TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Danamon aims to spin-off its sharia business unit
Bank Danamon has been preparing its sharia business unit for a spin-off, the execution of which will most likely occur within the next five years, pending the strengthening of the sharia unitâs assets, a top executive said
Change Size
B
ank Danamon has been preparing its sharia business unit for a spin-off, the execution of which will most likely occur within the next five years, pending the strengthening of the sharia unit's assets, a top executive said.
Danamon president director Henry Ho said on Tuesday that the process to separate the unit, Danamon Syariah, from the private lender was ongoing.
'We are preparing it. The whole idea is to make sure that we build a critical size before we spin it off. There's no point of spinning off if it's too small because there's no economy of scale,' he said.
Ho added that in Danamon's view, critical size meant Danamon Syariah owning between Rp 12 trillion (US$1 billion) and Rp 15 trillion in assets.
By the end of June, the unit held Rp 2.8 trillion in assets, as shown by Danamon's first-half financial report. Its outstanding financing amounted to Rp 2.1 trillion, while its third-party funds reached Rp 2 trillion.
Ho said that Danamon Syariah would stick to its focus on disbursing loans to small- and medium-scale enterprises (SMEs) and to cooperatives, as they provided better margins.
At present, 80 percent of the unit's financing portfolio is disbursed to SMEs and cooperatives. 'We will also focus on the microfinance segment to raise the assets,' he said.
Latest banking statistics, jointly published by the Financial Services Authority (OJK) and Bank Indonesia (BI), show that there were 11 sharia banks and 23 banking business units operating across the country by the end of July.
Assets owned by the sharia industry reached Rp 244.21 trillion, representing a tiny 4.8 percent of the nation's total banking assets.
Danamon director and sharia business unit head Herry Hykmanto said that the unit was targeting around 20 percent growth in its overall financing in 2014. Last year, the company's total financing stood at about Rp 1.88 trillion.
'Our targeted segments are in transportation and trading. We also plan to run a total of 200 channeling offices by year's end, an increase from the 178 that we have now,' he added.
Third-party funds are expected to climb to Rp 2.7 trillion at the end of the year, up from the Rp 1.4 trillion posted in 2014.
To reach the funding target, Herry said that the unit would roll out new savings products. 'We want to raise the portion of CASA [current account savings account] by offering new savings products. The CASA makes up for 40 percent of total funding,' he added.
Part of the savings will include the company's BISA Qurban saving account, a product launched on Tuesday to facilitate customers seeking to finance qurban (goat or cow sacrifice).
Danamon Syariah hopes to attract 8,000 new customers from the new product and it has so far seen 500 new accounts opened during the August trial phase.
By setting the 2014 financing and third-part funds target, the unit is looking to reduce its financing-to-deposit ratio (FDR) ' the equal ratio of loan-to-deposit ratio (LDR) in sharia banking ' to 100 percent, down from 111 percent recorded in the first half.
Unlike the LDR in the commercial banking, no benchmark has been set for the FDR.
Meanwhile, Danamon's shares, sold under the BDMN code, ended at Rp 3,700 apiece, down 0.5 percent from the previous day.
