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Danamon's new boss to boost CASA
The new president director of Bank Danamon has said that there is still room for the private lender to attract deposits as it eyes higher current accounts and savings accounts (CASA) in the coming years
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The new president director of Bank Danamon has said that there is still room for the private lender to attract deposits as it eyes higher current accounts and savings accounts (CASA) in the coming years.
According to Sng Seow Wah, who took the helm from Henry Ho in late February, CASA expansion is among the bank's main focuses this year, as it would enable the lender to generate cheap funds to finance lending operations.
'That's something we're working on at the moment. It requires you to have a very clear strategy about how to attract customers to open accounts with you,' he told The Jakarta Post recently.
'It sounds very easy, but it takes a while to implement. In the end, we have to ask a very fundamental question about why customers want to bank with us,' he added.
Sng acknowledged that Danamon was in the habit of using time deposits to fund its lending expansion, especially as liquidity has tightened over the past few years.
The bank's loans-to-deposit ratio (LDR) ' which reflects its liquidity ' spiked to 100.7 percent in 2012 and 95.1 percent in 2013, higher than the 92 percent limit set by banking regulators.
Danamon's financial reports show that time deposits have dominated its third-party funds portfolio since 2010 at the most recent.
Until the first quarter of 2015, time deposits accounted for 53.7 percent of total third-party funds, while CASA accounted for 46.3 percent.
The total amount of third-party funds reached Rp 116.5 trillion (US$9.06 billion) between January and March.
The reliance on time deposits has proved costly for the bank because it had to pay a high interest rate on customer funds, resulting in growing costs and compressed profitability.
'So we are putting in a lot of work to collect more current accounts and savings accounts now. Our intention is not just to increase our CASA, but to ensure quality CASA that will remain with us,' Sng said.
According to Sng, the publicly listed Danamon will play to its mass-market strength and develop its small and medium enterprise loan segment.
Assuming that loan pricing remains the same, the bank expects the CASA strategy to improve its net interest margin (NIM), which has been declining since 2012.
By the end of the first quarter, Danamon's NIM stood at 8.3 percent, down from 8.6 percent posted in the first quarter of 2014.
Its profitability remained under pressure as its net profit amounted to Rp 686.83 billion in March, 21.5 percent less than a year ago.
Danamon finance director Vera Eve Lim attributed the low profits to flat loan growth, hovering at Rp 135.69 trillion during the first three months of the year. With flat growth, the bank booked flat net interest income as well.
Meanwhile, Danamon's fee-based income from the insurance business continued to be affected by a new regulation implemented by the Financial Services Authority (OJK), which requires such income to be amortized, contrary to the previous upfront recognition.
This has resulted in an 18 percent decline year-on-year to Rp 891 billion in the bank's non-interest income in the first quarter.
In terms of lending, Sng said that he did not expect the second quarter to be aggressive, but reasserted that the bank would, over the course of the year, reap better business results than last year.
Danamon, according to its latest financial result, controlled Rp 193.81 trillion worth of assets as of March. Its shares fell 1.9 percent to Rp 4,880 apiece on the Indonesia Stock Exchange (IDX) on Friday from the previous day.
