Danamon enjoys 36% profit growth in H1

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Publicly listed Bank Danamon (BDMN), the nation’s sixth largest lender by assets, saw its net profit grow 36 percent in the first half of the year from a year ago, thanks to high lending growth and increasing fee-based income.

 Bank Danamon, controlled by Singapore’s investment fund Temasek Holdings, booked Rp 2 trillion (US$211.30 million) in net profits in the January–June period this year, primarily due to a 19 percent increase in lending to Rp 110 trillion, president director Henry Ho told a press briefing on Wednesday.

 The lender booked Rp 6.29 trillion net interest income in the first six months of this year, up 20 percent from the same period last year. It also maintained high stable net interest margin (NIM) of 10.3 percent in June this year from a year earlier, almost double the industry-wide NIM, which is the difference between lending rate charged to customers and deposit rate banks must pay to customer.

 “The most important factor [for profit growth] is loan growth. Secondly, fee-based income also rose 23 percent to Rp 2.2 trillion,” Bank Danamon’s chief financial officer Vera Eve Lim said.

 Credit segments which support the bank’s lending were the mass market segment, including those who are self employed, as well as automotive loans, durable goods, and sharia gold pawning lending. Bank Danamon’s mass market credit segment grew 20 percent to Rp 64 trillion in June from a year ago, contributing 58 percent to the bank’s overall lending portfolio.

Automotive financing subsidiary PT Adira Dinamika Multi Finance (ADMF) contributed 44 percent to Bank Danamon’s overall lending, reaching Rp 44 trillion as per June or up 26 percent from the previous year.

 “There’s a new down payment rule which is implemented for the first time for the automotive industry. Financing firms need time to adjust,” Vera said. “We hope the market will recover, and, in the meantime, we will grow business sectors which are not affected — SME, micro, trade finance.”

 Banks and multifinances as of June this year have to demand between 20 and 30 percent down payment requirement for automotive and housing loans, stricter than zero requirement previously as the central bank and government aim to prevent overheating in consumer loans.

 “It’s too early to see the impact of the new down payment rule. There’s a slide in financing by 16 percent from May to June, but May figures were not normal because consumers stockpiled credit in anticipation of the new regulation,” Adira’s new president director Willy S. Dharma told reporters.

 “We hope if there’s a landing it’s not hard landing, but soft landing,” Willy added. Indonesia’s rapid economic growth of more than 6 percent in the past couple of years has boosted consumer demand and loan growth in Southeast Asia’s largest economy, with car and automotive sales surging to a record high last year.

 “Current macroeconomic conditions mean loan growth momentum will continue in the third and fourth quarters of this year,” Vera said, citing targets to grow lending by between 18 and 20 percent throughout this year.

 As bad loans and capital strength remained manageable, Bank Danamon is upbeat about further healthy growth this year. Gross non-performing loans (NPL) ware at 2.5 percent in June, well below the central bank’s 5 percent threshold, while capital adequacy ratio (CAR) was at 18.8 percent, far higher than the 8 percent minimum requirement.