Mandiri Warns of Risk to Loan Growth From Virus Outbreak

(Bloomberg) -- Follow Bloomberg on LINE messenger for all the business news and analysis you need.

PT Bank Mandiri, Indonesia’s second-largest bank, warned that its loan growth may drop to the lower end of a target range for 2020 if the economic fallout from the novel coronavirus outbreak is prolonged.

The state-owned lender will focus on improving the quality of its assets instead of chasing growth, Mandiri’s President Director Royke Tumilaar said.

“It’s not that we will stop growing our loans, but we will put more focus on quality right now,” Tumilaar, 55, said in an interview. “Becoming the biggest by assets is not our priority.”

The virus outbreak is likely to curtain Mandiri’s loan growth this year to around 8%, the bottom of the target range of 8-10%, according to Tumilaar.

Despite the risk from the coronavirus outbreak, Tumilaar said Indonesia’s banking industry will perform better this year than in 2019, thanks to the central bank’s accommodative monetary policy, the improvement in the economy and better liquidity.

Expansion Budget

Indonesia’s financial regulator has encouraged the country’s banks to consolidate to create strong institutions. New rules that came into effect this month require commercial banks with less than 3 trillion rupiah ($219 million) in core capital to gradually increase the total over three years.

Tumilaar said Bank Mandiri has a budget for non-organic expansion, though he declined to disclose the amount and said he is not currently working on any deals.

“We have our obligation to our shareholders. We want to create value from any acquisition that we are doing,” Tumilaar said.

Last year, Mandiri failed to pursue discussions about a plan to buy smaller rival PT Bank Permata. That helped Bangkok Bank Pcl emerge as the winner of a subsequent bidding round, after beating out Japan’s Sumitomo Mitsui Financial Group Inc. with its $2.7 billion offer.

Tumilaar said Mandiri was in the early stages of exploring the Permata opportunity, and never made any formal offer for the bank.

Mandiri’s shares gained as much as 2% on Thursday, extending gains this year to 2.3%, compared with a 5% drop in the Jakarta Stock Exchange Composite Index.

Tumilaar was Mandiri’s corporate banking director before taking the president director role in December. Mandiri reported a record profit for 2019, earning 70% more than its larger rival PT Bank Rakyat Indonesia.

To contact the reporters on this story: Fathiya Dahrul in Jakarta at fdahrul@bloomberg.net;Harry Suhartono in Jakarta at hsuhartono@bloomberg.net;Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, ;Thomas Kutty Abraham at tabraham4@bloomberg.net, Russell Ward

©2020 Bloomberg L.P.