T

he strong appetite for taking out loans to purchase automobiles and motorcycles, durable goods as well as fund small and medium enterprises (SMEs) has fueled 23 percent year-on-year growth in loans for Indonesia’s sixth largest lender Bank Danamon (BDMN) during the first quarter of 2012.

The increase in outstanding loans, which reached Rp 106 trillion (US$11.6 billion) as of the end of March, lifted Bank Danamon’s net profit by 18 percent to Rp 900 billion in the first three months of the year compared with the same period last year.

Net interest income derived from Bank Danamon’s lending business also rose 5 percent to Rp 3.02 trillion.

“The Indonesian economy had remained conducive during early 2012, creating a positive business climate,” Bank Danamon president director Henry Ho told a news conference to announce first quarter financial results on Tuesday.

Southeast Asia’s top economy is expected to grow by about 6.5 percent this year despite the global economic slowdown, supported by strong household consumption, which accounts for more than half of Indonesia’s economy.

Loans for cars and motorcycles, which are important indicators of Indonesia’s household consumption to drive the nation’s economic growth, are Bank Danamon’s forte through its subsidiary PT Adira Dinamika Multi Finance Tbk (ADMF).

“Our automotive loans, both for two-wheelers and four-wheelers, disbursed through Adira Finance grew by 30 percent” in the first quarter this year from a year earlier, said Bank Danamon finance director Vera Eve Lim.

Vera attributed the rise in loans to the stable growth of and lower interest rates for the automotive industry, as banking regulator Bank Indonesia has maintained a low interest rate environment by cutting benchmark borrowing costs by a total of 100 basis points since a year ago to a record low of 5.75 percent.

Vera said Adira would continue to grow despite a new ruling requiring between 20 and 30 percent down payments for automotive loans beginning in the middle of this year.

“But the amount of growth will depend on the industry forecast as well,” she added.

Bank Danamon’s automotive loans and its micro-lending account for two-thirds of the bank’s loan portfolio, and that has attracted Southeast Asia’s largest lender DBS Group Holdings Ltd to takeover a 99 percent stake in Danamon in a $7.2 billion deal, the largest ever made by a regional bank.

The so-called non-performing loans (NPL) indicating bad loans at Bank Danamon remained manageable at 2.5 percent at the end of March this year, well below the central bank’s 5 percent ceiling.

The bank’s capital adequacy ratio (CAR) remained above the level set by BI at 19.1 percent as of end-March from 17.5 percent during the same period last year, while the loan-to-deposit ratio (LDR) increased to 98.6 percent from 94.8 percent a year ago.

Shares in Bank Danamon traded at Rp 6,250 apiece on Tuesday, down 0.79 percent from a day earlier. The shares have jumped more than 50 percent so far this year, easily outstripping the broader stock index’s 8.8 percent gain, on the DBS takeover news.