Publicly listed lender Bank Danamon, the nation'€™s sixth-largest bank by assets, saw its net profits plunging 16 percent in the first half of this year dragged down by weak loans in the automotive and micro sectors.

Bank Danamon, owned by Asia Financial, a unit of Singapore'€™s Temasek, booked Rp 1.25 trillion (US$92.97 million) in profits in the January-June period of this year, down from Rp 1.49 trillion in the same period last year, the lender announced on Tuesday.

Lending contracted by 3 percent to Rp 136.3 trillion as of June this year from Rp 140.64 trillion in June 2014, as Bank Danamon'€™s auto-financing unit, which makes up 40 percent its loans, was hit by a nationwide slump in automotive and motorcycle sales.

'€œOur credit demand is generally down,'€ Danamon president director Sng Seow Wah told a press briefing.

Bank Danamon'€™s automotive-focused financing unit and micro-loan segment led declines in its lending portfolio in the first half of the year from the same period a year ago, with its micro-lending product Danamon Simpan Pinjam suffering an unexpected 15 percent decline to Rp 17.4 trillion from
Rp 20.4 trillion.

Indonesia'€™s economy has sunk to its lowest level in more than five years and automotive sales, which are among the key indicators of economic growth in Southeast Asia'€™s largest economy, have slumped.

Financing subsidiary PT Adira Dinamika Multi Finance, which focuses on car financing, saw its vehicle and consumer product financing dropping by 4 percent to Rp 48.6 trillion in the first half of this year, from Rp 50.8 trillion in the same period last year. Financing for banking corporations was down by 5 percent to Rp 17.7 trillion.

'€œOur motor vehicle financing disbursements declined by 11 percent compared to the same period last year,'€ said Adira Finance director I Dewa Made Susila.

Domestic automobile and motorbike sales plummeted 23 percent and 18 percent, respectively, in the first half of this year from the
same period, Made said, adding
that high secondhand-vehicle financing demand had helped his company avert a steep decline in financing.

Meanwhile, gainers in the bank'€™s lending portfolio included SME loans, which rose 7 percent to
Rp 21.6 trillion, retail credit'€™s 16 percent growth to Rp 11.4 trillion and its sharia unit lending that surged 46 percent to Rp 2.8 trillion.

Bank Danamon'€™s weak lending performance was exacerbated by a rising non-performing loan (NPL) ratio to 2.9 percent as of June, from 2.1 percent in the same period last year. '€œThe NPL is dominated by mining-related corporations that borrow to fund their heavy equipment.

This situation has been ongoing for the past two years,'€ said Bank Danamon director and chief financial officer Vera Eve Lim, adding that the NPL ratio remained manageable and below the banking regulator'€™s 5 percent threshold.

Vera predicted flat business growth in the second half of this year if the economic slowdown continued.

The Financial Services Authority (OJK), the banking regulator, recently slashed its full-year nationwide loan growth target to 13 to 14 percent from the previous 16 to 17 percent.

Shares in Bank Danamon, under the code BDMN on the Indonesian Stock Exchange, traded at Rp 4,085 on Tuesday, having dropped nearly 10 percent so far this year, in line with the decline suffered by the broader Jakarta Composite Index. (prm)

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