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RETAIL BANKING | Tony Chua, Indonesia
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Bank Mandiri expects small loans surge by 25%

Indonesia’s average annual 6% growth opens up opportunities for more small loans.

PT Bank Mandiri, Indonesia's largest bank by assets, expects its loan book to expand by as much as 25% this year as the country's booming economy spurs a surge in smaller loans.

While intensifying competition to lend is capping growth and profit margins in its corporate loan business, the bank is experiencing strong growth this year thanks to rising demand for consumer, micro and small-business loans, said Chief Executive Officer Zulkifli Zaini. While the bank's loan yields have fallen by around one percentage point, he said, the overall loan book will expand between 22% and 25% this year. The nonperforming-loan ratio will edge up to around 2.5% from 2.42% last year, the CEO said.

"The opportunity as the Indonesian economy grows is enormous. It's huge," he told The Wall Street Journal in an interview.

The bank's growth shows how the benefits of economic expansion, as well as the opportunities in Southeast Asia's largest economy, are spreading beyond its leading corporations and the commodities sector.

Indonesia's economy has been expanding at an annual rate of more than 6% recently, putting the nation of 240 million people among the world's fastest-growing. The growth is creating a new middle class, which is opening bank accounts and taking out bank loans for the first time.

Consulting firm Bain & Co. projected corporate loans in Indonesia would climb more than 85% in the next five years while consumer loans and loans to small and medium-size enterprises will more than double. Indonesia is "one of the most attractive markets in Asia in terms of growth and profitability," said Ed Lin, a co-head at Bain's global financial-services practice and author of the study.

View the full story in The Wall Street Journal.

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