Bank Mandiri was formed on 2 October 1998 as part of the Government of Indonesia's bank restructuring program. In July 1999, four state-owned banks - Bank Bumi Daya, Bank Dagang Negara, Bank Ekspor Impor Indonesia and Bank Pembangunan Indonesia - amalgamated with Bank Mandiri. Each of the four legacy banks had played an integral and essential role in the development of the Indonesian economy. Today, Bank Mandiri continues the more than 140-year tradition of contributing to the banking industry and the Indonesian economy.

Immediately following the merger, Bank Mandiri embarked on a comprehensive process of consolidation. Among the first steps were to close 194 branches that were in close proximity to each other, and to reduce the number of Mandiri employees from 26,600 to 17,620. The Bank Mandiri brand was rolled out across the entire network and in its advertising and promotional campaigns. In addition, Bank Mandiri successfully implemented its new, integrated core banking system to replace the core banking systems of the four legacy banks.

Since its establishment, Bank Mandiri's performance has been on a continuously upward trajectory, as shown by an increase in profit from Rp 1.18 trillion in 2000 to Rp 5.3 trillion in 2004. In addition, Bank Mandiri also marked an important milestone on 14 July 2003 by successfully conducting an initial public offering of 20% of its shares (4 billion shares).

In 2005, Bank Mandiri encountered a number of setbacks that resulted in a decline in profitability. One of these setbacks was a rise in non-performing loans, as shown by an increase in the net consolidated Non Performing Loan (NPL) ratio from 1.60% in 2004 to 15.34% in 2005. This had a direct and dramatic impact on the bank's profit, which slumped by 80% from Rp 5.3 trillion in 2004 to Rp 603 billion in 2005. In response, the bank's share price slid from Rp 2,050 in January 2005 to Rp 1,110 in November 2005.

Transformation - Stage I

The year 2005 marked a turning point for Bank Mandiri when it resolved to focus on becoming a Regional Champion Bank. To do so, the Bank formulated a comprehensive Transformation Program consisting of four principal strategies, namely:

• The inculcation of a new corporate culture through performance-based organizational restructuring, overhaul of the existing performance-based evaluation system, development of leadership and talent, and training and hiring staff to meet strategic needs.
• Aggressive containment of Non-Performing Loans, with emphasis on the resolution of toxic loans and strengthening of the risk management system.
• Accelerating business expansion so as to exceed average market growth through distinctive strategies and value propositions in each segment.
• Developing alliances between directorates and business units so as to optimize customer service, and explore all available business opportunities related to existing customers and their value chains.

In order to achieve its goal of becoming a Regional Champion Bank, Bank Mandiri conducted its Transformation Program in three phases, namely:

• Phase One - "Back on Track" (2006 - 2007): During this phase, the focus was placed on restructuring and laying the foundations for Bank Mandiri's future growth;
• Phase Two - "Outperform the Market" (2008 - 2009): During this period, the emphasis was on expanding the Bank's business so as to ensure significant growth in all segments and a level of profitability that exceeded the market average;
• Phase Three - "Shaping the End Game" (2010): During this phase, Bank Mandiri played an active role in bringing about the consolidation of the Indonesian banking sector.

The changes brought about by the Transformation Program between 2005 and 2010 have resulted in a consistent strengthening of Bank Mandiri's performance, as reflected by various financial parameters. Non-performing loans fell significantly, as shown by a decline in the net consolidated NPL ratio from 15.34% in 2005 to 0.62% in 2010, while the Bank's net profit soared from Rp 0.6 trillion in 2005 to Rp 9.2 trillion in 2010.

In line with the transformation of its business, Bank Mandiri has also undergone a cultural transformation based on a reformulation and reinvigoration of its key values. In doing so, the Bank identified five core corporate cultural values, which conveniently refer to by the acronym "TIPCE", which stands for Trust, Integrity, Professionalism, Customer Focus and Excellence.

Bank Mandiri has also significantly improved its level of quality in providing service to its customers. For four consecutive years (2007, 2008, 2009 and 2010), Bank Mandiri has been named a service leader among domestic banks based on a Marketing Research Indonesia (MRI) survey. In addition, the Bank's achievements in instituting good corporate governance have also been widely recognized.

Bank Mandiri's consistently improving performance has elicited a positive response from investors, as shown by a significant increase in the Bank's share price from a nadir of Rp 1,110 on 16 November 2005 to Rp 6,500 at the end of 2010. Within a period of approximately five years, Bank Mandiri's market capitalization soared sixfold from only Rp 21.8 trillion to Rp 136.5 trillion.

Transformation - Stage II

Bank Mandiri is now embarked on the second stage of its transformation process for the 2010-2014 period, during which time the Bank has revitalized its vision "To be Indonesia's most admired and progressive financial institution." Based on this vision, by 2014 Bank Mandiri intends to achieve a market capitalization of Rp 225 trillion, a market revenue share of 16%, a ROA of around 2.5%, and an ROE of around 25%, while at the same time maintaining asset quality as reflected in a gross NPL ratio of under 4%. By the end of 2014, Bank Mandiri is determined to have the biggest market capitalization in Indonesia and to be among the Top 5 banks in ASEAN, while by 2020 Bank Mandiri expects to be among the Top 3 in ASEAN in terms of market capitalization, and to be a major regional player.

In order to realize this vision, Bank Mandiri's business transformation during the 2010-2014 period will focus on the following three business areas:

• Wholesale Transaction: Bank Mandiri is consolidating its leadership position by offering comprehensive financial transaction solutions and developing holistic relationships in serving its corporate and commercial customers in Indonesia.
• Retail Deposit & Payment: Bank Mandiri is determined to become the consumer's bank of choice in the retail deposit market by providing a unique and superior banking experience.
• Retail Financing: Bank Mandiri's goal is to become the No. 1 or 2 bank in the retail financing segment by winning the competition in the mortgage, personal loan, and credit card markets, and by becoming a major player in the micro banking market.

Besides focusing on these three strategic areas, Bank Mandiri is also strengthening its organizational structure and infrastructure (branch, IT, operations, risk management) so as to be better able to provide integrated service solutions. In seeking to achieve its goals, Bank Mandiri benefits from the support of its world-class human resources, cutting edge technology, prudential risk management, and good corporate governance.

One of the key milestones towards realizing Bank Mandiri's vision during the second stage of the transformation process was the successful holding of a limited public offering in early 2011 to strengthen its capital base. As of the third quarter of 2011, the Bank's total equity has reached Rp 59.7 trillion to become the first bank in Indonesia to win the title as International Bank according to Indonesian Banking Architecture criteria. Mandiri is the largest financial institutions in Indonesia with assets reached Rp 501.9 trillion, the largest lender to reach Rp 297.5 trillion, and with the largest third party funds reached Rp 376.4 trillion. Bank Mandiri is able to maintain its loan quality, as shown by its gross and net NPL ratio of 2.56% and 0.66% respectively.

As of the third quarter of 2011, Bank Mandiri employs 27,305 employees with 1,526 branches all over Indonesia and 7 overseas branches/representatives offices/subsidiaries. In addition, Bank Mandiri has networks of 70,616 units of Electronic Data Capture as well as various and comprehensive electronic channels which include Mandiri Mobile, Internet Banking, SMS Banking and Call Center 14000. Bank Mandiri is well supported by its six business pillars of subsidiaries operating in shariah banking, capital market, consumer finance, life insurance, general insurance, as well as a niche bank focusing in micro segment.

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