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T Bank DBS Indonesia has targeted a 20-25 percent revenue increase from cash management this year, with the joint venture lender proposing a new cash management program for its customers.

The free-of-charge program, Working Capital Advisory, was launched on Tuesday by DBS Indonesia, a subsidiary of Singaporean DBS Group Holding Ltd., to enable corporations and small and medium enterprises (SMEs) to manage their cashflows better.

DBS Indonesia cash management head Iwan Rusli said that the demand for cash management programs would always grow even though the economy was currently facing a number of challenges.

'€œCash management programs will help our customers increase the efficiency of their operations in sluggish economic conditions. So I think our revenue from cash management will grow around 20-25 percent this year,'€ he said.

Irwan added that the cash management business, alongside trade finance in the Global Transaction Services (GTS) division, had contributed 33 percent of the bank'€™s total revenue in the first half of this year.

He explained that the cash management business contributed around 40 percent to the bank'€™s GTS division, while the remaining came from trade finance.

During the first semester of this year, DBS Indonesia posted Rp 1.04 trillion (US$88.63 million) in net interest income, an increase of 40.99 percent from Rp 737.6 billion in the same period last year.

However, the bank posted a loss of Rp 718.9 billion in non-interest income, down further by 38.3 percent from Rp 441.9 billion in the same period last year.

Iwan said that the Working Capital Advisory program was being offered to existing and prospective institutional customers in order to reduce their banking costs and unlock trapped cash inside their cashflows.

Iwan said that during DBS'€™ pilot program in Asia, participating companies were typically able to identify a 20-30 percent increase or a possible S$5 million-1 billion in cashflow.

According to the Atradius Payment Practices Barometer in November 2013, 52 percent of 2,300 institutional banking customers of DBS Indonesia agreed that cashflow-related issues in the country would be the greatest challenge to profitability.

'€œThe program will help them to release their huge amount of trapped cash, which provide leeway for them to lessen their need for working capital, as well as increasing their profits,'€ he said.

Also on Tuesday, DBS Indonesia trade finance head Guntur Widodo expressed his hope that the program would help his sub-division to achieve their target of S$1.4 billion (Rp 13.1 trillion) in trade loans by the end of this year, an increase of 16.6 percent from around S$1.2 billion in the first half of the year.

Guntur said that the trade finance sub-division of DBS Indonesia served 400 institutional customers, the majority sellers and buyers in domestic trade.

According to Guntur, DBS Indonesia will reach more SMEs, which are currently categorized by the bank into four categories of business turnover or minimum annual sales volume of Rp 135 billion, Rp 675 billion, Rp 1.8 trillion and above Rp 1.8 trillion.

In its first half financial report, DBS Indonesia booked Rp 217.4 billion in net profit, a decrease of 40.73 percent from Rp 366.8 billion in the same period last year.

The bank posted Rp 39.50 trillion in loans in the first half of this year, an increase of 7.89 percent from Rp 36.61 trillion in the same period last year.

However, its non-performing loan gross (NPL) surged to 3.06 percent in the first semester this year from 0.56 percent in the same period last year.

DBS Indonesia president director Melvin Teo refused to comment when asked about the cause of the rising NPL, although he asserted that the bank always managed its portfolio based on periodical stress tests for each sector held by its internal risk management division.

'€œWe have just finished our stress tests and we are quite comfortable now. We are very careful in choosing customers for our bank and we always make sure that we are there to support our customers when the economic cycle is not doing so well,'€ he said. (gda)