Bank Danamon suffers from drop in profits due to auto slump
Bank Danamon has suffered a 62.1% yoy drop in its net profits to Rp 1.26tn ($94.2mn) in May due to a continuing slowdown in the automotive industry.  Indonesia's automotive and motorcycle sales are down 16.6% and 24.7% respectively due to sluggish demand and a rise in commodity prices.
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Linkedin Tassia Sipahutar (The Jakarta Post) Jakarta ● Mon, June 29, 2015

Midway through the year, some major banks are facing the possibility that profits may be less robust than in previous years, the latest unaudited financial statements suggest.



Private lender Bank Danamon suffered a 62.1 percent year-on-year (yoy) drop in its net profits to Rp 1.26 trillion (US$94.2 million) in May 2015, according to its data.



Its net interest income surged 4.5 percent yoy to Rp 4.11 trillion on the back of falling outstanding loans, which fell 1.1 percent yoy to Rp 106.94 trillion.



In May 2014, Danamon's loans grew at an annual pace of 13.2 percent.



Danamon finance director Vera Eve Lim attributed the result to continued slowdown in the automotive industry.



'Loans [were] impacted by auto. The industry has continued to trend lower for both two wheels and four wheels. SMEs [small and medium enterprises] and commercial grew about 10 percent, including sharia business,' she said in a text message on Sunday.



Automotive loans are one of Danamon's largest lending segments and the bank has for several quarters suffered the effects of rising commodity prices chipping away at demand for automotives.



Sluggish automotive demand 'which initially started in commodity-based regions ' had made its way into Java, the country's most populous island, Vera said.



The latest data on automotive sales help explain Danamon's weak loans; domestic car sales reached 443,181 units in May, down 16.6 percent yoy. The motorcycle industry also delivered a lackluster performance, selling 2.6 million units in May, 24.7 percent fewer than the previous year.



Vera said that Danamon would try to maintain growth for the remainder of the year, at the same time as avoiding 'negative selection'.



PaninBank, another private lender, reported a 13.4 percent yoy drop in its bottom line to Rp 791.38 billion in May.



Panin's loans grew at a similar rate as in the same period last year, hovering at 9.2 to 9.3 percent, showing no significant improvement in lending over the one-year period. As of May, the lender's outstanding loans amounted to Rp 114.15 trillion.



Panin vice president director Roosniati Salihin said that the bank would remain vigilant in the face of economic slowdown and market uncertainty. 'We will push loan disbursement to a maximum 15 percent this year,' she told The Jakarta Post.



Meanwhile, among the top 11 listed banks, Bank Tabungan Negara (BTN) and OCBC NISP became the second and third major banks to post upticks in profit growth, following Bank Mandiri.



State-owned BTN, which specializes in mortgages, is turning its business around after posting a poor performance in 2014. Its net profits surged by a half to stand at Rp 677.53 billion in May.



BTN president director Maryono previously said the bank was on track to reach its yearly business targets. BTN is aiming to book lending growth between 17 percent and 19 in 2015.



Private lender OCBC NISP, part of Singapore's group OCBC, pushed its bottom line up by 9.7 percent yoy to Rp 622.89 billion, according to its May report.



OCBC NISP president director Parwati Surjaudaja said that the bank had booked a positive result on the back of loan growth.



Parwati also attributed the increased profits to efforts to curtail third-party fund growth, helping to improve the lender's cost of funds.