An established Indonesia-based financial services group
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Three months ended 30 September 2013 ("Q3-2013") vs Three months ended 30 September 2012 ("Q3-2012")
Net Interest Income
Total interest income increased by IDR12.6 billion from IDR32.7 billion in Q3-2012 to IDR45.4 billion in Q3-2013. The increase was mainly attributable to the increase in consumer financing and finance lease income from PT Batavia Prosperindo Finance Tbk ("BPF") which amounted to IDR12.2 billion due to an increase in the number of customer bookings in Q3-2013.
Interest expense increased by IDR9.7 billion from IDR10.4 billion in Q3-2012 to IDR20.1 billion in Q3-2013. The increase was mainly due to the interest expense incurred on the BPF's New Bond (as defined below) of IDR7.8 billion to fund its consumer financing business. As a result, the net interest income margin decreased from 68.1% for Q3-2012 to 55.7% for Q3-2013.
Net premiums income
Net premiums income was contributed by PT Malacca Trust Wuwungan Insurance ("MTI") and increased by IDR2.8 billion in Q3-2013 as compared to Q3-2012 due to the growth in the average number of customers and transaction volume in Q3-2013.
Gain on trading of equity and debt securities
Gain on trading of equity and debt securities increased by IDR0.4 billion in Q3-2013 as compared to Q3-2012 mainly due to the trading fees earned by BPS from the purchasers of BPF's New Bond (as defined below), which amounted to IDR0.8 billion in Q3-2013, as BPS is acting as one of BPF's selling agents for the New Bond (as defined below). The increase was partially offset by a decrease in trading fees due to a decrease in customer selling transaction volume in Q3-2013 as compared to Q2-2013. (Q3-2013: 8.4 trillion; Q3-2012: 9.5 trillion).
General and administrative expenses
The increase in general and administrative expenses of IDR1.9 billion was mainly due to the expenses incurred for the operation of BPF's new branches and the higher operating expenses for MTI due to the growth in the business.
The increase in professional fees of IDR 0.9 billion was mainly attributable to the increased outsourcing fees for MTI due to the increase in the number of outsourced employees and also professional fees paid in relation to the issuance of BPF's New Bond (as defined below).
Allowance for impairment of receivables
The increase in allowance for impairment of receivables of IDR1.1 billion from Q3-2012 to Q3-2013 was mainly due to an increase in the provision made for trade and other receivables based on the management's assessment that the collectability of trade and other receivables is expected to deteriorate. However, the magnitude of deterioration is not expected to be significant.
The decrease in marketing expenses of IDR3.9 billion was mainly due to a decrease in commission paid to selling agent in PT Batavia Prosperindo Aset Manajemen's ("BPAM") in Q3-2103 due to a decrease management fees earned by BPAM in Q3-2013 as compared to Q2-2012.
Other income - net
The decrease in net other income of IDR4.3 billion from Q3-2012 to Q3-2013 was mainly due to the loss in short term investment made by MTI as part of its risk management effort. This was partly offset by a gain on foreign exchange and gain on disposal of plant and equipment by BPF and PT Strait Finance ("SF").
Review of financial position (Group):
Total assets increased by 24.81% from IDR1,007.4 billion as at 31 December 2012 to IDR1,257.3 billion as at 30 September 2013.
Financial assets at fair value through profit or loss increased by IDR20.4 billion mainly due to new bonds acquired by PT Batavia Prosperindo Sekuritas ("BPS") for short term investment.
Trade and other receivables increased by IDR292.7 billion as a result of the growth in the consumer financing business for BPF.
Prepayments and property, plant and equipment increased by IDR6.6 billion and IDR2.1 billion, respectively, mainly due to additional prepayment of office rental and purchase of property, plant and equipment for additional BPF's branches during the financial period.
Total liabilities increased by 40.0% from IDR558.4 billion as at 31 December 2012 to IDR781.6 billion as at 30 September 2013.
Trade and other payables increased by IDR62.8 billion from IDR137.6 billion as at 31 December 2012 to IDR200.4 billion as at 30 September 2013 mainly due to the increase in payables to BPS's client deposit accounts and an increase of MTI's claim reserves as a result of increased amount of vehicle's insurance claims reported.
Bank borrowings decreased by IDR130.5 billion from IDR398.2 billion as at 31 December 2012 to IDR267.8 billion as at 30 September 2013 mainly due to repayment of bank borrowings by BPF for its consumer financing business. Bond payables of IDR286.3 billion as at 30 September 2013 related to new bonds issued to third parties by BPF during Q3-2013 to fund its consumer financing business ("New Bond"). The New Bond which aggregated to IDR300 billion was issued on 3 July 2013 in three (3) tranches with maturity periods of up to three (3) years. The first tranche of the New Bond with a principal of IDR20 billion and an interest rate of 9.25% per annum has a maturity period of one year; the second tranche of the New Bond with a principal of IDR50 billion and an interest rate of 9.50% per annum has a maturity period of two years; and the third tranche of the New Bond with a principal of IDR230 billion and interest rate of 10.75% per annum has a maturity of three years. The interest for the New Bond will be payable on a quarterly basis.
Cash flows statements
Q3-2013 vs Q3-2012
Net cash used in operating activities was IDR20.0 billion in Q3-2013. In Q3-2013, the operating cash inflows before working capital changes were IDR1.8 billion. The net cash outflows from changes in working capital were mainly due to a decrease in trade and other payables of IDR97.5 billion mainly due to the decrease in payables to BPS' client deposit accounts as at 30 September 2013 as compared to 30 June 2013 and an increase in prepayments as a result of additional office rental for additional BPF's branches as at 30 September 2013 as compared to 30 June 2013. This was partly offset by a decrease in trade and other receivables of IDR53.9 billion as at 30 September 2013 as compared to 30 June 2013 mainly attributable to BPS's brokerage business.
Net cash flow used in investing activities was IDR9.5 billion in Q3-2013 mainly due to net additions of financial assets at fair value through profit and loss which amounted to IDR11.4 billion, the net proceeds used for the acquisitions of plant and equipment which amounted to IDR1.6 billion. This was partly offset by acquisition of shares from non-controlling interests of IDR3.5 billion.
Net cash flow from financing activities amounted to IDR60.5 billion in Q3-2013. This was mainly due to proceeds from bank borrowings of IDR185.3 billion, proceeds from the issuance of the New Bond to third parties of IDR 286.3 billion and net proceeds from restricted time deposits which amounted to IDR30.4 billion, which was partially offset by repayment of bank borrowings amounting to IDR441.5 billion.
Cash and cash equivalents of the Group was IDR161.4 billion as at 30 September 2013.
The Indonesian economy in Q3-2013 grew by 5.6% (yoy), slower than 5.8% (yoy) posted in Q2-2013. The domestic economic slowdown mainly stemmed from weak construction investment and lower growth in non-construction investment. The performance of real export improved despite an increase in total imports. Meanwhile, both household consumption and government consumption showed an increased trend. Bank Indonesia believes that the domestic economic slowdown is linked to stabilization policy issued by the Government and Bank Indonesia to bring economic growth to a healthier and more balanced level. With the development throughout Q3- 2013, Bank Indonesia projects that Indonesia's economic growth to achieve 5.5% -5.9% in 2013, rising thereafter to 5.8 to 6.2% in 2014.
Financial system stability is maintained at the back of the resilient banking industry. The Capital Adequacy Ratio (CAR) in September 2013 remained high at 18.0%, well above the minimum requirement of 8%, while the ratio of Non-Performing Loans (NPL) maintained low at 1.86%. Meanwhile, credit growth recorded 23.1% (yoy) in September 2013, an increase as compared to 22.2% (yoy) in August 2013. However, the increase in credit growth was impacted by the rupiah revaluation following the depreciation in the currency. Using a fixed exchange rate's computation, credit growth was on a downward trend, from 20.2% (yoy) recorded in August 2013 to 19.9% (yoy) in September 2013. Bank Indonesia believes that the downward trend in credit growth trend was in line with the domestic economic slowdown and is expected to grow in the range of 18%-20% for 2013.
The Group will continue to explore opportunities to collaborate with strategic partners through new investment as and when opportunity arises. Barring any unforeseen circumstances, the Board expects the Group to be profitable for the financial year ending 31 December 2013.