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Standard Chartered Unveils Strategies to Tackle Financial Downturn in Indonesia Operation

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by June 24, 2016 General

The executive, who assumed his position since May 2014, shared one of his notable moments — when the lender made a pitch to help assist Indonesia sell dollar-denominated Islamic bonds earlier this year.

“I remember the presentation where we put our slide up. One of the MoF [ministry of finance] women, who was one of [the officials] who lead the panel said Mr. it is a 152 [year?]. No mistake? I think this is one of the thing that we are really proud of, we are not the kind of bank that comes and go,” Tse Koon said.

Cautiously optimistic

However, the executive who leads about 2,000 employees at SCBI said he didn’t deny that the lender, which has a long presence in Southeast Asia’s largest economy, is still facing a challenging environment in this year’s operation. Last year, it posted a swing in profitability.

“I would say the growth would not be that fantastic. It will be a flattish single digit growth,” said Tse Koon, after being asked about an estimate of the lender’s growth of business.

He did not specify whether he was referring to the revenue or net income.

Running three main businesses in Indonesia — retail banking, commercial banking and corporate institutional — SCBI recorded a decline in its financial performance last year.

According to the financial report posted at SCBI’s official website, the lender booked a net loss of Rp 285.6 billion ($21.2 million) last year, a swing from a net income of Rp 620.8 billion in 2014.

The report blamed the financial downturn on the “continuous economic slowdown which resulted in delayed investment decisions, depressed commodity prices and volatility in the market resulted in the rupiah depreciation against US dollar.”

The report also said the lender last year suffered higher loan impairment in both corporate and retail segments due to tough macroeconomic conditions.

It also says SCBI also booked higher operational expenses, driven by one-off restructuring costs as well as settlement of historical litigation case arisen in 2008. No further elaborations provided, but Reuters reported on April 1 the lender was struggling to recoup a $1 billion loan extended to one of Indonesia’s conglomerate with business in the coal sector.

Tse Koon refused to explain how Standard Chartered would deal with the troubled loan.

“That was not done within Standard Chartered Indonesia … it is not in our books,” he said.

But for this year, Tse Koon gave a hint that SCBI is “cautiously optimistic,” on its performance, without giving any specific projections on net income growth.

He said SCBI sees 2016 as an important year as the lender aims to “set the foundation right.”

“People are a lot more positive about 2017,” Tse Koon, who prior to leading Indonesia operation, serving Standard Chartered for four years in Dubai as Head of Governance, West, with jobs to supporting 49 countries across Middle East, Africa, Europe, and Americas.

Tse Koon said SCBI plans to broadening down its client base, targeting not just the lender’s traditional clients of global corporations, including those from the US, UK, Europe, Korea or Japan, but now also aiming for the local suppliers and distributors, which fits to become the lender’s clients.

“We aren’t only banking on those big boys,” said Tse Koon, but SCBI will also aim for the clients’ distributors, suppliers and companies within the lower chain related to the clients’ businesses.

According to SCBI’s last year annual report, its commercial banking services are available for clients from Medium Enterprises to local corporations. SCBI provides banking solutions to clients with minimum annual sales turnover of $10 million, especially those with main goals to set up international operations or trading.

A wide range of banking solutions will be on offer for such clients, starting from transaction banking, financial markets and corporate finance.

While the current economic environment has made it difficult to get what Tse Koon calls “big chunky deals,” SCBI seeks to tap into smaller deal, which can give the lender a lot more sustainable businesses.

SMEs, unsecured loans, credit card business

Meanwhile, in the other spectrum of SCBI’s businesses, Tse Koon said the lender also seeks to grow its unsecured loans, which he said the lender is already a significant player in the segment. He didn’t elaborate much.

However, when asked whether SCBI is keen to tap micro-financing in Indonesia or tap micro-businesses, which offer higher profitability but riskier operations, Tse Koon hinted the lender is likely to leave the market to the local lender.

“If you try to do every bank, you end up actually not optimizing the resources you have,” he said.

Pared relatively better than its rival foreign lenders, SCBI has branch office in Jakarta, six auxiliary branches in Surabaya (East Java), Medan (North Sumatra), Bandung (West Java), Semarang (Central Java), Denpasar (Bali) and Makassar (South Sulawesi) — the biggest cities in the country.

SCBI operates 19 cash offices, two trade counters and ATMs spread across the counrty according to the 2015 financial report.

In its other banking business, Tse Koon, a graduate of National University of Singapore in Economics and Philosophy, said it will also invest money in its credit cards businesses, especially to tap prospects in e-commerce segment and improve the security aspects.

The executive, who has spent most of his career with Standard Chartered and has served a wide range of roles across corporate banking sales as well as operations, said SCBI has and will continue to form a series of “strategic tie up partnership with online companies.”

Some partnership that SCBI has done with local e-commerce startups, include deals with online shopping startup like Blibli.com and online ticket booking service Traveloka.

“Stanchart would like to be known as e-commerce credit card,” said Tse Koon.

SCBI registered a total assets of Rp 63.8 trillion as of last year’s book. Such figure is a slight decline compared to 2014’s Rp 64.6 trillion, which the lender attributed the decline mainly driven by lower loans and investment securities.

SCBI’s total outstanding loans at the end of 2015 stood at Rp 27.6 trillion, a decrease of 10 percent compared to the previous year.

It blamed the fall on the market downturn and technical aspects where it required to run what it is called “credit risk optimization of certain retail and corporate exposures,” in order to improve its ‘risk weighted assets’  efficiency.

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