Dupont Analysis As A Measure of Mandiri Bank's Profitability and Efficiency Before and After Merger

Abstract

Basit, Abdul (2005). DuPont Analysis as a Measure of Mandiri Bank's Profitability and efficiency before and after Merger. Jogjakarta, Accounting Department, Faculty ofEconomics, Islamic University ofIndonesia. Established in October 1998, in the aftermath of the Asian financial crisis of 1997 and 1998, Bank Mandiri is a product ofa merger of four state-owned banks: Bank Bumi Daya (BBD), Bank Dagang Negara (BDN), Bank Ekspor Impor (Exim) and Bank Pembangunan Indonesia (Bapindo). In the depths of the crisis, at Government instigation, sixty-seven banks were closed, merged or acquired by other institutions. To restore bank balance sheets and public confidence, the Government implemented a radical restructuring and recapitalization program, directed by the Indonesian Bank Restructuring Agency (IBRA). Government priorities were to reduce overlap in the banking sector and to create much larger, stronger entities that could serve the needs of a modernizing economy. The research examined Bank Mandiri and the four state-owned banks: BBD, BDN, Exim, and Bapindo from 1994 to 2003. The research arranged into two groups. The first group, Bank Mandiri before merger, was the simulation of merger of four state-owned banks. The writer combined the resume of financial statement of those four state-owned banks from 1994 to 1998. The second, Bank Mandiri after merger, was compiled from 1999 to 2003. Thus itplaces a major emphasis on examining whether the profitability and efficiency before merger is different significantly from the profitability and efficiency after merger. Return on Assets (ROA) decomposition (DuPont Analysis) allows financial statement users to examine what is the profitability, measured by Net Profit Margin (NPM) and efficiency, measured by Total Assets Turnover (TATR) difference between before and after merger. The hypothesis was then tested with a different paired t-test using statistical Package for Social Science (SPSS) 11.0 software for windows. We found that profitability and efficiency of Bank Mandiri before merger were not significantly different from profitability and efficiency after merger. It means that the merger of banks in Indonesia still become the last choice for government to keep unhealthy banks operating activities ratherthan liquidate them.