Bank Danamon reports first quarter profit of Rp 171b

Bank Danamon reports first quarter profit of Rp 171b

JAKARTA (JP): The publicly-listed Bank Danamon announced on
Tuesday that its first quarter profit reached Rp 171 billion,
more than half of the 2000 full-year profit of Rp 306 billion.

Danamon president Arwin Rasyid said, however, that the sources
of the profit were still dominated by interest revenue from
government bank recapitalization bonds as outstanding loans were
only around Rp 6.3 trillion.

"The contribution of the (government) bonds is still huge...
More than 70 percent of (our profit) comes from the interest paid
on the bonds," Arwin told a press conference announcing the
results.

The government has issued around Rp 430 trillion worth of
bonds to finance the recapitalization of a number of local banks.
The state budget covers the interest on the bonds.

Bank Danamon, which is one of the country's largest private
banks, received around Rp 41 trillion worth of bonds carrying an
average interest rate of 12.5 percent, compared to the lending
rate of around 18 percent.

Arwin said that the bank's profit this year was expected to
reach some Rp 500 billion, but it would depend on developments in
local interest rates and the exchange rate of the rupiah against
the U.S. dollar.

He said that the current fluctuation in interest rates and the
rupiah was discouraging the business sector from expanding
activity, thus limiting the room for banks to channel loans.

"It's still too early to predict what will happen because
there's still seven months to go. Let's hope that the current
conditions are only temporary," he said.

Danamon earlier this year said that it planned to channel
around Rp 4.5 trillion in new lending in 2001, which is
equivalent to around Rp 1.1 trillion per quarter. But new lending
in the first quarter of this year amounted to only Rp 702
billion.

The rupiah has been under strong pressure during the past
couple of months partly due to domestic political instability.
The fluctuation in the rupiah plus the inflationary threat, has
forced Bank Indonesia to keep raising its benchmark interest
rate, which is currently hovering at around 16.30 percent.

Bank Indonesia deputy governor Miranda Goeltom said on Monday
that the central bank would continue to maintain its high
interest rate policy to counter the inflationary threat.

But Arwin warned that if the interest rate on Bank Indonesia
one-month SBI promissory notes reached the 18 percent level,
recapitalized banks, particularly those holding a larger amount
of fixed rate bonds carrying a 12.5 percent interest rate, would
suffer greatly.

Some bankers had earlier said that if the Bank Indonesia
interest rate continued to increase, their banks would suffer a
negative spread problem.

Bank Danamon also said that non-performing loans (NPLs) in the
first quarter remained at the 8.6 percent level.

Arwin was optimistic that the NPL level could be reduced to
the 5 percent level by the end of this year as required by Bank
Indonesia.

Bank Danamon said that its capital adequacy ratio (CAR) in the
first quarter increased slightly to 58.8 percent from 58 percent
at the end of last year.

The central bank has required that banks must have a minimum
CAR level of 8 percent by the end of this year or risk closure.

The bank also said that third party funds in the first quarter
increased to Rp 32 trillion from Rp 30.6 trillion at the end of
2000.

Bank Danamon's first quarter performance could not be directly
compared with the performance in the same period last year
because the bank had not yet merged with eight other banks at
that time. The merger was only completed in June of last year.

Arwin also said that Bank Danamon managed to settle its major
debts to foreign institutions.

He said that the bank had settled its debt with Peregrine
Fixed Income Ltd and was only required to pay around $44 million
of the total debt of US$114 million to the company due to a 70
percent discount.

Danamon had also settled its $95.9 million debt to Sumitomo
Syndicated Lenders by only having to pay around $42.3 million,
the equivalent of a 56 percent discount. (rei)