Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
Merger Simulation between Bank Mandiri and Bank BNI
Towards ASEAN Banking Integration
Billy Christianto* and Tuntun Salamantun Zen**
Indonesia is one of the developing countries in Asia-Pasific that have big population
and potential in the world. Currently, no one bank in Indonesia has passed the
Qualified ASEAN Bank with the credit rate around 17%. Actually there is no rule for
the bank to open new branches in other ASEAN country, but Qualified ASEAN Bank
certificate allow the bank to expand their business easier in other ASEAN country
members. In order to answer the challenge, Indonesia needs one national bank which
is well known around the world especially in Asia. The data research for this research
is taken from Bursa Efek Indonesia website for the period 2010 – 2014. The period of
this research is from February 2015 – October 2015. The objective of this research is
to know the valuation firms after merger with scenario analysis, calculate the
projection capital adequacy ratio, and compare the company financial ratio before
and after merger. This paper analyses the merger simulation between bank Mandiri
and Bank BNI using merger and acquisition theory, discounted cash flow valuation
method with scenario analysis and synergy, pro-forma balance sheet projection in
calculating capital adequacy ratio, and financial ratio analysis. The findings of this
paper are the after merger firm indicate the positive synergy in scenario analysis
which leading to high valuation of the after merger firm, the after merger firm reach
the minimum requirement area of QAB which is 17%, and the after merger firm has
better performance mostly in financial ratio though it is not significant.
Keywords: Merger Simulation, Valuation, Qualified ASEAN Bank, Bank Mandiri,
Bank BNI.
1.
Introduction
ASEAN is integrated to make one market economy. This system makes the
trade with fewer tariffs between ASEAN members. This market encourages all
members to show off their best and producing products or services with high value.
In 2020, ASEAN will implement the banking integrations as the flow of investment
and the capital between countries are liberalized. The bank in ASEAN region is
needed in order to accommodate the greater service for intra-ASEAN market. This
integration is called ASEAN Banking Integration Framework (ABIF). This gives the
advantage to the banks which have reached the Qualified ASEAN Bank (QAB)
certificate to expand their banking institutions in other ASEAN countries.
Nowadays, the leading banks in Indonesia based on the tier 1 capital $million
are Bank Mandiri, Bank Rakyat Indonesia, Bank Central Asia, Bank Rakyat
Indonesia, and Bank Danamon Indonesia.(The Banker Database Web site, 2015).
From those banks, there are 4 state owned companies except Bank Central Asia
which is private company. From those state owned companies, the one who has the
biggest asset per capita is Bank Mandiri. Normally in every year, the certified state
owned companies will receive funding from the government which is called
Penyertaan Modal Negara (PMN)(BINBANGKUM, Ditama, 2015). The funding is
from state budget which annually be done by the parliament. The state capital
participation is to increase the capital asset of state owned companies in order to
make it stronger and can compete with other foreign companies in Indonesia.
*Billy Christianto, School of Business and Management Bandung Institute of Technology, Indonesia,
Email: billy.chris@sbm-itb.ac.id
**Tuntun Salamantun Zen, School of Business and Management Bandung Institute of Technology,
Indonesia, Email: tuntun@sbm-itb.ac.id
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
In 2015, Bank Mandiri had made the proposal to ask funding from the
government which is Rp 5.7 trillion. This number is needed to do finance the
infrastructure budget for doing the expansion in other countries. Besides, the
additional funding is going to be used for right issue around Rp 20 trillion.
However, the government refuses to add more funding towards Bank Mandiri,
so the bank should find another alternatives to get the funding. It is because of the
funding for Bank Mandiri is not really necessarily in short period, so the government
will use the budget for other purposes.
Without the government funding, the recent data tell that capital adequacy of
Bank Mandiri has reached 16.22%. This number can’t make Bank Mandiri pass the
Qualified ASEAN Bank (QAB) which has the standard at least 17% or 17.5% based
on the actual QAB in 2019. The one who can pass QAB may expand their bank in
other ASEAN countries without requiring any confirmation of the country’s authority.
This integration gives huge advantages to the bank and make easier in the
administration to open new bank in other ASEAN countries.
Bank Mandiri is chosen to be the one candidate to pass the QAB because it
has the biggest asset until the end of 2014 which around Rp 855 Trillion, while Bank
Rakyat Indonesia (BRI) has Rp 778.02 Trillion and Bank Negara Indonesia (BNI) has
Rp 416.57 Trillion. According to the state owned enterprises minister, the ASEAN
countries have agreed to apply their banks as the candidate of QAB. Since Bank
Mandiri and Bank BNI has the same purpose to become a giant national bank in
Indonesia and expand their business line in other countries especially ASEAN, both
bank is suggested to do merger. Besides, the government has high influence
towards the Bank Mandiri and Bank BNI in this merger.
Currently, Bank Mandiri has not passed yet the minimum number of capital
adequacy ratio in order to get the qualified ASEAN bank certificate. In order to
compete with other foreign banks and free trade of ASEAN in the end of 2015, the
banks of Indonesia have to merger or acquisition. By doing the merger, the minister
of state owned enterprises expect that Indonesia has one biggest bank that can
compete with other banks in ASEAN or even in the world. The second problem
comes up to this research is that the Bank Mandiri and Bank BNI may not integrated
really well to achieve the qualified ASEAN Bank certificate.
Hence, this paper is set to know how significant the difference between the
company valuation independently and after merger with discounted cash flow
method and synergy valuation, to know whether the Bank Mandiri and Bank BNI can
achieve the QAB that is measured by the capital adequacy ratio, and to know the
Bank Mandiri and Bank BNI financial performance before and after merger which are
measured using financial ratios.
This research will use the secondary data from the Bursa Efek Indonesia /
Jakarta Composite Index which is the annual report from 2010 – 2014 of Bank
Mandiri and Bank BNI in order to know the company performance and growth of the
company. The merger simulation variables in this research are several financial
ratios, capital adequacy ratio, and synergy. The combined company valuation will be
done by using the discounted cash flow model.
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
2.
Theoretical Framework
ASEAN Banking Integrationgivesadvantages to all of the ASEAN bank to
become the leading growth region with mutual beneficial, self-reinforcing regional
economic and financial dynamics which accelerate regional growth. Besides, it
intends to eliminate discrimination against foreign banks, and create more consistent
banking environment. This can be characterized with developed and integrated
regional financial markets, financial system that supports regional economic
integration, strong ASEAN FIs that effectively intermediate funds, facilitate crossborder capital flows and support regional expansion of ASEAN corporations, and
seamless regional payments and settlements system.
ASEAN banking integration framework (BANGKO SENTRAL NG PILIPINAS,
2012)has 3 main points which are equal access, equal treatment, and equal
environment. In the equal access, there is market entry which consists of capital
adequacy, Consolidation requirements and authority, restrictions on large exposures,
and accounting and transparency and cross border banking. In the equal treatment,
the regulatory are domestic or QAB and risk based. In the equal environment, there
are harmonized banking regulations which have accounting and disclosure part,
capital requirements, risk management, principal component analysis, resolution of
failed bank, large exposure limits, anti-money laundering, and consumer protection.
In analyzing the companies which want to do merger, there are some
determinants that are critical to be concerned by the company or the advisory firms.
Based on Bruner (2003) research, the outcome of the company performance
measurement is required return by investors. The valuation possibilities towards to
the investors are value conservation when the return of the investment will be equal
to the required return by the investors which is net present value (NPV) is 0, the
value creationwhen the NPV is more than 0 and the investment return will be
exceeding the required return by the investors, and the value destroying is when the
NPV is less than 0 or negative.
Schill, Chaplinsky and Doherty (2000) showed that one of the valuation
method of a merger and acquisition is the discounted free cash flow method. The
discounted free cash flow method determines the valuation of the company based on
the present value of all free cash flow until the company is assumed liquidated.
In determining the free cash flow of the companies, it needs the forecast
period and the terminal value in which the company can get some additional
advantages. In the forecasted period, it has to be the economic cost and the benefit
from the transactions. The terminal value is computed using the additional year after
forecast period which will have the same period for the last year in the forecast
period. The regular assumption in using discounted cash flow is that there is not
abnormal growth and it is adjusted depends on the required return which is the cost
of capital itself. The macroeconomic trends, industry trends, and firm strategy are
considered to determine cash flow.
In merger, there is value transfer from all of the companies to new companies.
The value transfer from each company may give positive synergy or negative
synergy. The research (DAMODARAN, Aswath, 2005 )showed that the two firms
with unrelated businesses line would create benefits from diversification, and the
high correlation between the companies can impact to the variance in earnings,
however it does not influence the expected returns.
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
According to research (DYMSKI, Gary and Mohanty, Lisa, 1999)banks have
to decide the amount of capital they need to hold. The capital of the bank can help
the bank to prevent failures in which the bank cannot fulfill the obligations to pay its
depositors and other creditors. A bank's capital is the "cushion" for potential losses
which protect the bank's depositors and other lenders. Capital adequacy ratio shows
a bank’s strategy regarding its capital structure and is measured as the Capital (Tier
I+ Tier II) divided by the Risk weighted assets. Tier one capital is the capital in the
bank's balance sheet that can absorb losses without a bank being required to cease
trading. It consists of equity capital and disclosed reserves. Tier two capital can
absorb losses in the event of a winding-up and so provides a lesser degree of
protection to depositors. Tier two capital comprises of undisclosed reserves, general
loss reserves and subordinate term debts. CAR determines the capacity of a bank in
terms of meeting the time liabilities and other risk such as credit risk, market risk,
operational risk, and others.
The advantages from the merger and acquisition are usually called as
synergy. The synergies have two types which are operational synergy and financial
synergy. The synergy differences can be taken from the different between the
company valuations with additional synergy and without synergy.
Table 2.1: Hypothetical Framework
Bank Mandiri
Bank BNI
Valuation, financial
ratio, and capital
adequacy ratios
Valuation, financial
ratio, and capital
adequacy ratios
Bank Mandiri
Merger process
Discounted Cash
Flow analysis
Bank BNI
Merger process
Discounted Cash
Flow analysis
Bank Mandiri-BNI
(After Merger)
Valuation with
synergy analysis
Bank Mandiri-BNI
(After Merger)
Financial ratio and
capital adequacy ratio
Based on the several researches above, then the hypothesis that will be submitted
as the temporary answer to the problem statements on this research are:
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
H1: Bank Mandiri and Bank BNI have higher expected performance which is shown
in increasing financial ratio.
H2: Bank Mandiri-BNI can reach the minimum certain of Qualified ASEAN Bank
which is around 17% and it is calculated by capital adequacy ratio of the bank.
H3: Bank Mandiri and Bank BNI can compete with other bank around ASEAN with
higher valuation in positive synergy between both of them.
3.
The Methodology and Model
3.1
Data
The research will use the secondary data which is collected from other parties
who publish the financial report. Since the target company in this research have
done the initial public offering (IPO) and has been registered in the Bursa Efek
Indonesia (BEI), the data is taken form the Indonesia Stock Exchange (IDX). The
range year of the financial report is from 2010 until 2014.
The method in collecting the data that will be used in this research is
documentation method. Documentation method is one of data collecting method by
learning the documents and data which is needed, then will be continued by
analyzing, accounting, and calculating the data.
3.2
Analytical Method
3.2.1 Discounted Cash Flow
The main concept is projections and also time value of money. All of the future
cash flow are estimated and discounted by using cost of capital to get present
values. If the value from the projection and discounted cash flow method is higher
than the current cost of investment, it has good potential and opportunity to be
invested. Discounted cash flow model is better to use the terminal value techniques
rather than project the cash flow until infinity because the economic condition in a
long time can’t be predicted precisely and the market is dynamic. In this research,
the range of forecast year is 10 year projection from 2014.
Formula 3.1: Discounted Cash Flow
Discount rate in this method will be equal as weighted average cost of capital
(WACC). Weighted average cost of capital is a weighted capital sources in common
stock, preferred stock, bonds, and other long-term debt. If the WACC in the company
is increasing, it will impact in the increasing beta, rand decreasing in valuation.
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
Formula 3.2: Cost of Capital
E: Market value of the firm equity
D: Market Value of the firm debt
Re: Cost of Equity
Rd: Cost of debt
Tc: Corporate tax
In calculating the cost of debt in a company, the synthetics
rating(DAMODARAN, Aswath, 2015)method is used. The calculation of cost of debt
is the total of risk free rate and the default risk in the bond rating system which is
S&P bond rating. The bond rating default risk is calculated using interest coverage
ratio which based oncompany’s bond rating. The net cost of the debt is calculated
after the tax deductible interest payment, so the interest paid generally will be lower.
Formula 3.3: Cost of Equity
Cost of equity is about the return that stockholders require for a company.
This method is using CAPM method by generating data from risk free rate, company
beta, and market return of company industry. The beta is taken from Thomson
Reuters in current position of beta (THOMSON REUTERS, 2015).
3.2.2 Free Cash Flow to the Firm
Free cash flow is company operating cash flow that can be used for other
purposes such as investment or expansion. The calculation of free cash flow
consists of three main points which are Net Operating Profit After Tax (EBIT x (1-Tax
Rate)), Net Current Asset Investment (∆ Current Assets - ∆ Current Liabilities), and
Net Fixed Asset Investment (∆ Fixed Assets + Depreciation).
In order to synchronize with the synergy, the future free cash flow have to be
calculated based on the average growth that company had in the past. In this
research, it is based on the 5 years historical growth, while for sustainable growth is
assumed zero growth. After 10 years projection, it is assumed that the company will
be liquidatedwhich existsTerminal Value. The future free cash flow will be divided by
WACC in order to get the net present value of the firm. The formula of NPV is:
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
Formula 3.4: Free Cash Flow Calculation
3.2.3 Synergy Valuation
The synergy valuation is calculated as same as scenario analysis methodby
using the one of the merger company growth. The growth can impact to operating
synergies such as cost synergy and growth synergy valuation. Furthermore, financial
synergies are also affected in several areas which are diversification, tax benefit, and
debt capacity.
3.2.4 Pro-forma Balance Sheet Projection
Pro-forma balance sheet projection is to forecast the next year company
performance by using sales percentage and cumulative annual growth return
(CAGR) as the fundamental method. In forecasting the balance sheet, it is possible
that the asset is imbalanced with the liabilities and equities. The different between
asset and liabilities with equities is called either external fund needed if positive or
excess cash if negative which is put in liabilities and equities account. In this
research, the capital adequacy ratio is calculated in the certain period by looking at
the result of pro-forma balance sheet projection.
3.2.5 Capital Adequacy Ratio
Capital adequacy ratio is a ratio that usually be used to know the bank’s risk
of insolvency if it has excessive losses. It is also known as Capital to Risk Weighted
Assets Ratio (CRAR). The ratio is generally used to protect depositors and promote
the stability and efficiency of financial systems. In the ASEAN banking integration,
CAR is one of the factors that the bank can get the qualified ASEAN Bank (QAB)
Certificate. This method can identify whether the bank is strong enough to expand
their bank by looking their capital. This method is comparing the two types of capital
by the risk weighted assets.
The two types of capital consist of tier one capital, which measure a bank’s
financial strength such as common stock and retained earnings. Tier two capitals is
supplementary bank capital includes revaluation reserves, undisclosed reserves, and
hybrid instruments and subordinated term debt.
Formula 3.5: Capital Adequacy Ratio
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
3.2.6 Financial Ratio
The company performances before and after merger aremeasured by looking
at the change of financial ratio in each year which the categories are activity ratios,
solvency ratios, and profitability ratios. The better performance of the after merger
company indicates that the after merger firm has positive growth and positive
synergy.
4.
The Findings and Result Analysis
4.1
Valuation of the Before and After Merger Firms
The table 4.1 and 4.2 summarize the valuation of Bank Mandiri and Bank BNI
by using discounted cash flow method. The assumption in this valuation is there is
no terminal growth rate which means the company is assumed liquidated its entire
asset in the end of the forecasted period. The weighted cost of capital (WACC) of the
company is arithmetically averaged from historical WACC. The WACC of Bank
Mandiri is 8.62%, while Bank BNI is 8.66%. Hence the valuation of Bank Mandiri is
Rp 915,679,547 million, while Bank BNI is Rp 514,030,638. It shows that the
discounted valuation of Bank Mandiri is higher than Bank BNI since Bank Mandiri
has less WACC and higher free cash flow to the firms. The higher the valuation of
the company, the greater the company asset and performance is. The valuation of
the company is subjective regarding that there are several different assumptions and
point of view towards the company.
Table 4.1: Bank Mandiri Discounted Cash Flow Valuation
Value of Bank Mandiri ( in million Rp )
Year
t
FCFF
2014
0
61,164,028
2015
1
19,564,825
2016
2
23,121,763
2017
3
27,377,153
2018
4
32,478,136
2019
5
38,604,639
2020
6
45,976,972
2021
7
54,865,242
2022
8
65,601,009
2023
9
78,591,735
2024
10
94,338,707
2025 ( Terminal Value )
10
113,459,263
Terminal growth rate
0%
PV FCFF
61,164,028
18,011,826
19,596,770
21,361,592
23,330,186
25,529,856
27,991,812
30,751,742
33,850,471
37,334,716
41,257,952
575,498,596
915,679,547
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
Table 4.2:Bank BNI Discounted Cash Flow Valuation
Value of Bank BNI ( in million Rp )
Year
t
FCFF
2014
0
(4,586,008)
2015
1
10,250,871
2016
2
12,250,312
2017
3
14,696,000
2018
4
17,696,610
2019
5
21,388,562
2020
6
25,943,272
2021
7
31,576,317
2022
8
38,559,016
2023
9
47,233,091
2024
10
58,029,192
2025 ( Terminal Value )
10
71,490,345
Terminal growth rate
0%
PV FCFF
(4,586,008)
9,433,736
10,375,119
11,454,287
12,693,517
14,118,756
15,760,230
17,653,151
19,838,539
22,364,185
25,285,772
359,639,353
514,030,638
Table 4.3 shows the fundamental factors which are interest growth and
operating growth in doing merger simulation. The calculation for both interest and
operating growth is based on cumulative annual growth return (CAGR) from the
historical period. The favorable condition is taken from the higher number, while the
unfavorable condition is the lowest number.
Table 4.3: Interest and Operating Revenue Growth
Interest Revenue growth
Bank Mandiri
Bank BNI
14.163% (Favorable)
11.82% (Unfavorable)
Other operating revenue
growth
24.77% (Unfavorable)
26.64% (Favorable)
Table 4.4 summarizes the after merger value between Bank Mandiri and Bank
BNI without synergy and with synergy. The synergy calculation is based on the
difference of merged firm in favorable and unfavorable scenario with the total of each
firm. The current total value of the after merger company without considering the
forecasting free cash flow is Rp 1.429.710.185 million. However, the valuation
method using discounted cash flow with unfavorable scenario is Rp 3.588.454.190
million, while favorable scenario is Rp 4.606.740.602 million. Hence the favorable
synergy is Rp 3.177.030.417 million, and the unfavorable synergy is Rp
2.158.744.005 million. It indicates that the unfavorable condition still gives positive
synergy towards the company after merger which can increase the company value.
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
Table 4.4: Synergy Comparison (in million Rp)
Scenario Synergy
Bank
Value
Bank Mandiri
915,679,547
Bank BNI
514,030,638
Total Value
1,429,710,185
Favorable Condition Scenario
Favorable Synergy
4,606,740,602
3,177,030,417
Unfavorable Condition Scenario
Unfavorable Synergy
3,588,454,190
2,158,744,005
According to the synergy comparison between favorable and unfavorable condition,
the total payoff is calculated equally between the favorable synergy and unfavorable
synergy which is 50% probability. Hence the total pay off valuation is around Rp
4.097.597.395 millionwhich means the synergy of the after merger firm is Rp
2.667.887.210 million.
4.2
Capital Adequacy Ratio
Table 4.5 has been computed using pro-forma balance sheet projection from
2015 until 2025 using sales percentage based and cumulative annual growth ratio. In
order to know the after merger capital adequacy ratio, the calculation method is
combined between pro-forma balance sheet and capital adequacy ratio. In the proforma balance sheet, the revenue and expenses are based on most likely projected
revenue and expenses. While in the balance sheet, the growth is based on two
methods which are percentage of sales method and cumulative annual growth return
(CAGR) method.Since it is a pro-forma method to forecasting future condition, there
must be a different between asset and liabilities with equity which is put after
liabilities and equity account. It is called external fund needed if the different is
positive, and excess cash if is negative.
After the pro-forma balance sheet has been computed, the capital adequacy
ratio for the after merger firms can be calculated in each year by comparing the
capital of the firms with the risk weighted asset which consists of credit risk,
operational risk, and market risk. In this paper, the forecasting of credit risk weighted
asset is calculated using CAGR method, and the other risks weighted asset are
computed by averaging arithmetically the comparison between the historical data of
those risks with asset. Hence the new capital adequacy ratio is expected forecasted
as the table shown below.
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
Table 4.5: Expected Capital Adequacy Ratio
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Capital Adequacy Ratio
17.73%
17.41%
17.21%
17.13%
17.15%
17.29%
17.53%
17.87%
18.32%
18.88%
The expected capital adequacy ratio shows some various capital adequacy
ratios in each year. The trend between 2015 until 2018 is decreasing since the
growth of the core capital is less towards the risk weighted asset which means the
capacity of banks in paying off the liabilities and other risk weighted asset is
decreasing. However, from 2019 until 2024, the capital adequacy ratio is expected to
increase since the growth of the core capital has overwhelmed the growth of the risk
weighted asset. Through this calculation, the after merger bank is going to be ready
to get Qualified ASEAN Bank which is the requirement needs around 17%. The
certificate publisher said that it is depends on the bank which want to expand their
business line in other countries, but for the bankruptcy safety needs at least 17% of
capital adequacy ratio.
4.3
After Merger Financial Ratio Analysis
Table 4.6 shows all the financial ratios without synergy of activity, solvency,
and profitability ratios in the forecasting period. The forecasting period of 2014 –
2024 without synergy shows that the asset growth is higher than the interest revenue
and operating revenue growth which leading to the decreasing in the asset turnover
ratio. It also shows that the interest expense growth is higher than the interest
revenue growth which can impact to the decreasing gross profit. Otherwise, the rest
factor of the financial ratios is increasing. The operating profit margin and net profit
margin is increasing regarding that the after merger company has less other
operating expense growth rather than the operating revenue growth. The ROA and
ROE of the company is increasing which indicate that the company is growing and
has better performance in financial report. The debt ratio towards the company is
also increasing which means there is some increasing loan and receivables account
in the asset which impact to the increasing debt. Hence the debt ratio towards either
asset or equity will increase.
The scenario analysis is considered in the financial ratio between favorable
and unfavorable. However, it does not show any significance difference which the
maximum different is in every factors. It is caused regarding that both firms have no
significant difference in interest and operating growth and capital ratio.
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
Table 4.6: Forecasted Combined Financial Ratio 2014 - 2024
Asset Turnover
Receivables Turnover
After merger Financial Ratio 2014 - 2024 without Synergy
2014 2015
2016
2017 2018
2019
2020
Activity Ratios
0.075 0.074
0.072
0.070 0.068
0.066
0.064
0.117 0.115
0.112
0.109 0.105
0.102
0.098
2021
2022
2023
2024
0.061
0.095
0.059
0.091
0.056
0.087
0.054
0.084
Debt-to-assets ratio
Debt-to-equity ratio
Interest coverage ratio
86.96% 87.07%
6.898 7.329
1.129 1.088
Solvency Ratios
87.10% 87.14% 87.17%
7.702
8.053 8.377
1.142
1.202 1.269
87.21%
8.672
1.342
87.25% 87.28%
8.935 9.166
1.423 1.513
87.32%
9.364
1.612
87.35% 87.39%
9.531 9.668
1.722 1.844
Gross profit margin
Operating profit margin
Net profit margin
Return on assets (ROA)
Return on equity (ROE)
66.86%
41.18%
32.80%
2.48%
19.64%
Profitability Ratios
64.34% 64.32% 64.31%
40.73% 42.89% 45.28%
32.47% 34.20% 36.10%
2.34%
2.39% 2.45%
20.65% 22.11% 23.55%
64.29%
47.92%
38.21%
2.51%
24.98%
64.28%
50.84%
40.54%
2.58%
26.37%
64.24%
57.66%
45.97%
2.71%
29.02%
64.23%
61.61%
49.13%
2.77%
30.26%
5.
64.36%
38.77%
30.92%
2.28%
19.20%
64.26%
54.08%
43.12%
2.64%
27.72%
64.21%
65.99%
52.62%
2.84%
31.44%
Conclusion and Recommendation
The valuation after merger firms between Bank Mandiri and Bank BNI is
higher than the sum of each individual bank because there is synergy. Even though
the synergy used is unfavorable condition, the valuation of the firms still higher. The
factors of this reason are the interest revenue growth and operating revenue growth
is quite similar between two firms.
The capital adequacy ratio for the after merger firms in the period 2015 –
2024 has reached the minimum requirement of Qualified ASEAN Bank which is at
least around 17%. Through this certification, the after merger firms can expand their
banks in other ASEAN country members easily since they have certain
qualifications.
The financial ratio after merger is approximately the average between each
individual firm ratio. For the forecasting method using pro-forma income statement
and balance sheet, the financial ratio mostly has better performance than before. If
the ratio is compared between favorable and unfavorable ratio, it is not significantly
different since the interest and operating revenue growth is quite similar between
each individual firms.
Through this research, it recommends for Bank Mandiri and Bank BNI to do
merger based on corporate finance analysis. Through this merger, both national
banks which are mostly owned by the government can achieve greater performance
based on valuation, capital adequacy ratio, and financial ratio. Furthermore, the
merger let the firms have bigger asset than before with bigger market share not only
in Indonesia but around ASEAN. Through this merger, the after merger company will
have higher capital adequacy ratio then before which means the after merger
company can achieve the Qualified ASEAN Bank certificate. Furthermore, the after
merger firm will have high valuation and synergy means the company is high worth
not only for the shareholders, but also for stakeholders.
In competing with other ASEAN Bank members, the after merger firm of Bank
Mandiri and Bank BNI has to restructure their management. The new management
Proceedings of 9th Asia-Pacific Business Research Conference
5 - 6 November 2015, Bayview Hotel, Singapore, ISBN: 978-1-922069-87-0
should be formed efficiently and effectively. The restructure of this new management
has to consider several factors such as the new policy of every division. If the after
merger firm can do well in managing the new after merger firms, the after merger
bank will be the biggest national bank in Indonesia and become the center of
attention from other ASEAN Bank members. Henceforth, the Bank Mandiri and Bank
BNI can enhance their performance and market share in other countries.
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