Indonesia Danamon Expects '03 Net To Grow 25%

Indonesia Danamon Expects '03 Net To Grow 25%

Edhi Pranasidhi
Dow Jones
Jakarta

PT Bank Danamon Indonesia expects net profit growth to slow to
around 25 percent next year, from 38 percent projected this year,
due to a fall in interest income amid declining interest rates.

"We expect our net profit to increase to around Rp 1.25
trillion next year," Bank Danamon's finance director Prasetio
said in an interview Monday.

Net growth of the bank, Indonesia's fifth largest bank by
assets, will mostly come from miscellaneous operating income,
including fee-based income, commissions and foreign exchange
gains, he said.

This year, Bank Danamon expects to book around Rp 1 trillion
(US$112 million) in net profit, up 38 percent from Rp 723 billion
last year.

The net profit rise this year, which is above a previous
estimate of 18 percent, is due to a forecast increase in the
bank's loan portfolio to Rp 18 trillion by year-end from an
earlier projected Rp 10 trillion.

Prasetio said interest income next year is likely to remain
flat or slightly lower, given expected falling interest rates,
but he wouldn't provide an estimate.

The government has been guiding rates lower to help boost
growth, with the benchmark one-month central bank note now at
12.99 percent, down from over 16 percent a year ago.

Bank Danamon booked net interest income of Rp 3.74 trillion in
the nine months ended Sept. 30, down 11 percent on year from
Rp 3.91 trillion.

But higher miscellaneous operating income of Rp 456.12
billion, compared with Rp 250.69 billion last year, lifted net
profit for the first nine months of this year to Rp 725.26
billion, a rise of 26 percent from Rp 576.82 billion a year ago.

In a bid to support net profit growth, the bank expects to
increase its loans-to-deposits ratio next year to around 56
percent from a target of 48 percent this year, Prasetio said.

Bank Danamon expects to extend Rp 28 trillion in loans next
year.

Established in 1956, Bank Danamon has Rp 48 trillion in assets
representing 5 percent of the system. The bank is publicly
listed, but is 99.35 percent owned by the Indonesian government
after a bailout following the 1997 Asian economic crisis.

The government plans to divest most of its stake in the bank
next year. It plans to sell a 20 percent stake via a public
offering and a 51 percent stake to a strategic shareholder, which
will also have management control of the bank.

In an effort to attract investors to buy the government's
stake, Bank Danamon's management and senior government officials
will hold a roadshow early next year in several countries in
Europe and Asia, Prasetio said. He didn't elaborate.

Banking industry sources said the government expects to
complete the sale of the planned 71 percent stake by March or
April.

The government had planned to sell the stake in November, but
it had to delay the move to early next year as the recent bomb
blasts in Bali damped investor sentiment.

The roadshow is expected to become a vehicle for the
government to brief investors on the investment climate in
Indonesia after the bombings, said Prasetio.

To attract investors, Bank Danamon's management also plans to
boost the share price by combining five existing shares to one
new share. The 5-for-1 reverse stock split is expected to be held
in the first quarter of next year.

Bank Danamon shares closed 7.7 percent higher Friday, the last
trading of the year, at Rp 350.

"I expect that the bank's share price will be at between
Rp 1,500 and Rp 1,800 after the reverse stock split," Prasetio
added.