Headline / October 2019

Staying Competitive in a Challenging Environment

Consolidated net income of the bank, in which Malaysia’s CIMB Group holds a 92.5 percent stake, rose to Rp 1.98 trillion ($140 million) between January and June, from Rp 1.77 trillion in the corresponding period a year ago.

CIMB Niaga president director Tigor M. Siahaan shared his views on prospects in the global and domestic economy, his strategy to ensure the bank remains competitive and how to maintain its good earnings, in a recent interview with GlobeAsia’s Muhamad Al Azhari at the lender’s head offices in Jakarta.

“We will continue our prudent practices with regards to loan disbursement, in response to current economic conditions. We will also continue to pay close attention to our asset quality, as it is our top priority,” said the veteran banker, who has been leading the lender since June 1, 2015. The lender’s net interest income grew steadily at 5.5 percent to Rp 6.32 trillion, while its loan-loss provision declined by 2.0 percent, helping it offset weak loan growth.

CIMB Niaga’s total assets grew 4.5 percent to Rp 271.86 trillion, affirming its position as the second-largest private lender in Indonesiain terms of asset value.

However, weaker corporate demand saw CIMB Niaga only record a 2.6 percent expansion in total outstanding loans to Rp 190.5 trillion in the first half of 2019. Mortgage loans, consumer loans and loans to small and medium enterprises, which grew by 13.5 percent, 10.0 percent and 4.1 percent, respectively, were the main drivers of the bank’s loan growth, as corporate loans grew just 2.1 percent.

“The local markets cannot avoid the global situation. We know there is a lot of volatility, like what is happening in the US-China trade war. We still don’t know the end game, so the volatility will likely continue. That’s what we know; whether Indonesia will benefit from this, we have yet to see,” Tigor said.

Cautiously Optimistic

Tigor, who served as chief country officer of Citi Indonesia between 2011 and 2015, said he remained “cautiously optimistic” about the Indonesian economy. He added that he was upbeat that strong domestic demand would help the country maintain its growth momentum, but he was cautious about the negative impact uncertainty may have on the global economy.

“Many are talking about whether a recession is coming to the US; talk like that demands a careful response, because it could become a self-fulfilling prophecy,” said the banker, who obtained his undergraduate degree from the University of Virginia.

Tigor’s view was echoed by Bank Indonesia Governor Perry Warjiyo on Sept. 19, when he said the central bank was anticipating a “prolonged impact from the trade war, which is impacting world trade volumes and global economic growth.

Indonesia, which saw its economy growing at a two-year low in the first half of this year, must also cope with higher oil prices, which have continued to weigh down the global economy.

As part of efforts to lift the country’s economy, Bank Indonesia trimmed interest rates for a third straight month on Sept. 19, while also relaxing some rules on lending. The central bank cut its seven-day reverse repurchase rate by 25 basis points to 5.25 percent, bringing the total cut this year so far to 75 basis points.

The latest round of easing by the US Federal Reserve lowered borrowing costs to prop up growth in the world’s largest economy. In a separate statement released on the same day, Bank Indonesia explained that “the tit-for-tat imposition of higher import tariffs by the United States and China was stifling world trade volumes and global economic growth. The US economy is moderating on declining exports and nonresidential investment. In addition, economic growth in Europe, Japan, China and India continues to decelerate on weaker exports, which has fed through to lower domestic demand.”

“The global economic slowdown has triggered lower international commodity prices, including oil, leading to mild inflationary pressures. In response, many countries have introduced fiscal stimuli and relaxed monetary policy,” the bank said.

According to central bank data, the total outstanding loans distributed by Indonesian lenders stood at Rp 5,528.6 trillion, having increased 9.94 percent year-on-year. This growth represented a slowdown compared with May’s growth of 11.05 percent.

Bank Indonesia cited weaker demand for corporate loans for this.

For the whole of 2019, however, Bank Indonesia remains upbeat that total outstanding loans disbursed by the banking industry would increase to the 10-12 percent year-on-year range, before hitting 11-13 percent in 2020.

The central bank is forecasting GDP growth of 5.1 percent this year and 5.3 percent next year.

Spreading the Risk

Tigor said, based on his observations, loan growth in the construction sector improved, amid a push by President Joko “Jokowi” Widodo’s administration to improve the country’s ailing infrastructure. “In the trade sector and consumer goods, it also remains good, but of course, from the mining sector and natural resources, they were not really good, because of the decline in commodity prices,” he said.

When asked about CIMB Niaga’s loan growth until the end of this year, he said they were expecting single-digit growth in the “mid-to-high” range.

“Our mortgage loans are likely to remain good; we also expect strong growth in unsecured loans, credit cards and SMEs. But with corporate loans, we will be selective; there is still growth, but we don’t think it will be as aggressive as consumer and SME loans,” he said.

Tigor said CIMB Niaga was taking a systematic approach to spreading its lending risks. “We don’t want there to be a concentration of risk in one particular industry. We want to have very dispersed risks, meaning our risks will be spread out,” he said.

He added that CIMB Niaga would also focus on businesses with “much better credit risks.” However, this means the lender would have to prepare to disburse loans at lower margins, as a better risk profile comes at a lower premium.

“However, we will also push down our interest costs by continuously boosting our CASA ratio,” Tigor said.

A lender with a higher current-account, savings-account ratio enjoys lower cost of funds, which means it could earn higher profit.

“Three years ago, our CASA ratio was just 40 percent [of total deposits], but now it has grown to around 54 percent to 55 percent. This really helps our cost of funds; this also has helped our net interest margins,” he said.

Tracking Technological Development

Tigor said CIMB Niaga keeps a close eye on technological development, as it seeks to attract millennials, while also benefitting from the rapid rise of various online platforms specializing in e-commerce and fintech lending.

“There are a few strategies to boost our CASA ratio. First, in consumer banking we are actively pushing digital transactions. People who are active in digital banking are usually active on using various online platforms and they are subscribed to other financial products, such as home loans, auto loans and wealth management products. How do we become the main bank for them?” Tigor said.

According to a CIMB Niaga statement, 95.5 percent of total transactions made by its customers as of June 30 were done through digital banking channels, such as CIMB Clicks, Go Mobile, automated teller machines and mobile banking. The lender is supported by 482 offices, which include 27 mobile cash units. It operates 4,505 automated teller machines, 103,189 electronic data capture devices, 941 cash deposit and recycle machines, 159 multifunction devices and 28 digital lounges.

“We are very active in attracting millennial customers. For example, we launch digital lounges at campuses. We first launched it at the Atma Jaya [University] campus in Sudirman. We want to offer a new nuance in our branch banking. There is self-service banking and we offer co-working spaces for young people,” Tigor said.

He added that CIMB Niaga continues to make improvements to its mobile banking services. “People can open accounts without meeting any customer representatives. For those who are not our customers yet, we offer video banking, of which the KYC [know-your-customer] part will be done there. They can take a selfie with their ID card to subscribe through our mobile banking services to open an account,” Tigor said.

“It is about digitalization. Everything is on the phone. We really push for this and make improvements to our mobile banking services every month. We can now offer cardless money withdrawals and cardless transactions. We are hoping to launch new features every month to make life easier for our users,” he said.

Tigor said the Malaysia-based CIMB Group is actively pushing digitalization.

“We want to be at the leading edge of technology. Many of the innovations we implement we do because we realize many of our customers are fintech players, platform providers and startup companies. They use our services because we provide them with solutions and what we offer them meets their expectations. We cannot stand alone, we must cooperate with the whole ecosystem,” he said.

Sharia First

Tigor also explained in the interview that the lender is operating one of the fastest-growing shariah-compliant units in Indonesia. He said the lender was actively promoting its Sharia First campaign, aimed at educating customers and offering the bank’s shariah products to them first before offering conventional products. CIMB Niaga Syariah is the fourth-largest shariah-compliant lender by assets in Indonesia.

“We are seeing good business growth in our shariah unit,” Tigor said.

According to the lender’s financial report for the first half of this year, total financing by its shariah unit rose 31.6 percent to Rp 27.96 trillion, while total third-party funds increased 37.6 percent to Rp 27.17 trillion.

“We are seeing fast growth in both shariah funding and financing. Half of all new mortgage loans we disburse come from shariah,” he said.

CIMB Niaga Syariah’s total assets rose 56.9 percent to Rp 38.22 trillion, contributing 14.06 percent of Bank CIMB Niaga’s total assets.


A Chat With Tigor Siahaan

Tigor Siahaan, 47, is a veteran banker who has been involved in the banking sector for more than two decades. After graduating from the McIntire School of Commerce at the University of Virginia, Tigor decided to start his career in the banking industry. He ascended fast. In 1995, he was just a management associate at Citi Indonesia, five years later, he was appointed vice president for institutional remedial management at Citi’s head offices in New York.

He then returned to Indonesia as country risk manager for Citi Indonesia from 2003 to 2004, before slowly rising through the ranks, including becoming country risk manager, head of corporate and investment banking, and country head for institutional clients at Citi Indonesia before his appointment as the bank’s chief country officer in 2011.

He became president director of Bank CIMB Niaga in 2015. The bank is celebrating its 64th year anniversary this year, taking into account the origin of the lender as Bank Niaga before it went through mergers and its acquisition by the CIMB Group.

The Kuala Lumpur-based CIMB Group has a presence in several member states of the Association of Southeast Asian Nations (Asean), including Malaysia, Indonesia, Thailand, Singapore, Cambodia, Brunei, Vietnam, Myanmar, Laos and the Philippines. It also has offices in China, Hong Kong, India, Sri Lanka, the United States, Britain and South Korea.

GlobeAsia spoke with Tigor, a father of three sons and leader of the country’s second-largest private lender and six-largest lender by assets, to explore his leadership style, vision and personal interests.

How would you describe your leadership style?

Everyone has a different style, but I think I am the type of a person who likes to be non-bureaucratic. I want everything to be open. I like to hear everything directly, rather than going through a hierarchy, and I am trying to find solutions for everything. Solutions can come from anyone, so I want every employee to speak out, give ideas and contribute. I am pretty open to listening to input. Nothing is perfect, but how do we fix things?

What are your targets and ambitions in leading CIMB Niaga?

I am hoping for the bank to stay at the leading edge of technological development. How to tailor our services to the changing behavior of consumers. How to continue to improve our services and take advantage of new technology.

As an experienced banker, when was your toughest time? And your concerns?

For me, life has ups and downs; if we are at the top, don’t be arrogant; if we are at the bottom, don’t give up. Through hard work, I believe we can always climb to the top. But one thing is certain, I embrace challenges. There were many stressful times. I have been through a lot of work, time, blood, sweat and tears, but I always believe with the right attitude, things will work out. In terms of challenges, what makes me cautious is what is not visible to us. For example, you know in the past everybody fancied Kodak, and then they suddenly became obsolete, as everybody started using smartphone cameras.

Do you still read books?

Yes I do. The last one I read was ‘Bumi Manusia’ [by famous Indonesian author Pramoedya Ananta Toer]. I always try to keep changing between fiction and nonfiction. I previously also read ‘Bad Blood: Secrets and Lies in a Silicon Valley Startup’ [by John Carreyrou]. Many interesting things were unveiled there. I also read a book by South African comedian Trevor Noah, who told many interesting stories.

When do you find time to read books?

Before I go to sleep. Usually about 40 minutes. Or when I am in the car, while I am stuck in crazy traffic jams.

Do you read hard copy, or use your smartphone?

[Laughs] Hard copy. I can’t use my smartphone. My eyes get too tired when I use it for reading books. I prefer printed products. What is on your bucket list?

There are many places I haven’t visited yet. Like I really want to go to Egypt to see the pyramids. I also want to see animal migration in Africa. When hundreds of thousands of animals migrate. That would be exciting.

How do you balance your work and life?

I try to sit down for dinner with my family at least twice a week. When we are at the table, we have a rule that forbids the use of mobile phones. I sometimes also go to watch a movie with my children.