According to the sector’s regulator, the Bank of Indonesia, there are 120 commercial banks and 1681 rural lenders in Indonesia. In reality, however, a small number of them are responsible for most of the lending activity in the market, with 15 banks accounting for about 70% of credit. As ranked by assets, the following are the five largest banks in the country, including three state-owned institutions.

BANK MANDIRI: The largest Indonesian bank by several measures, Bank Mandiri was set up by the government after the 1997-98 Asian financial crisis, the fusion of four failed banks that had required state bailouts: Bank Bumi Daya, Bank Dagang Negar, Bank Ekspor Impor and Bank Pembangunan Indonesia. For the first nine months of 2011, the bank reported net profit of Rp9.2trn ($1.1bn), an increase of 44% over the Rp6.4trn ($766.7m) in the corresponding period the prior year.

The lender has five major financial services subsidiaries: Bank Syariah Mandiri, the Islamic-banking unit; Mandiri Sekuritas, its investment bank; Mandiri Tunas Finance, a consumer auto-finance unit; AXA Mandiri, a bancassurance joint venture with the French insurance giant; and Bank Sinar Harapan Bali, a Balinese microfinance lender.

Mandiri also has a European subsidiary based in London and recently opened the first branch of an Indonesian bank in Shanghai, China. The bank has obtained a license to open operations in Malaysia, although it has not done so yet, citing the high capital requirements in the neighbouring country.

BANK RAKYAT INDONESIA (BRI): The second-largest bank, BRI held $45.02bn in assets as of the end of 2010. BRI is a large bank even by regional standards, with an asset base that is substantial enough to rival those of major banks in Singapore, Malaysia and the Philippines, all countries against which Indonesia benchmarks itself. The firm was founded in 1895 as Priyayi Bank of Purwokerto, gained its current name in 1946, and became a state-owned bank in 1950. Thanks to the rural units that the bank established in the 1970s, the lender has established an identity based on its national presence, microfinance, and loans to small and medium-sized companies.

BRI has a large branch network through which it offers microfinance products, and the bank claims it has the world’s largest and most profitable microlending operation. The bank has 325 branches, 148 sub-branch offices and 4049 microfinance units, in addition to two foreign representative offices. For the first three quarters of 2011, BRI reported net profit of Rp10.4trn ($1.3bn), up from Rp6.7bn ($798.8m) for the same nine months in 2010. Similarly, net interest income for the first three quarters increased from Rp20.8trn ($2.5bn) in 2010 to Rp26.2trn ($3.1bn) in 2011.

For BRI, Bank Mandiri and the other state-owned banks, a major question looming in 2012 is that of the “single-presence policy” – a 2006 edict from the central bank mandating that no one shareholder or group can own a majority stake in more than one bank. That led to some mergers between privately owned financial institutions, but Indonesia’s government appealed to the central bank to exempt the state-owned banks until 2012. There have been no announced plans for if, when and how the rule might apply to the state-owned lenders.

BANK CENTRAL ASIA (BCA): One of the two privately owned lenders among the top five, BCA is Indonesia’s third-largest bank by assets and biggest by market value. The institution came under public control after the 1997-98 Asian financial crisis, but a quick recovery led to a government divestiture.

An initial public offering in 2000 reduced the government’s stake by about 20%, and then in 2002 a 51% stake was sold to FarIndo Investment of Mauritius, a group whose principal investor was Indonesian tycoon Robert Hartono, who owns the world’s third-largest manufacturer of clove cigarettes, Djarum. Parent company Djarum Group is the country’s wealthiest conglomerate. BCA has the lowest cost of funds among Indonesia’s major banks and also has a history of spending on technology. It was the first Indonesian bank to have automated teller machines, for example.

BCA reported a net profit of Rp7.7trn ($918.6m) for the first nine months of 2011, up 25% from Rp6.1trn ($733.1m) earned during the corresponding period in 2010. At the time of the announcement of its third quarter 2011 financial results, the bank noted that it plans to expand its housing loan and securities businesses.

According to the global ratings agency Fitch, the strengths of BCA include the bank’s substantial deposit base and high quality assets.

BANK NEGARA INDONESIA (BNI): Formed in 1946. BNI was, for a period, the country’s central bank, and the government currently owns a 60% stake in the organisation. BNI has been publicly traded since 1996 and has close to 1670 domestic branches.

Its overseas branches are in Singapore, Hong Kong, Tokyo, London and New York. As with Bank Mandiri and BRI, it is unclear how potential enforcement of the single-ownership policy for government banks would affect BNI. The bank has four subsidiaries where BNI has majority ownership : BNI Multifinance, BNI Securities, BNI Life Insurance and BNI Sharia.

BNI has been aggressive in restructuring the business in 2011, publicly stating that it was seeking strategic partners for each of these four units. In April 2011 it was announced that a 25% share of BNI Securities would be sold to SBI Securities Company of Japan, with the expectation that the bank’s new minority investor would be able to strengthen existing investment banking activities.

For the first three quarters of 2011, BNI reported net profit of Rp4.1trn ($487m), up 37% from the same period in 2010. The non-performing loan ratio at BNI, which has steadily declined in recent years, continued its fall over the first nine months of 2011, reaching 3.83% in the third quarter of the year. One of BNI’s main focuses for 2011 has been an improvement in asset quality, and therefore the percentage of soured loans is expected to continue falling.

CIMB NIAGA: Founded in 1955 as Bank Niaga, since 2002 this lender has been majority-owned by CIMB, the Malaysian financial-services group. CIMB Niaga owes its status as the fifth-largest bank thanks to the government’s single-presence policy, which requires that no one owner can hold a majority stake in more than one bank. CIMB’s parent company Khazanah, the Malaysian government’s investment holding company, had previously acquired Bank Lippo, another Indonesian lender that failed during the 1997-98 Asian financial crisis. Therefore, when the single-presence policy was implemented in 2006, the banks were combined to create CIMB Niaga.

CIMB Niaga Syariah, the lender’s Islamic finance arm, has developed a strong reputation in line with the company’s Malaysian roots – Malaysia was among the world’s first countries to embrace the concept of Islamic finance and the practice has been pushed there by government and regulators.

CIMB Niaga’s profits in the first three quarters of 2011 reached Rp2.3trn ($280.6m), a 35% jump from the Rp1.74trn ($208.4m) recorded during the first nine months of 2010. CIMB is the largest foreign-owned bank in the country by assets, and therefore could be among the institutions most affected by a potential plan to cap bank ownership at 50%. The plan, which the governor of the central bank suggested was under consideration in 2011, would change the maximum any one shareholder can own from 99% to 50%. But the difficulty in applying such a change, including the potential stock market chaos, has led some in the country to doubt its feasibility. Others suspect that it may be a method to reduce the foreign presence in the sector, as about a third of the country’s 120 banks are foreign, or local lenders with foreigners holding a controlling stake.