BCA: Indonesia's headline act
Bank Central Asia, now one of Asia’s most admired lenders, is certainly one to keep an eye on in Indonesia, as it reaps the benefits of collaborating, not competing, with fintech firms.
Jahja Setiaatmadja, head of Bank Central Asia
There’s a telling moment during Asiamoney’s interview with Jahja Setiaatmadja. The head of Bank Central Asia is discussing its mortgage lending division, which has grown from a Rp18 trillion ($1.27 billion) business in 2010 to be worth Rp88 trillion today, when he says, almost casually: “Our strength means we attract good customers with sound credit.”
This might be the primary mantra of Indonesia’s best-run bank.
Later, a Jakarta fund manager echoes his point.
“They’re a class act,” he says. “They don’t chase your business – your business chases them.”
It’s a great place to be: the lender of first resort (if BCA decides it wants to be) to borrowers from all walks of life.
For an emerging market operator, BCA is safer than most developed-world banks. Its non-performing loan ratio at the end of 2018 was 1.4% – half the national average – while its coverage ratio was just shy of 180%. Net income rose 12.6% year on year in the first half of 2019, while return on equity in 2018 was an industry-leading 18.8%.
It buys judiciously – in June 2019 it got approval to buy Bank Royal, a specialist small and medium-sized enterprise lender, for Rp1 trillion – but rarely, instead relying on organic growth. It has a ludicrously low cost of funding for an emerging-market institution and trades at a price-to-book value of over 4.5, compared to less than 1.9 at its rival Bank Mandiri.
That puts BCA in an enviable position. Because it borrows at such low rates, it can on-lend to corporates at “a better rate than they could get anywhere else”, says a local analyst. “That allows BCA to tell companies: ‘You give us all your business, including capital markets and advisory, or we’ll pull our business from you. It’s a very successful approach – they use their leverage well.”
Setiaatmadja has been at the bank since 1990; he joining from Suzuki after being headhunted by Anthoni Salim, now the chairman of Salim Group. Back then, the local conglomerate owned both BCA and the Japanese carmaker’s local joint venture.
“It was a downgrade, from finance director at Suzuki to assistant general manager at BCA,” he says. “But I could see this was a bigger firm with better facilities and more potential.”
Over the last three decades, Bank Central Asia has been transformed into one of Asia’s most admired lenders, and one of the 10 largest companies in the Asean region by market capitalization.
Setiaatmadja worked his way up the ranks, becoming deputy CEO and, in 2011, chief executive.
Retail customers loved BCA for that and for their excellent customer service, and stayed loyal to the cause
Setiaatmadja identifies as a team leader, rather than lord of all he surveys.
“I always tell my people that I’m not a superhero who can do everything,” he says. “I see myself as a conductor, the head of a symphony. I can’t play every instrument, but I know all the sounds. I know when some of them are out of tune, and which songs we need to play for the audience.”
Refreshingly, for the head of a bank with a quarter of a million employees, he has a palpable disdain for the cult of meetings.
“In other institutions, meetings are the very heartbeat of everything,” he says. “That’s not the case here – we don’t believe in long, frustrating, debating meetings. We run scrum teams, where small groups tackle decisions and individuals are empowered to make decisions. You need a strong team: you can’t have 1% or 2% of people making every decision.”
For a conservative lending institution, BCA has long been ahead of the game on technology. It was the first bank in Indonesia to pioneer ATMs, rolling them out nationwide, not just in big cities.
Retail customers loved them for that and for their excellent customer service, and stayed loyal to the cause. The bank rarely advertises, relying on reputation and word-of-mouth. A key area of growth in recent years, as Indonesia’s economy expands and spawns a new generation of tycoons, has been its wealth management business.
Setiaatmadja, now 60 but showing no signs of age or being willing to hand over the reins, tips the bank to retain its “position as a leading digital payments bank. Four or five years ago, I was quite afraid of fintech firms. Everyone told us: ‘You will be challenged by them, replaced by them’. Now, I don’t see them as a threat but as an ally. We are collaborating with them.
“Central banks are protecting banks from fintechs, telling them if they want to do payments, they’ll have to work with us”.
A cogent example is QRIS, a service recently launched by Bank Indonesia that lets banks and fintechs process QR code payments on a standardized platform.
Is there anything that keeps him up at night?
He grins and shakes his head.
“No,” he replies. “I have an alert system, a warning system in my head. At BCA, we process 27 million transactions a day. If I started to worry about that, I would never get any sleep.”