RETAIL BANKING | Cesar Tordesillas, Indonesia

Bank Mandiri shifts focus from corporate to retail lending

Indonesia's largest banks will start chasing high yields from retail loans.

Among them is Bank Mandiri, who expressed its preference on lending to the retail sector this year in order to generate interest income.

That move is also aimed at offsetting a possible decline in return from corporate loans.

“Interest from retail lending is higher, as you all may know, thus that would yield higher income,”

Bank Mandiri president director Zulkifli Zaini attributed the higher interest in retail lending as the reason for its shift. 

Zulkifli said the interest rate on corporate loans stood at “single digit” level. “We want to increase our interest revenue by moving to retail loans and fee-based income,” he said.

The prime lending rate for Bank Mandiri’s corporate loans now stands at 10 percent and its retail lending at 12 percent, down from 11.25 percent and 13 percent, respectively, last year as the central bank has been cutting its key interest rate.

Retail loans at Bank Mandiri stood at Rp 81 trillion last year, accounting for 30 percent of its total lending. That compared to 41 percent contribution from corporate lending, which stood at Rp 112 trillion.

Falling borrowing costs have squeezed the net interest margin on corporate loans to 5.4 percentage points last year from 5.8 percentage points in 2010. N

Pahala Mansury, Bank Mandiri’s finance director, says the lender would have difficulties in maintaining its net interest margin this year if it keeps focusing on the corporate sector. He said Mandiri aimed to boost retail lending contribution to 32 percent of total lending this year.

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