reduction of redundant staff, bringing the combined workforce of 26,600 down to 17,620. A single brand - Bank Mandiri was rolled out throughout the national network and across all of advertising and promotional activities. One of Bank Mandiri's most significant early achievements was the complete overhaul of its technology platform. The Bank inherited a total of nine different core banking systems from its four legacy banks. After an initial investment to consolidate the systems around the strongest inherited platform, the Bank undertook a 3-year USD 200 million program to replace the core banking platform with one that was specifically geared towards retail banking. Today, Bank Mandiri's IT infrastructure provides straight through processing and a unified interface for our customers. In line with the bank's vision, we tapped into profitable business segments with growth potential so as to enable us to offer a comprehensive range of banking services. We chose to focus on key segments including corporate, commercial, micro, retail and consumer finance - with distinctive strategies for each business while leveraging on synergies across these different market segments. We emerged as a Domestic Multispecialist Bank in Indonesia, and embarked on specific initiatives that enable us to grow and achieve dominant market share of revenue in our focus segments. In addition, Bank Mandiri aims to be a Regional Champion Bank - a public-listed bank that would be measured by market capitalization and ranked high amongst other blue chip public-listed banks in South East Asia.

Tranformation Program - Stage 1 (2005 - 2009)

The ambitious goals that we set for ourselves over the years could only be achieved by transforming our organization to adapt to the changing dynamics of our market. In 2005, we committed to a 5-year transformation program that resulted in Bank Mandiri becoming a dominant Multispecialist Bank. We identified four key areas for transformation: culture, sales, alliances, and NPL controls. The Transformation Program was conducted in three phases :

Phase One (2006-2007)

Back on Track : During this phase, the focus was placed on restructuring and laying the foundation for Bank Mandiri's future growth

Phase Two (2008-2009)

Outperform the Market : During this period, the emphasis was on expanding the Bank's business to ensure significant growth in all segments and a level of profitability that exceeded the market average

Phase Three (2010)

Shaping the End Game : : During this phase, Bank Mandiri focused on becoming a Regional Champion Bank, through the consolidation of financial services businesses and emphasis on strategic non-organic growth opportunities. This included the strengthening of the performance of subsidiaries and the acquisition of a bank or other financial company that could create added-value to Bank Mandiri

The changes brought about by the Transformation Program between 2005 and 2010 have resulted in the bank's consistently growing performance, as evidenced by the following financial highlights :

  • Non-performing loans fell significantly, with the net consolidated NPL declining from 15.34% in 2005 to 0.62% in 2010
  • Net profit soared from Rp 0.6 trillion (equivalent to USD 61. 3 million) in 2005 to Rp 9.2 trillion (equivalent to USD 1.02 billion) in 2010

In line with the transformation of our business, we also went through a cultural transformation based on a reformulation and reinvigoration of our key values. We significantly improved our customer service quality levels. For 5 consecutive years (2007, 2008, 2009, 2010 and 2011), Bank Mandiri has been named as a service leader amongst domestic banks based on a Marketing Research Indonesia (MRI) survey. In addition, the Bank's achievements in instituting good corporate governance have also been widely recognized. Bank Mandiri's consistently improving performance has elicited a positive response from investors, as shown by a significant increase in the Bank's share price from Rp 1,110 on November 16, 2005 to Rp 6,300 as at September 30, 2011 - which constitutes a rise of 33.6% a year on average (CAGR). Within a period of less than six years, Bank Mandiri's market capitalization soared seven-fold from only Rp 21.8 trillion (equivalent to USD 2.16 billion) to Rp 146.9 trillion (equivalent to USD 16.6 billion).

Tranformation Program - Stage 2 (2010 - 2014)

We are now embarking on the second stage of our transformation process for the 2010-2014 period by revitalizing our vision "To be Indonesia's Most Admired and Progressive Financial Institution". By 2014, Bank Mandiri intends to achieve a market capitalization of Rp 225 trillion, a market revenue share of 16%, an ROA of around 2.5%, and an ROE of around 25%, while at the same time maintaining an asset quality in a gross NPL ratio of under 4%. And by end 2014, we are determined to reach the ranks of the Top 5 Banks in ASEAN.

The Bank has set its sights to be among the Top 3 in ASEAN by 2020, in terms of market capitalization, and to be a major regional player. In order to realize this vision, Bank Mandiri's business transformation during the 2010-2014 period will focus on the following three business areas:

Wholesale Transactions

We are consolidating our leadership position by offering comprehensive financial transaction solutions and developing a holistic relationship approach in serving our corporate and commercial customers in Indonesia.

Retail Deposits & Payments

We are determined to become the bank of choice for consumers in the retail deposit market by providing a unique and superior banking experience.

Retail Financing

Our goal is to become the No. 1 or 2 bank in the retail financing segment by leading in the mortgage, personal loan, and credit card markets, and by becoming a major player in the micro banking segment. Besides focusing on these three strategic areas, we are also strengthening our organizational structure and infrastructure (branch, IT, operations, risk management) to provide more integrated service solutions. To successfully achieve our goals, we will leverage on the critical support of our human resources, technology, prudential risk management, and good corporate governance.

Achievements To Date

As of December 2011, Bank Mandiri's total assets have reached Rp 551.9 trillion (equivalent to USD 60.86 billion), more than double of that in 2006 (Rp 267 trillion) - which is a growth of 15.6% (CAGR); making us the largest bank in Indonesia. Our loans also grew by 22% (CAGR) to Rp 314.4 trillion (equivalent to USD 34.67 billion) from Rp 118 trillion in 2006 while our net profit grew by 38.3% (CAGR) to Rp 12.2 trillion (equivalent to USD 1.35 billion) from Rp 2.4 trillion in 2006. Besides being the nation's largest lender (on a consolidated basis), Bank Mandiri is also the largest depository in the country with Rp 422.3 trillion (equivalent to USD 46.57 billion) in third party funds. In terms of asset quality, our gross and net NPL ratios stand at 2.21% and 0.52% respectively.

One of the key milestones towards realizing Bank Mandiri's vision during the second stage of the transformation process was the successful completion of a rights issue in February 2011 that strengthened our capital base. With this, Bank Mandiri's capital has reached Rp 62.7 trillion (equivalent to USD 6.9 billion), representing an increase of 48.9% year-on-year. Hence, we became the first bank in Indonesia to achieve the status of an international bank according to the Indonesian Banking Architecture (Arsitektur Perbankan Indonesia/API).

We are also supported by our subsidiaries which contribute significant income of approximately 12% to the total consolidated net profit of the Bank. Today, Bank Mandiri has the largest ATM network with 10,000 units throughout Indonesia. We have earned the distinction of being a most trusted company in Indonesia for corporate governance for 5 consecutive years. We are ready to become an anchor bank in Indonesia as we have fulfilled the criteria set by Bank Indonesia, and propelled ahead by our vision to be Indonesia's Most Admired and Progressive Financial Institution.

Enhancing Synergies & Values from Subsidiaries

To support our various business segments and our strong performance-driven culture across the organization, Bank Mandiri has implemented a Strategic Business Unit (SBU) based organization - consisting of Strategic Business Units as the profit generators and future growth engine, corporate center functions and shared services functions. Our SBUs which serve Corporate Banking, Commercial & Business Banking, Micro & Retail Banking, Treasury & International Banking and Consumer Finance, are backed by our subsidiaries. We are continuously seeking mutually beneficial business opportunities that create synergies, building alliances and strengthening our supporting businesses with and through our subsidiaries, notably Mandiri Sekuritas in investment banking, AXA Mandiri Financial Services in insurance, Bank Syariah Mandiri in Sharia banking, Bank Sinar Harapan Bali in micro banking, and Mandiri Tunas Finance in multi-finance. In 2011, Bank Mandiri acquired Mandiri AXA General Insurance (MAGI), a joint-venture between Bank Mandiri and AXA Societe Anonyme, to strengthen Bank Mandiri's penetration into the general insurance business. With various subsidiaries that support our businesses, we have further strengthened our position as a prominent financial holdings institution in Indonesia.

Mandiri