Bank Danamon loans, profit up

Bank Danamon loans, profit up

The Jakarta Post, Jakarta

Publicly listed Bank Danamon announced on Wednesday an 8.5
percent increase in its unaudited nine-month net profit, thanks
to rapid expansion in lending, particularly consumer lending.

The country's fifth-largest bank by assets booked an after-tax
profit of Rp 1.89 trillion as of September 2005, as compared to
the Rp 1.75 trillion it posted in the same period last year.

The bank's outstanding loans grew by 38 percent, from Rp 25.98
trillion a year ago to Rp 35.72 trillion this year, pushing its
net interest income to rise by 18 percent to Rp 3.47 trillion.

Danamon, which currently manages Rp 44.66 trillion in third-
party funds, recorded a 9 percent rise in its net interest margin
in the first nine months, higher than the 8 percent increase in
the corresponding period a year earlier.

In total, consumer loans make up 42 percent of total loans, as
compared to 41 percent last year, dominated by lendings for
vehicle purchases of 76 percent, thanks to the lender's vehicle
financing firm Adira Finance's sound performance, having booked a
37 percent rise in net income from Rp 257 billion to Rp 353
billion.

With the fairly solid nine-month showing, Vera Eva Lim,
Danamon's chief financial officer, said full-year loans were
expected to grow by 22 percent to 25 percent from the 2004 full
year figure of Rp 29.4 trillion.

"Higher interest rates will curb loan growth by consumer-
related companies next year," Vera said.

The central bank has been aggressively raising its reference
interest rate in past months to help contain inflation and keep
the rupiah attractive. The central bank's benchmark interest rate
currently stands at 11 percent.

Next year's outlook, however, was not that bright, according
to president director Sebastian Paredes.

"We project that lending will grow slower to about 20 percent
next year as a result of the current economic situation and
higher interest rates," said Sebastian.

The bank also reported a decline in its nonperforming loans
(NPL) from Rp 1.5 trillion (5.8 percent of total loans) last year
to Rp 786 billion (2.2 percent) in 2005.

"We have been reasonably disciplined in extending our credit
and strong loan recoveries have resulted in a decline in our
NPL," added Sebastian.

The capital adequacy ratio (CAR) weakened from 30.2 percent in
the same period last year to 24.4 percent.

Shares in the bank, controlled by Singapore's state-owned
investment company Temasek Holdings Pte. Ltd., rose 1.3 percent
on Thursday to close at Rp 3,875.