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Case Study

Bank Central Asia: Changing strategy to maintain market leadership

By Margaret Cording and Pallivathukkal Cherian Abraham

10 pages

December 2015

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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, Strategy, 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

Available Languages

English

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