Danamom revises up lending target

Ika Krismantari , The Jakarta Post , Jakarta | Thu, 09/04/2008 10:16 AM | Business

Bank Danamon, the country's fifth largest lender, expects full-year lending to grow 25 percent on a rise in consumer loans despite a weakened economy and higher interest rates.

Outstanding loans will likely reach Rp 66.25 trillion (US$7.28 billion) by the end of the year, up from Rp 53.3 trillion a year earlier, Danamon chief financial officer Vera Eve Lim said Tuesday evening. The figure is more than the previous target of Rp 64.7 trillion.

Eve Lim said the company was still expecting robust growth in consumer loans to help counter an estimated decline in corporate financing.

"We expect that demand from outside Java will remain strong as the incomes of many people living there are on the rise," Eve Lim said.

High commodity prices on the global market have spurred economic growth in regions outside Java, where commodities including cocoa, palm oil, coal, tin and nickel are abundant.

"The market is adjusting itself to the current condition, where inflation is high and is followed by the rise in interest rates. Consequently corporate sector loans will slow down," Vera said, although she refused to mention figures.

Corporate lending contributed 32 percent to Danamon's total loans in the first half of the year, while retail and consumer loans contributed 43 percent and small scale business 25 percent.

Increased inflationary pressure stoked by the May fuel price increases has forced the central bank to increase its interest rate, which currently stands at 9 percent.

The increased BI rate has spurred banks to follow suit with their own rates, leading to dampened demand for loans from individuals and businesses.

However, Eve Lim said the bank remained upbeat on meeting this year's revised lending target, and her optimism is supported by the latest central bank data, which shows that bank lending in the country grew 31.6 percent in the first semester, well above the target of between 22 and 26 percent.

Danamon's outstanding loans rose 32 percent in the first six months of the year to Rp 61.2 trillion, from Rp 46 trillion a year earlier.

The growth in lending pushed Danamon's net profit for the period to Rp 1.16 trillion, a 14 percent increase from in the same period last year.

Non-performing loans stood at 2.3 percent in the first semester, compared to 3.1 percent for the same period in 2007.