Danamon profit up 68%, to buy more Adira shares

Danamon profit up 68%, to buy more Adira shares

Tony Hotland, The Jakarta Post, Jakarta

Publicly listed Bank Danamon reported on Wednesday that net
profit in the first nine months of the year surged by 68.1
percent compared to the same period of last year on the back of
higher net interest income.

The country's fifth largest lender by assets said net profit
increased to Rp 1.75 trillion (US$192.63 million) from Rp 1.04
trillion in the third quarter of last year.

Net interest income rose by 67.6 percent to Rp 2.94 trillion.

"Net interest income increased as a result of an expansion in
net interest margins, which largely benefited from lower cost of
funds amid the low interest environment," Danamon chief financial
officer Vera Eve Lim told a press conference when announcing the
bank's unaudited third quarter financial results.

Banks here have been enjoying higher net interest income due
to the declining trend in the central bank's benchmark interest
rate. This helped lower the interest expenses paid by banks to
depositors, thus reducing cost of funds.

Danamon, which currently manages Rp 36.44 trillion in third-
party funds, trimmed interest expenses to Rp 1.77 trillion from
Rp 2.61 trillion.

The net interest margin improved to 8.1 percent in the first
nine months against 5.3 percent previously.

Outstanding loans grew by 27.7 percent to Rp 26.75 trillion
from Rp 20.95 trillion, largely boosted by significant growth in
consumer and commercial loans (including loans to small and
medium enterprises), leading to a higher loan to deposit ratio at
74 percent.

These two loan categories accounted for 76 percent of the
bank's loan portfolio as of September, while corporate loans made
up the rest.

Danamon's president director, Francis A. Rozario, said full-
year net profit was expected to hit around Rp 2.2 trillion, which
was higher than the initial target, while lending was targeted to
reach Rp 30 trillion.

"Next year, we project net profit to grow by 20 percent as
total lending is set to expand by 30 percent," Rozario said.

The bank also plans to pay out 50 percent of its nine months
profit as interim dividend, amounting to Rp 877 billion or Rp 178
per share, by December.

Danamon's profitability was also backed by the growth of its
financing unit, Adira Finance, which booked Rp 257 billion in net
profit in the first nine months -- up 122 percent compared to the
same period last year.

Adira's total new financing grew by 102 percent to Rp 4.4
trillion, mainly driven by financing for new motorcycle
purchases.

"In total, Adira will likely contribute about 15 percent to
our profit. Adira will also possibly issue Rp 500 billion to Rp 1
trillion worth of bonds next year," said Rozario.

He added that Danamon planned to acquire another 20 percent of
the shares in the firm by 2006 at the latest. Danamon holds 75
percent of the shares in Adira at the moment.

Danamon's capital adequacy ratio climbed to 31.9 percent from
25.3 percent due to both the bank's better earnings as well as
the issue of $300 million worth of subordinated debt in March.

However, the non-performing loan ratio went up to 5.8 percent
from 5.1 percent previously, 70 percent of which was due to loan
assets purchased from the now disbanded Indonesian Bank
Restructuring Agency.