Tony Sitathan, Jakarta – When a troubled commercial bank in Indonesia needed to improve its standing with the public and the business community, it turned to Landor Associates, considered one of the world's foremost authority in image building and branding. Landor was to develop a new visual identity and overall brand expression to mirror the new direction of Bank Internasional Indonesia (BII).
Remaking BII's image was no easy task, as it was one of many banks to be recapitalized in 1997 because of the Asian financial crisis. BII was left with a huge loan exposure of close to US$1.3 billion from its founding parent company Sinar Mas Group and its flagship company Asia Pulp and Paper, which had run up massive debts in excess of $12.2 billion.
The Indonesian Bank Restructuring Agency (IBRA) now owns 57 percent of BII, while the Sinar Mas Group owns less than 3 percent. As part of the IBRA's national loan program with the International Monetary Fund, it has agreed to sell the bank – although plans to merge BII with Bank Mandiri have been shelved for the time being.
Bank Internasional Indonesia was founded in 1959 as a commercial bank and licensed as a foreign-exchange bank in 1988. BII's first initial public offering was in 1989 and since then has been seen as one of the six top banks in Indonesia in terms of sheer asset base. It has more than 2 million customers, about 250 branch offices, and its own network of 600 automatic teller machines, and is considered the second-largest card business and the leading electronic-banking system provider in Indonesia. Its e-banking strategy received kudos when its Internet Banking won the i2bc eAward last year in the financial category from Indonesia Infocosm Business Community (i2bc). It was also acknowledged as one of 10 best companies applying e-business in the Brick and Mortar Company Category.
Landor recommended that BII build on the success of its tradition and focus on developing new products and services through innovative thinking, building lasting customer relationships and embracing new technology.
Ebrahim Kazi, a branding consultant for Landor Associates, said its job was in essence to ensure that all brand propositions are focused. "It was important that the brand stays relevant for BII while focusing on its strengths and be able to build lasting relationships with their clients. It also helps to focus on its marketing and advertising efforts while helping to keep these big investments in line," he said.
Michael Ip, Landor's managing director for the Asia-Pacific region, said the integral component of BII's branding system is the new brand architecture. "It is common to see complicated branding relationships in the marketplace, which customers have very little time to understand and sift through. BII is moving away from communicating multiple brands to focusing on a single, strong corporate brand, from which new products and services can be launched," he said.
By placing a positive spin on BII's position and identity in the Indonesian banking scene, BII hopes to create a lasting impression with its shareholders, stakeholders and, most important, the public. BII needs to improve its image in the public eye. For example, last May, an offering of planned rights certificates, which are used to raise the recovery levels of bank loans of up to 25 percent, failed to live up to expectations. Instead of raising the expected Rp1.4 trillion (US$159 million), only Rp300 billion ($34 million) was raised. The offering was part of the Ministry of Finance's and the central bank's plan to ensure that IBRA announces the recovery rate of problem loans it has been managing.
It has been announced that this year BII will attempt to issue a Rp2 trillion ($225.2 million) bond to improve the bank's balance-sheet structure. It is hoped that BII will improve its high cost of funding, which mainly comes from deposits. A financial risk consultant for Axiom Consulting based in Hong Kong, Benjamin Tan, said he felt that BII needs to reshape its short-term loan structure. "In order to maximize its ability to offer long-term credit facilities to its corporate customers it cannot depend on its short-term fund position. This is detrimental to the bank as it shows that certain sectors within the bank are inadequately capitalized," he said.
BII has thus far written off Rp1.2 trillion in non-performing loans (NPLs). This was done to improve the overall quality of the bank's assets. One of BII's directors, Sukatmo Padmosukarso, has informed the Jakarta Stock Exchange that the bank still reserves the right to claim the non-performing credits either by restructuring, by auction or even through litigation. The writeoff decision was approved by its shareholders in a meeting last December.
Perhaps all these measures do create a sense of credibility for the Indonesian banking scene, which has been blamed for much of the financial chaos of 1997-98. So far BII has undergone two management shakeouts, displacing the old vanguard and those with implicit ties to the debt-laden Sinar Mas Group. Several analysts have also warned against members of the Sinar Mas family making a comeback similar to the founders of Bank Central Asia or Lippo Bank.
Taking control of a banking entity with the ability of raising funds for business conglomerates is an attractive option. Perhaps legislation should be passed in parliament and mooted by the central bank where business conglomerates should be debarred from managing or running banks. A good example of a banking institution that has stood the test of time is Bank Rakyat Indonesia (BRI). Calling itself the People's Bank, it has been free from the clutches of powerful conglomerates and has been professionally managed since it was founded about 150 years ago. Its debt-to-equity ratio is among the lowest of banks in Indonesia while its NPLs are less than half of the national average. That speaks volumes for a bank.
It is to be hoped that BII can learn valuable lessons from the likes of BRI instead of relying too much on new branding strategies or what some call window-dressing. Spin doctors can only do so much. The rest is up to the people managing the banks.