Bank Danamon targets corporate borrowers
(16 May 2013 – Indonesia) Indonesia’s Bank Danamon is eyeing an expansion of its wholesale banking business, particularly lending to corporate borrowers.
Corporate borrowers currently make up just a small portion of Bank Danamon’s loan books, at just 11 percent.
According to new research, Danamon’s profitable micro and vehicle finance loans have powered the group’s growth in recent years, management expects margins to decline and growth rates to slow as competition in these segments intensifies, particularly from bigger rivals Bank Rakyat Indonesia and Bank Mandiri.
"To maintain its earnings growth, Danamon needs to diversify its sources of income – and quickly. Management believes that partnering a big bank with an established wholesale banking business such as Singapore’s DBS Group would give it the ability to make more profitable use of the cheap retail deposits gathered by its large branch network," the source said.
"A more diversified loan book could also reduce the bank’s cost-to-income ratio from above 50 percent now, which is relatively high compared to its bigger rivals.
"But management stressed that it aims to keep its mass-market loans at over 50 percent of its loan book even as it expands its wholesale lending."