Bank Mandiri's branch network now 1.8 times the size of BCA's

Branch network increased by 1.6 times between 2009 and 2012.

According to Barclays, for the past three years, Mandiri has been investing heavily in its network and transaction banking capabilities. Between Dec 2009 and Sep 2012, its branch network increased by 1.6 times, its ATM network by 2.1 times and its micro-finance network by 2.3 times.

Here's more from Barclays:

It now has the largest branch network and the second-largest ATM network in Indonesia. Its branch network is now 1.8 times the size of BCA’s (a bank that is comparable in transaction banking) and its ATM network is similar in size.

… enabling CASA, fee and micro loan growth
Investment in network expansion and transaction banking capabilities is helping Mandiri lower its cost of funds, shift its loan portfolio towards higher-yielding loans and generate additional fee income.

Its CASA growth rate during this period picked up and was above or in line with the system (Mandiri’s 27% CASA growth in 2011 compared with 22% system growth, in contrast with its 11% CAGR in 2009-10 compared with the system’s 20% CAGR).

Fee income from key transactions and third-party product sales (classified as transfers, retail transactions, credit cards and mutual fund, ORI (Republic of Indonesia Obligations) and bancassurance by the company) has been growing significantly ahead of overall balance sheet growth (CAGR of 53% relative to balance sheet CAGR of 18% in 2009- 2011).

In addition, the micro-loan portfolio has grown at a 47% CAGR during this period. The growth of its micro-loan portfolio is best judged in relative terms. While in Dec 2009, Mandiri’s portfolio was only 10% the size of BRI’s, by Sep 2012 it had grown to 17%.

Opportunity to deploy surplus liquidity to enhance profitability
From a liquidity perspective, too, Mandiri still appears to have room on its balance sheet. Its LDR (82% -2012E) is below the industry average (86%). This should allow Mandiri to grow its loan book faster than its deposit growth.

Increasing LDR from 82% to 87% (other things remaining constant) would allow Mandiri to increase its ROE by ~150ppt, on our estimates.