Danamon expects 50 percent increase in profits this year

JAKARTA (JP): Publicly listed Bank Danamon expects to book a 50 percent increase in net profit to Rp 500 billion (US$42.4 million) this year from Rp 333.9 billion last year.

The bank said in a statement over the weekend that it has prepared a number of corporate strategies to achieve the target, such as swapping some portions of its recapitalization bonds with assets now held by the Indonesian Bank Restructuring Agency (IBRA).

Last year, the bank received bonds worth Rp 65.35 trillion from the government to improve its capital level but it did not really help the bank's cash flow.

"The bank will also reduce the portion of time deposits in its funding sources as the interest rate, which is higher than other savings, have become a burden for the bank," the statement said.

Last year, time deposits contributed about 70 percent of the overall funding sources. Checking accounts and savings only contributed about 30 percent.

Danamon, which last year took over eight smaller banks, also planned to increase total lending by 75 percent to Rp 10.4 trillion this year from Rp 5.9 trillion in 2000.

Last year, the bank launched several new products including account transfers through ATM, telephone bill payments, life insurance called Primajaga in cooperation with Zurich Life Insurance, and credit card payments jointly with ANZ Panin Bank and HSBC.

Bank Danamon, which was one of the country's largest private banks, was nationalized by the government in April 1998 after its shareholders failed to repay emergency funds from the government. The funds were channeled to save the bank from collapse after is suffered financial problems due to the country's economic crisis.

The government later merged Bank Danamon with eight other smaller nationalized banks -- Bank Rama, Bank Tiara Asia, Bank Duta and Bank Tamara, and nonlisted Bank Pos, Bank Jaya, Bank Nusa Nasional and Bank Risjad Salim -- in June last year as part of its bank restructuring program.

Bank Danamon said that its nonperforming loan (NPL) reached 8.6 percent at the end of 2000 after the successful restructuring of most of its lending.

Its capital adequacy ratio (CAR) also reached about 40 percent, far higher than the eight percent level that must be met by local banks by the end of this year. (05)