Bank Mandiri set for full online banking in July

JAKARTA (JP): Online banking will be available by the end of July to customers of the four state banks merged into Bank Mandiri, its president said on Wednesday.

At a gathering with local journalists, Robby Djohan acknowledged the four banks still used their own information technology (IT) networks, preventing customers from one branch of a former state bank from doing online banking with a branch of another state bank.

He said the bank allocated US$50 million to acquire a new IT system for Bank Mandiri and would scrap all existing IT systems used by the different component banks.

He said the updated technology would allow customers to conduct online banking through the Mandiri's branches and ATM network.

"I'm very sure there will be no big difference in the cost between acquiring the new IT system or integrating the existing IT systems used by the four former state banks."

Robby said he decided to acquire the new system because the old system carried a greater risk of failure.

The banks merged into Bank Mandiri were Bank Bumi Daya, Bank Dagang Negara, Bank Eskpor Impor Indonesia and Bank Pembangunan Indonesia (Bapindo).

Bank Mandiri chief commissioner Binhadi said the bank formed a "Team 2000" to convert IT systems of each branch to Bank Mandiri's IT system.

"Every weekend, five teams conduct parallel work in converting the technology. By the end of July, all branches will already be integrated into Bank Mandiri's IT master system," he said.

The special teams are also assigned to reconcile interbranch items inherited from Bank Mandiri's component banks. According to the government's agreement with the International Monetary Fund, the teams have to complete the reconciliation of interbranch items by Feb. 29.

In the process, Binhadi said, Bank Mandiri would cut the number of its branch offices from 740 to 546 by the end of this year. He said it would lead to "rationalization" of personnel.

"We have sometimes two or three or even four branches in one mall, or two branches located at a distance of 100 or 200 meters away. We must close some of them, so that we will be more efficient," he said.

A number of Bank Mandiri's existing branches, especially those in predominantly Muslim areas like Aceh province, Madura island in East Java and Pekalongan in Central Java, would be converted into Mandiri Syariah's branches, Binhadi said.

In addition, back offices in most branches would also be scrapped, he said. Bank Mandiri would build back office hubs, each of which would serve around 10 to 13 branches. The branches would function only as "front offices" to serve customers.

When the process of technical integration of its component banks is completed, Bank Mandiri will prepare itself to float 25 percent of its outstanding shares through an initial public offering.

Robby said his bank targeted earning between US$1.2 billion and $1.5 billion from the share offering.

The large part of the proceeds would be used by the bank to extend new credits to companies in the prospective sectors, such as exports and imports, the resource-based industry and consumer financing.

The bank expects to extend between Rp 8 trillion ($1.1 billion) and Rp 10 trillion in new loans by the end of this year.

Robby reported the bank would transfer Rp 16.2 trillion of Rp 45.5 trillion in its bad debt portfolio to the Indonesian Bank Restructuring Agency.

Of the total bad debt, Robby said the bank was able to collect Rp 4.2 trillion and restructure Rp 13.5 trillion.

With a relatively clean book, Robby said, the bank should achieve a net profit of Rp 725 billion for this year.

"That's our conservative target, based on interest income minus interest payments to our depositors and fee-based income minus operation cost. We have yet to include potential income from our bond management and efforts to reduce our cost of funds."

The government issued Rp 178 trillion worth of bonds to Bank Mandiri to bring the bank's capital adequacy ratio to the minimum statutory level of 4 percent.

Robby said the bank's capital adequacy ratio should soar to 12 percent by the end of this year. (rid)