DANAMON STARTS POSTING PROFIT AFTER MERGER.
The financial data of Bank Danamon showed that the profit was not attributable only to an increase in interest income from Rp 3.5 trillion in 1999 to Rp 5 trillion in 2000, but also to a decrease in cost of fund and other costs. In 1999, cost of fund totaled Rp 6.4 trillion. In 2000, it dropped to Rp 3.9 trillion.
In 1999, Bank Danamon set aside Rp 1.9 trillion of its income to cover non performing credit writeoff, but in 2000, the fund reserved for that purpose dropped to only Rp 82 billion. See the following table.
Table - 1 Profit/Loss report of Bank Danamon, 1998 - 2000 (Rp billion)
Description 1998 1999 2000 Interest income 6,107 3,560 5,062 Interest cost 14,211 6,427 3,889 Net interest income (cost) (8,104) (2,867) 1,172 Other operating incomes 265 761 231 Operating income/cost (7,839) (2,106) 1,404 Operating costs 1,241 1,116 882 Net operating income/cost (9,080) (3,221) 522 Foreign exchange loss 993 -- 261 Non operating income/cost (66) (88) 128 Net income/cost before fund against writeoff (10,139) (3,309) 388 Fund against write-off 17,732 1,899 82 Profit/loss before tax (27,871) (5,208) 306 Income tax (2,167) 1,794 -- Net profit/loss (25,705) (7,002) 306
Source: Bank Danamon
Financial performance low
Despite the profit, the financial performance of Bank Danamon is still low. After the merger in which Bank Danamon as the survising company, its assets rose 133% from Rp 25 trillion to Rp 60 trillion. Its credits also rose to Rp 6 trillion or an increase of 183% from Rp 2 trillion in the year before. The amount of public funds it held (giro, savings and deposits) rose 56% to Rp 11 trillion including Rp 2.7 trillion from the 8 defunct banks.
Higher increase in credit than the increase in the amount of public funds pushed up its Loan to Deposit Ratio (LDR) to 19.4% from 11.6% in 1999. The figure was still too low as only 19% of the public funds channelled as a productive credits.
The high increase in its assets was caused partly by the government bonds it holds that its capital adequacy ratio (CAR) was quite high at 38.2% by the end of 2000. If compensated with its retained loss of Rp 32 trillion, the CAR might be much smaller.
However, as the retained loss was relatively large, its real equity was still very small. In 1999 (before merger) the authorized capital of Bank Danamon was Rp 34 trillion with retained loss of Rp 32.4 trillion that its real equity was only Rp 1.6 trillion. In 2000, despite the merger, the amount of its authorized capital rose only to Rp 35.3 trillion while its retained loss was Rp 32 trillion that its real equity amounted to only Rp 3.2 trillion.
Table - 2 Financial condition of Bank Danamon, 1998 - 2000 (Rp billion)
Perincian 1998 1999 2000 Total assets 22,909 25,972 59,992 Cash 481 936 766 Current assets & securities 2,688 3,652 4,645 Government bonds -- 19,010 46,406 Credit (gross) 31,393 2,216 5,918 Fund reserved against credit writeoff (18,911) (766) (1,154) Credit (net) 12,482 1,450 4,764 Fixed assets (net) 230 188 270 Other assets (net) 7,027 737 3,142 Public deposits 12,803 19,179 30,501 Loan received 29,727 3,159 17,264 Subordinate loan & loan capital 209 183 977 Other liabilities 7,870 1,726 8,059 Authorized capital (2,347) 34,080 35,252 Retained profit/loss (25,354) (32,356) (32,060) Total capital (outside deferred tax) (27,702) 1,004 2,825 Interest income 6,107 3,560 5,062 Interest cost 14,211 6,427 3,889 Net interest income/cost (8,104) (2,867) 1,172 Net profit/loss (25,705) (7,002) 306
Source: Bank Danamon
With additional capital in the form of government bonds and the transfer of part of its non performing credits to the Indonesian Bank Restructuring agency (IBRA), the CAR of Bank Danamon was quite safe at 38% by the end of 2000. The ratio of its non performing credits to its total credit also declined to 8.5% by the end of 2000. However, the ratio of its total credits to public funds (LDR) was still too low at 19.4% reflecting low productivity of the public funds it held.
The increase in interest income contributed to improving its rentability as reflected by its ROAA and ROAE though the rate was still low.
The net profit posted in 2000 has improved its rentability from being negative in the previous year.
While increasing assets, the merging of the eight banks into Bank Danamon has also increased its liabilities. A consolidated financial report showed that, before the merger loan received by Bank Danamon amounted to Rp 3.1 trillion but after the merger the loan surged to Rp 17.3 trillion.
Based on a consolidated financial report, the increase in the amount of loan after the merger caused an increase in the asset solvability ratio to 90%. This showed that the ability of the management to settle debts on assets was lower as the ratio shows that 90% of the assets represented debt.
Table - 3 Financial ratios of Bank Danamon
Ratio (%) Parameter 1999 2000 Capital adequacy ratio (CAR) 54,6 38,2 Loan to deposit ratio (LDR) 11,6 19,4 NPL to total credit 45,1 8,5 Net foreign exchange position (NOP) 36,0 18,0 Income to asset average (ROAA) -28,6 0,5 Income to capital average (ROAE) -53,9 10,9 Cost to income ratio -53,0 62,2 Current assets to current liabilities 35,5 37,1 Net profit to interest income (1966,8) 6,0 Net profit to equity (2566,7) 5,1 Net profit to assets (26,9) 0,5 Total liabilities to equity (30,1) 0,6 Total liabilities to total assets 89,5 90,0
Source: Bank Danamon
Non performing credit (NPL) down
Non performing credit transferred to IBRA are distinguished into two namely ones Transfer of Contract Agreement (TCA) and Asset Transfer (ATK).
The amount of credits already transferred to IBRA reached Rp 23.5 trillion including Rp 12.5 trillion of TCA and Rp 20 trillion of ATK.
In 2000, Bank Danamon succeeded in reducing the ratio of its non performing loan (NPL) to its total credit from 31% in July 2000 to 8.5% by the end of that year. NPL was reduced by debt restructuring and intensive claims, etc. The result of restructuring and claim were as follows:
- Restructuring in 2000 covered Rp 250 billion debts of 8 corporate debtors.
- Claims to debtors securing Rp 150 billion.
Table - 4 NPL of Bank Danamon before and after merger, 2000
(Rp billion) End of Total Total Portion period credit NPL (%) Januari 5,886 465 7.9 Pebruari 5,947 452 7.6 Maret 5,908 579 9.8 April 5,919 728 12.3 Mei 5,924 705 11.9 Juni 5,590 1,554 27.0 Juli 5,922 1,605 27.1 Agustus 5,453 1,276 23.4 September 5,929 1,085 18.3 Oktober 5,915 1,112 18.8 Nopember 5,901 891 15.1 Desember 5,894 501 8.5
Source: Bank Danamon
Program of Bank Danamon in 2001
Bank Danamon planned to increase for small and medium enterprises (UKMK) by Rp 1.1 trillion in 2001 or 25% of a total increase of Rp 4.5 trillion projected for its program credits (KKPA, KPKM, KKP), two steps loan and non program credits. A number of working program has been launched to achieve the target such as UKMP service center in areas with priority potential areas; active participation in program credit in various forms of nucleus plasm partnership; cooperation with large banks active in,the distribution of UKMK credits and expansion of financing through Bank Perkreditan Rakyat to be distributed to small and medium enterprises; organizing cooperation with government institutions as well as related multilateral agencies to develop small and medium enterprises and cooperatives.
Bank Danamon, like other recapitalized banks, has a small ratio of credit to public savings (LDR). One way of increasing LDR is by actively buying assets of IBRA. In 2000, Bank Danamon bought Rp 3.7 trillion worth of assets controlled by IBRA including UKM/UKK worth Rp 3.2 trillion, KPR valued at Rp 342 billion and corporate debtors Rp 147 billion.
In 2001, Bank Danamon planned to buy Rp 3 trillion in credit, which has been restructured by IBRA either through bilateral offering or through open tender, which has been made by IBRA so far. At present Bank Danamon holds government bonds. Around 35% of the bonds carry a floating interest (3-month SBI) and 65% with fixed interest rate around 12% to 12.5%. Exchange of the bonds with fixed interest rate with restructured debt will raise yield from 12%-12.5% to 18% a year.
Outsourcing program is a strategic activity of the bank in a bid to optimize banking service, increase fee-based income and raise core lending. Currently the bank is named as a servicing agent representing IBRA in line with a agreement signed on May 26, 2000 to cooperate in the management of IBRA's assets worth Rp 6.2 trillion. Bank Danamon also hopes to see an increase in credits through organic growth or credit acquisition. Increase in credit acquisition is expected from the purchasing of loans, both restructured and non restructured loans.
The bank's growth target of Rp 4.5 trillion for credits in 2001 includes:
- Rp 1.1 trillion (25%) in the segment of small and medium enterprises and cooperative.
- Rp 1 trillion (22%) in the segment of consumer/individual credits.
- Rp 1 trillion (22%) in the segment of commercial credits
- Rp1.4 trillion (13%) in the segment of corporate credits.
The possibility of buying credit assets from IBRA through exchange with recapitalized bonds is not taken into account in projecting the credit growth. In order to achieve the credit growth a number of working programs have been implemented and planned by Bank Danamon. They are:
- Partnership and cooperation program with related institutions in the management of credits for small and medium enterprises and cooperative.
- Facility is offered in the form of consumer/individual credits for agents of motor vehicles, developers, credit card expansion and cross selling for customer-based Bank Danamon.
- Commercial credit and corporate credits, apart from relying on customer is based also on cooperation with other banks (syndicated loans) and the possibility of refinancing of debtors to be restructured under IBRA's outsourcing program.
|Printer friendly Cite/link Email Feedback|
|Comment:||DANAMON STARTS POSTING PROFIT AFTER MERGER.|
|Publication:||Indonesian Commercial Newsletter|
|Date:||Mar 27, 2001|
|Previous Article:||RECOVERY OF AD INDUSTRY OVERSHADOWED WITH UNCERTAINTY.|
|Next Article:||INDOCEMENT ISSUES RIGHTS SHARES TO REPAY DEBTS.|