Danamon posts 16% growth in net profit on strong lending

PT Bank Danamon Indonesia (BDMN) announced on Wednesday that its consolidated net profit after tax grew 16 percent to Rp 3.33 trillion (US$366.3 million) in 2011 from Rp 2.88 trillion in 2010.

Danamon director and chief financial officer Vera Eve Lim attributed the increase to a rise in lending to the mass market and small and medium enterprises (SME), as well as a rise in fee-based income.

She added that the bank’s overall loans grew by 23 percent from Rp 82.7 trillion in 2010 to Rp 101.7 trillion last year.

Meanwhile, mass market loans, which include auto loans from the bank’s Adira Finance and sharia-based gold backed finance, booked growth of 26 percent to Rp 59.25 trillion from the same period in 2010.

She further pointed out that SME loans recorded a 27 percent growth to Rp 14.2 trillion while commercial banking experienced a 19 percent lending growth to Rp 10 trillion.

The bank’s assets based financing (ABF) unit, which disburses loans to mid-size mining and agribusiness firms, also booked a 59 percent loan growth to Rp 4.5 trillion, she added during a press conference.

“The increase in Danamon’s financial performance in 2011 could be attributed to, besides credit growth, the growth in non-interest funds, which we refer to as fee-based income,” she said, adding that fee-based income grew by 24 percent to Rp 4.13 trillion.

The bank’s rights issue, which recorded a 113 percent subscription rate, increased Danamon’s consolidated capital adequacy ratio (CAR) to 17.5 percent by 2011, more than double the regulatory requirement of 8 percent.

The bank’s total funding also grew by 9 percent from Rp 80.9 trillion in 2010 to Rp 88 trillion in 2011, buoyed by a 12 percent growth in current accounts and savings accounts (CASA) to Rp 36.4 trillion.

Vera further noted that the rise in fee-based income rode on the back of higher credit-related fees and fees from bancassurance, which rose 29 percent to Rp 3.04 trillion and 196 percent to Rp 330 billion, respectively.

Danamon’s bancassurance service is based on a cooperation agreement with PT Asuransi Jiwa Manulife Indonesia inked in the third quarter of last year.

“Danamon also conducted a rights issue in 2011, enabling us to add capital worth Rp 5 trillion,” she said, adding that the strengthening of capital would allow the bank to “extend our network and expand our businesses”.

“In 2012, we plan to set up approximately 300 new branches across Indonesia and this would include conventional branches, sharia gold-based solutions and branches for our subsidiaries,” she said, adding that this year’s expansion would come on top of more than 300 new outlets last year.

Danamon president director Henry Ho added that the bank was projecting a loan growth “in the high teens” between 16-20 percent. The predictions were based on the projected economic growth of Indonesia, which Bank Indonesia has set at around 6.3 percent.

He added that the banked
“hoped that this year we would not have periods of illiquidity” or negative investment sentiments sparked by the economic crisis plaguing
Europe.

“The prognosis for 2012, as we all know, is clouded by what’s happening in Europe. The European
crisis is by no means over yet,” he said. “Economic growth will slow down.”

However, he added that Indonesia had a better chance of weathering the storm than other countries in the region given that Indonesia was not highly dependent on exports.

“Economic growth in Indonesia, as you know, is two-thirds driven by domestic activity. So in that sense, Indonesia will be more resilient than other countries,” he further noted.