Bank Danamon net profit jumps by 79%

Bank Danamon net profit jumps by 79%

Rendi A. Witular
Jakarta

Publicly listed Bank Danamon announced on Tuesday that its
first half net profit as of the end of June jumped by 79 percent
as compared to the same period last year, primarily on higher net
interest income resulting from lending expansion and lower
funding costs.

The country's fifth largest bank in terms of assets said that
net profit increased to Rp 1.1 trillion (about US$122 million) in
the first six months of this year as against Rp 615 billion a
year ago.

The bank's net interest income rose by 93.3 percent to Rp 1.97
trillion.

"Net interest income increased due to the rise in net interest
margins, which have benefited from lower funding costs," said
Danamon chief financial officer Vera Eve Lim at a press briefing
on Tuesday.

Vera said that the current declining trend in the Bank
Indonesia benchmark interest rate had pushed down interest rates
for savings and deposits, thus reducing the cost of funds. The
bank's interest expenses declined to Rp 1.17 trillion from Rp
1.95 trillion.

The bank's net interest margin improved to 7.9 percent in the
first half as compared to 4.4 percent during the same period last
year.

Danamon said that outstanding loans grew by 12.4 percent to Rp
23.8 trillion from Rp 21.2 trillion, mainly due to significant
growth in consumer loans, which increased by Rp 2.4 trillion, and
commercial loans (including loans to small and medium
enterprises), which grew by Rp 753 billion.

These two loan categories accounted for 67 percent of the
bank's total loan portfolio as of June this year.

Other operating income, which includes fee-based income,
dropped to Rp 797 billion in the first half from Rp 856 billion
in same period last year due to losses resulting from a decline
in the value of marketable securities.

Overall, however, the bank said that strong profitability had
improved the bank's financial ratios, with capital adequacy ratio
(CAR) increasing to 33.3 percent from 24.2 percent, and return on
equity and return on assets increasing to 35.2 percent and 4.2
percent respectively.

But the bank acknowledged that its non-performing loan ratio
had increased to 3.2 percent from 1.5 percent previously, but
said this was mainly attributable to the bank's new policy of
downgrading the collectibility of some loans, including
unrestructured non-performing loans purchased from the now-
defunct Indonesian Bank Restructuring Agency (IBRA).