Bank Danamon's net profit leaps 86.3 percent

Zakki Hakim, The Jakarta Post, Jakarta

Bank Danamon announced on Thursday that its net profit in the first quarter of this year jumped by 86.3 percent to Rp 503 billion (US$59.18 million) compared to Rp 270 billion in the same period last year.

Chief financial officer Vera Eve Lim said the increase was mainly driven by higher net interest income, which was up by 55 percent to Rp 944 billion.

She acknowledge that the higher net interest margin was a result of the declining trend in Bank Indonesia's benchmark interest rate, which pushed down the cost of funds, or interest paid to depositors.

Return on average asset (ROAA) and return on average equity (ROAE) improved to 3.8 percent and 34.4 percent, respectively.

The publicly listed bank, however, said that its nonperforming loan (NPL) ratio increased to 4.7 percent (near the Bank Indonesia 5 percent limit) from 2.8 percent.

The bank said this was related to the purchase of NPL assets from the now defunct Indonesian Bank Restructuring Agency (IBRA).

But its capital adequacy ratio (CAR) increased to 38.3 percent from 25.1 percent thanks to its $300 million subordinated debt issued in March, Vera said.

She also said that outstanding loans increased to Rp 20.96 trillion from Rp 20.28 trillion, while loan-to-deposit ratio stood at 54.1 percent as of March 31.

Danamon, the country's fifth largest bank in terms of assets, is 61.88 percent owned by a consortium of Temasek Holdings and Deutsche Bank.

The bank has just completed the acquisition of a controlling stake in finance company PT Adira Dinamika Multifinance.

Danamon said that the acquisition was intended to further strengthen the bank's consumer banking business.