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)