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ublicly listed lender PT Bank Danamon Indonesia (BDMN) estimates its net interest margin (NIM) ratio will decline in the fourth quarter, which has been triggered by higher costs of funds and other expenses.

According to Danamon finance director Vera Eve Lim, the bank'€™s NIM is predicted to fall to 9.5 percent in the fourth quarter from the 9.7 percent recorded in the previous quarter.

'€œOur costs of funds will increase due to the latest hikes in benchmark interest rates, which will squeeze the NIM,'€ she said on Thursday.

She added the costs of the funds, which are the interest costs paid for the usage of depositors'€™ funds, were predicted to surge by 20 basis points in this year'€™s fourth quarter from the third quarter.

The higher interest rates would continue to put pressure on its NIM next year, Vera said, adding that the changes in the global economy would also impact on some of its credit segments.

'€œWe'€™re being cautious and anticipating a slowdown in mining, heavy equipment and trade finance sectors. The three sectors have begun to show signs of slowing,'€ Vera said.

Danamon reported it booked Rp 3 trillion (US$264.29 million) in net profits between January and September, growing only slightly by 1 percent from the same period last year.

It attributed the rise to higher net interest and fee income. In the third quarter, the net interest income grew 5 percent to reach Rp 10.1 trillion, while its fee income surged 12 percent to Rp 3.7 trillion.

According to Vera, during the period, all of its loan segments recorded an increase, which led its outstanding loan disbursements to reach Rp 129 trillion, 14 percent higher than in 2012.

The bank'€™s latest financial results show that the mass market is the biggest segment in loans, making up for 53.4 percent of the total portfolio, followed by small, medium and commercial with 27.1 percent, wholesale with 13 percent and retail with 6.4 percent.

In the mass market segment, subsidiary PT Adira Dinamika Multi Finance, which provides automotive financing, reported a 5 percent rise in its loans to top Rp 47.38 trillion year-on-year.

Adira president director Willy Suwandi Dharma said his company had slowly begun to recover from the impact of Bank Indonesia'€™s (BI)loan-to-value (LTV) regulation that had been implemented since last June.

According to the Association of the Indonesian Automotive Manufacturers (Gaikindo), the sales of cars rose by 9 percent to 891,000 units between January and September from a year ago.

Meanwhile, the Indonesian Motorcycle Industry Association (AISI) reported that motorcycle sales were up 8 percent to 5.8 million units.

In the third-party funds segment, Danamon posted a 16 percent increase to Rp 102.32 trillion. The highest rise was recorded in demand deposit, which jumped 55 percent to Rp 20.7 trillion.

The financial report shows that as of September, Danamon'€™s total assets amounted to Rp 173.09 trillion. Its liabilities and equities reached Rp 142.87 trillion and Rp 30.23 trillion, respectively.

The bank'€™s shares ended at Rp 4,100 apiece on Thursday at the Indonesia Stock Exchange (IDX), unchanged from a day before.