(tribunnews.com)

The nation'€™s sixth-largest bank by assets, Bank Danamon, has revealed that its net profits after tax reached Rp 1.9 trillion (US$138.5 million) in the first nine months of 2015, down 10 percent from Rp 2.106 trillion in the same period last year.

The decline in profits was triggered by a weak loan business in the micro and auto financing segments, a Danamon official said in Jakarta on Monday.

Danamon director and chief financial officer Vera Eve Lim said the bank had seen some improvement though over the past few months, as its after-tax net profit grew by 14 percent to Rp 643 billion in the third quarter from the second quarter.

"We have implemented several changes at the beginning of this year to improve our business performance. These changes show promising results, although they are still at an early stage," said Vera.

In the first nine months of 2015, Danamon's loans to the small and medium enterprises (SME), commercial and corporate segments grew over the same period of last year. However, this growth was offset by a decline in consumer credit, especially in the segment of micro and auto financing. Overall loans fell by 4 percent to Rp 133.6 trillion in the first nine months of 2015 from Rp 139 trillion in the same period last year.

Loans in the SME segment grew 7 percent to Rp 22.6 trillion, while the commercial segment saw loan growth of 5 percent to Rp 16.2 trillion from Rp 15.4 trillion. Credit in the corporate segment increased by 5 percent to Rp 18.3 trillion from Rp 17.4 trillion.

Loans to the micro segment, issued through Danamon Savings and Loans (DSP), amounted to Rp 16.1 trillion, down 18 percent from Rp 19.6 trillion last year. Automotive financing and consumer goods loans, issued through Adira Finance, dropped 7 percent to Rp 47.6 trillion from Rp 51.1 trillion in the same period last year.

"The ratio of non-performing loans (gross non-performing loans) stood at 3.0 percent. This figure is still below the regulatory limit of 5 percent, "said Vera, adding that Danamon was striving to improve the quality of its assets through the application of strict risk management procedures and disciplined collection and recovery of debt.

In the first nine months of 2015, Vera further said, Danamon's current and savings accounts (CASA) accounted for 45 percent of customer deposits, up from 43 percent in the same period last year. CASA balances grew by 5 percent to Rp 53 trillion from Rp 50 trillion last year. Time deposits decreased 4 percent to Rp 63.2 trillion. This CASA growth composition resulted in a cost of funds (COF) of 6 percent, slightly improved from 6.4 percent in the same period last year.

The loan to funding ratio (LFR) stood at 91.1 percent, little changed from 91.3 percent in the same period last year and below the limit of 94 percent, as mandated by Bank Indonesia. Meanwhile, Danamon's consolidated capital adequacy ratio (CAR) consolidation stood at 19.1 percent, while the standalone CAR was at 20.1 percent.

In the third quarter, the lender posted an improved cost-to-income ratio of 51 percent compared to 54.6 percent in the second quarter. Net interest margin (NIM) grew from 7.8 percent in the second quarter to 8.3 percent in the third quarter thanks to the lower cost of funds.

Vera added that Danamon was running several initiatives to improve productivity and reduce the cost of funds. "Mainly, we are focused on improving coverage and the quality of our customer service by restructuring the service network and our sales," said Vera. (ebf)

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