Case Study

Bank Central Asia: Changing strategy to maintain market leadership

10 pages
December 2015
Reference: IMD-7-1682

Bank Central Asia (BCA) had maintained a simple and consistent strategy over the last fifteen years, consisting of two parts. First, it had invested in maintaining its position as Indonesia’s leading transaction bank, with a sizeable network of branches, automated teller machines (ATMs) and good electronic banking channels. This had raised its attractiveness to retail and business customers, allowing it to maintain its ratio of low-cost current and savings accounts (CASA) at 75.1%. This in turn allowed it to make loans to corporate and commercial customers at competitive rates (allowing it to focus on the most credit-worthy customers) while maintaining a high net interest margin of 6.53% in December 2014. The net result of this was that BCA had performed very well. Its return on equity (ROE) in 2014 was 25.5% and the ratio of non-performing loans (NPL) to total loans stood at 0.6%. However, it was not clear that this strategy would continue to be successful in the future. Growth in CASA funds had been only 4.2% in 2014, forcing the bank to rely more on time deposits and raise time deposit interest rates. Its loan portfolio had grown by only 11% in 2014 (down from 22% in 2013) and analysts thought future growth would continue to be in this range. The bank had entered a number of new, consumer-focused businesses (including insurance, wealth management, Islamic banking and motorcycle financing), but it was not clear yet whether these would be significant businesses that would strengthen BCA’s franchise or just a distraction.

Learning Objective

To understand and use the Porter Five Forces model for industry and competitor analysis, especially in the context of the banking industry. To understand and use the resource based view of competitive advantage, especially in the context of the banking industry.

Keywords
Regulatory Change, Bottom of the Pyramid, Banking, Industry Analysis, Competitor Analysis, Central Bank, Strategic Resources
Settings
Asia, Indonesia
Bank Central Asia, Finance and Insurance, Financial Services
2001-2015
Type
Published Sources
Copyright
© 2015
Available Languages
English
Case clearing houses
IMD case studies are distributed through case clearing houses. In order to browse the collection and purchase copies please visit the links below.

The Case Centre

Cranfield University

Wharley End Beds MK43 0JR, UK
Tel +44 (0)1234 750903
Email [email protected]

Harvard Business School Publishing

60 Harvard Way, Boston MA 02163, USA
Tel (800) 545-7685 Tel (617)-783-7600
Fax (617) 783-7666
Email [email protected]

Asia Pacific Case Center

NUCB Business School

1-3-1 Nishiki Naka
Nagoya Aichi, Japan 460-0003
Tel +81 52 20 38 111
Email [email protected]

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Looking for something specific?
IMD's faculty and research teams publish articles, case studies, books and reports on a wide range of topics