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Danamon sees modest growth
Bank Danamon Indonesia, the country's fifth largest lender by assets, projected that its lending will grow only slightly by 5 to 8 percent this year from a year earlier, as the adverse economic conditions push up risks and make the bank more selective in providing loans
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B
ank Danamon Indonesia, the country's fifth largest lender by assets, projected that its lending will grow only slightly by 5 to 8 percent this year from a year earlier, as the adverse economic conditions push up risks and make the bank more selective in providing loans.
Last year, the bank booked 15 percent growth in lending.
"We will be more selective in giving out loans, given the fluctuating currency and slow growth and there's still no full guarantee from the government to ensure customers' deposits," said I Made Dewa Susila, the bank's head of investor relations said on Tuesday.
He was referring to the government's guarantee on bank deposits which covers deposits of up to Rp 2 billion (around US$185,000).
Up to 85 percent of Danamon's lending goes to consumers as well as to the small and medium enterprise sector, with the remaining 15 percent going to the corporate sector.
"Despite slower growth in overall lending, we still expect a significant increase in SME credits, while there will be no increase in automotive credits, as the industry is expecting a 15 to 20 percent decrease in sales.".
The unfavorable economic conditions have also forced Danamon, which has been massively expanding its network in the past few years, to temporarily put on hold plans to recruit more staff for this year.
"We will stop hiring new employees this year, but there will be no layoffs," said Jos Luhukay, Danamon vice president.
The bank last year recruited up to 10,000 employees, a significant number particularly for a financial institution, Jos added.
The bank booked Rp 1.5 trillion in unaudited profit last year, a decline of 29 percent from a year earlier. The figure should have been significantly higher had the bank not set aside a huge provision to cover its losses on derivatives transactions.
A derivative transaction is a foreign exchange contract that derives its value from an underlying asset, commodity or liability, and is normally used as a hedging or investment tool.
The bank said the derivative losses had a lot to do with the fact that many exporters got burned amid the falling commodity prices and weak export demand, thus having problems in fulfilling their obligations.
