Bank Danamon reveals six factors behind its dire situation

Net profit declined 8% in 2015.

According to UOB KayHian, the bank's net profit declined 8% yoy in 2015. The bank reported 4Q15 net profit of Rp498b, flat increase of 0% yoy and down 23% qoq. 2015 net interest income growth remained flat at 0%.

"On a positive note, fee-based income increased 12% yoy on an increase in bancassurance and general insurance fees. Its consolidation strategy has resulted in opex dropping by 3% yoy in 2015 and cost-to-income ratio coming down to 51.7% from 56% in 2014." 

Here's more from UOB KayHian:

NIM decreased by 20bp to 8.2% in 2015 while ROAE continued to come down to 7.4% from 8.6% in 2014.

Loan growth of -7% yoy in 2015 as mass market loans decreased by 13% yoy. Mass market loans made up 47% of the bank’s loan portfolio, down from 50% last year. The drop in mass market loans came from both its sub-segments, namely Adira Finance and DSP (Micro business).

Adira Finance and DSP loans both decreased by 9% and 23% yoy respectively as competition continued to intensify in both the micro and automobile arenas.

NPL ratio at 3% in 2015, up from 2.3% in 2014. Cost of credit continued to increase in 2015, as asset quality pressures continued. The increase in NPL came from several segments, mainly from the processing, transportation, communication and trading sectors.

The bank has acknowledged its current dire situation. The bank has opened up to the market on its current bad performance. The bank has pointed out the following six factors: a) slow implementation speed of its restructuring plan, b) its business lacks differentiation from its competitors, c) insufficient talent, d) sub-optimal processes in place, e) limited accountability culture and discipline, and f) reliance on two engines of growth that are showing recent declines in performance.  

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