Ladies and gentlemen, I would like to welcome and thank our respective investors and analysts for joining PT Bank Danamon Indonesia Tbk's investor and analyst briefing first half 2025 financial results. Today, I will be your host and please allow me to quickly introduce myself. My name is Marcella Tanamas, Investor Relations of Bank Danamon. I would like to welcome and introduce Danamon's board of directors, chief financial officer, and also president director of our subsidiary, Adira Finance, who have joined from their respective locations. Bapak Daisuke Ejima, President Director. Bapak Honggo Widjojo Kangmasto, Vice President Director.
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Bapak Herry Hykmanto, Syariah and Sustainability Finance Director.
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Ibu Rita Mirasari, Compliance Director.
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Bapak Dadi Budiana, Risk Management Director. Bapak Thomas Sudarma, Enterprise Banking and Financial Institution Director.
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Ibu Yenny Siswanto, IT and Digital Director. Ibu Theresia Adriana Widjaja, Chief Financial Officer.
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Bapak I Dewa Made Susila, President Director of PT Adira Dinamika Multi Finance Tbk.
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We also would like to welcome Danamon's board of management, who have joined from their respective locations. Before we begin the CEO's presentation, let's first take a moment to look at a video of Danamon Group, showcasing our synergy and collaboration to grow as a financial group.
[Presentation]
Ladies and gentlemen, before we present the detail of PT Bank Danamon Indonesia Tbk's financial results for first half 2025, I would like to invite Bapak Daisuke Ejima as our President Director to deliver his remarks, highlighting the progress of our key strategies. Pak Ejima, the stage is yours.
Thank you, Marcella. Good afternoon all respective investors and analysts who are kindly covering Danamon. We truly appreciate all the support throughout the year. Among all management names who were introduced before, we have two new members that I would like to upfront highlight. Firstly, Ibu Yenny Siswanto, new IT and Digital Director, started from this past March. We also have Ibu Theresia Adriana, new CFO, who will cover more details of performance of first half of Danamon after my presentation. So let me touch on the key highlights of our activities during the first six months plus. Page three, please. You can see some macroeconomic key indicators highlighting Indonesian economic situations. Overall, sentiment-wise, we were having a sort of cautious sentiment. GDP growth is expected to go under 5%. PMI, Purchase Managers' Index, is also below 50.
Right side bottom, managed finance area, two-wheelers, four-wheelers are still seeing minus growth. The leading, the left side bottom, banking industry, although it's still growing in terms of lending and funding, but the growth rate is gradually seeing downward trend. Next page, please. Danamon key strategy will continue to be the same. We grow as a financial group, and we remain focused in building strong foundation for Danamon to continue deliver the sustainable business growth and the line of business. We have set three strategies based on four key pillar line of business: enterprise banking and FI, covering large corporate segment, SME, consumer, and Adira Finance. Three strategic themes we have been pursuing since 2024 until 2026. Those are dominant in ecosystem. Number two, unique MUFG proposition we would like to leverage. And thirdly, data analytics and process improvement we want to pursue.
There are several key highlights on the right side in terms of first half financials. Lending, + 6%; funding, + 10%; NPAT, + 12%. Most of these are showing a good trend, and detail will come again after me from new CFO, Ibu Theresia. Next page. Next two pages, I would like to highlight some key areas. Firstly, the strategic theme of targeted ecosystem. One of them is definitely automotive, which we have Adira Finance as another subsidiary. There's auto retail financing synergy between Danamon and Adira, what we call the product KPM Prima. This is primarily the automobile loan sold through our Danamon branches. We saw a good growth, + 16.8% year-on-year growth. We also introduced special package and red carpet program for particular privileged customers so that we can shorten the credit process of this auto loan.
We're also continuing to support the overall Indonesia International Motor Show, IIMS 2025 in Jakarta and Surabaya. With regard to data analytics and process improvement, we are making a big step. We are trying to collaborate with a few key startup companies. Here we show pictures of success state to enhance the credit process model through the GenAI. Bottom part, we are showing the milestone activities with regards to the financial conglomerations. Recently, we received the OJK approval so that Danamon will be operating a financial holding company under MUFG Group in Indonesia. Financial conglomerate members under Danamon will include Adira Finance, Mandala Finance, and Home Credit Indonesia. In line with this initiative and strategy, we recently announced the merger between Adira Finance and Mandala Finance. Currently, we all obtained the necessary approval and having the execution phase.
Legal day one will be expected in 1st of October this year. Right side, we also started a new collaboration between Home Credit Indonesia, iPhone 16 campaign in Indonesia, so that we can support each other through the customer activities. Next page, please. Here we are showing some core foundation building activities. Left side, our mobile banking applications, which is D-Bank PRO. We recently upgraded to D-Bank PRO version 2.0. We have newer design. We have 360 degree portfolio dashboard. We also are having the now 24 hours, seven days FX transaction that will cater the ease of the users. We will continue to brush up this mobile application, so that we will maintain this competitiveness in the market. We also continue the branch transformation since two years ago. Now, first half, we finished 16 additional branches. Total so far, 110 branches we newly transformed.
About 1/3 of our branches are already moved to this new transformation site. We also recently had the Danamon 69th anniversary in this month, and coincide with this opportunity, we launched new concept of Danamon on Wheels, which is the mobile branch to support the local activities in Indonesia. We also enhanced the co-event and co-based activities among all MUFG group companies, namely Danamon, Adira, Zurich, Home Credit, and MUFG. We will continue to enhance those group collaborations so that we will make our services unique. Now, I'd like to invite Theresia, Danamon CFO, for the performance update of first half 2025. Theresia, please.
Thank you, Pak Ejima. Good afternoon, everyone. Let me continue on the financial highlights. On the last table, our loan and trade finance grew by 6% year-on-year, with higher loan growth from wholesale lending by 13%. While retail lending decreased by 2% due to slowing down on the automotive industry. Bottom left table showing the healthy asset quality with loan at risk improved by 2.1% year-on-year to 9.1%, and has consistently improved since last year, with NPL coverage improved by 16% to 279.2%, while the gross NPL improving from 2.2% to 1.88%. On the top right table, June 2025 showing third-party deposits, which grew by 10% year-on-year to IDR 160.1 trillion, with 2% increase on our granular funding. On the bottom right table showing our operating income, which respectively flat year-on-year and NPAT of IDR 1.6 trillion increase by 12% year-on-year.
Next, please. On the balance sheet, showing our total assets grew by 8% year-on-year to IDR 251.5 trillion, mainly from loan and trade finance growth of 6%, while securities decreased by 7%. To support our loan growth, our funding grew by 6%, supported by strong CASA growth of 4%, and TD grew by 15%, while borrowing and long-term funding in Adira Finance declined by 21%, in line with the declining loan in Adira Finance. Next, please. On the profit and loss, Danamon recorded consolidated NPAT of IDR 1.6 trillion, grew by 12% year-on-year, mostly supported by better non-interest income, increased by 1%, and improvement in the credit cost with lower CoC by 16%, while the PPOP declined by 4%, mostly from the higher cost of funds and operating expense.
Next, please. On the key financial ratio, our risk-adjusted NIM is stable at 4.8% compared to last year, while cost to income year-on-year increased by 1.5% to 56.3%, which remains the same as Q4 2024. Compared to Q4 2024, our CASA ratio is better by 2.2%, from 41.7% to 43.9%, although year-on-year, it is lower by 2.1%. Our LDR lower by 1.1%, from 99.8% to 98.7%. We have ample liquidity. Healthy on our asset quality showing from the better NPL growth by 40 basis points year-on-year to 1.8%, and higher loan loss coverage by 16 percentage points higher year-on-year to 279.2%. Return on asset was stable year-on-year at 1.3%, while return on equity improved by 40 basis points. Our CAR is strong at 25.9%.
Next, please. This is to show our funding liquidity and capital. As explained in the beginning, our granular funding increased by 2%, mainly from the CASA. In terms of the liquidity, as shown on the right upper table, LCR and NSFR and LDR are steady. Our capital still strong, almost 100% of our tier one capital refer to the left bottom table with a strong CAR at 24% for bank only, and then 25.9% on the consolidated CAR. Next, please. As mentioned earlier, our loan and trade finance grew by 6% year-on-year, supported by double- digit growth across segments. EBFI grew by 13%, SME banking 11%, and consumer banking 15%, while Adira Finance declined by 7%. On the top left table showing the lending composition, which largely from the EBFI around 48%, followed by Adira Finance 28%, SME and consumer banking around 13% and 11% respectively.
Lending by sector on the bank only, mainly dominated in the household trading, manufacturing, financial intermediaries, and agriculture, forestry, and fisheries, while the lending by purpose bank only mainly from the working capital loan around 56%. Next, please. On the Adira Finance, industry trend of two-wheeler in five months 2025 declined to -2.4%, while Adira Finance sales performance from first half 2024 to five months 2025 declined to -22.3%. Industry trend on the four-wheeler in five months 2025 declined by 5.5%, while Adira Finance sales performance from first half 2024 to five months 2025 declined, at five months 2024 is -47.3%. New financing of Adira Finance year-on-year lower by 19% compared with the first half 2024 due to the weakening auto industry, which mainly from the four-wheeler and two-wheeler, while our NPL multipurpose loan was higher of 4%.
In terms of the outstanding loans, the total loans reduced by 7% year-on-year, mainly in the four-wheeler auto loans lower by 15%, two-wheelers lower by 5%, which partially headed off with the higher multipurpose loan, which higher by 11%. Next, please. On the revenue structure, it remains steady. Our operating income grew by 1% from higher non-interest income, which mainly dominated by treasury fees grew by 32%. Credit related fees bank only quite stable, while Adira Finance lower by 8% in line with the lower financing. Non-credit fee from the bank and wealth management year-on-year lower by 20%, while cash management and others increased by 24%. Next, please. This is showing the consistent improvement in our asset quality by maintaining the healthy asset quality as reflected in the Danamon ratio as below. Better NPL and SM ratio, refer the top left table.
Better loan at risk, refer to the bottom left table. We also maintain the NPL coverage ratio at 279.2% in June 2025, higher compared with June 2024 of 263.2%. Better CoC by 60 basis points year-on-year, whereby the composition of CoC was 12% from Danamon and then 88% from Adira Finance. I think that's all the updates on the financial highlight of first half 2025. I will hand over to Marcella for the Q&A. Thank you.
Thank you, Pak Ejima and Ibu Theresia for your presentation. Ladies and gentlemen, now is the time for us to start the Q&A session. Please write down your name, company, and questions on the chatbox menu, and I will read the questions. While waiting for the incoming questions, let's have a look at quick videos of our recent campaigns.
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We are still waiting for the incoming questions. If you have any questions on the material covered, you can put your questions on the chat box and I will read the question. There's a question from Pak Kresna from Mandiri Sekuritas. Thank you, Pak Kresna, for the question. The question is, how is industry liquidity trend today in management observation, and how does management view industry liquidity trend could be in the second half of 2025? We would like to ask the BOD to answer the question.
Thank you for the question, Pak Kresna Partogi Hutabarat. If you look at the statistic of Bank Indonesia, the total alat liquid in the statistic, actually the liquidity is ample. Even the number increased from during the Covid. That's fact number one. Having said that, fact number two, the competitions among banks about this deposit still very tough. That's why even though the central bank reduced the BI rate, I think it's for the third time this year, the transfer to our lending rate, the transfer of the lower lending rate still takes some time. To answer your question, we see the liquidity has no problem. We are confident, and I think Central Bank has done a good job. However, to translate into the lower lending rate, I think it still takes a while.
Maybe another two months to get the full effect of whatever the BI rate reductions. And then what is the other questions here? I think that's our observation so far. Thank you.
Thank you, Pak Honggo, for your answer. We are still waiting for another question. You may type your question from the chat box. There's another question from Pak [Boby] from Mandiri Sekuritas. Thank you, Pak [Boby], for the question. To kick off the Q&A session, could you elaborate the reasonings of a meaningful decline in credit costs in first half 2025? Considering the current macro and purchasing power conditions, are we confident enough to withstand future NPL formation? How is the recent trend of NPL formation in the past four- five quarters?
Hi, Pak [Boby]. This is Dadi from Risk Management. The reasons for the decline in credit costs basically was the good quality of our portfolio. Our loan portfolio, especially in the remaining businesses other than Adira, has actually seen better asset quality, I would say, compared to, let's say, even two years ago. The improvement has continued, even though I would say that as you can probably see from our NPL ratio, right? This translates to the lower credit cost, basically. Adira, as you are probably aware of, in line with the softening of the auto sector, and also, I believe in line with the performance of other consumer finance companies, I think, in their case, the credit cost is still at an elevated level compared to their historical standards.
However, if we compare their credit cost with 2024, it's been on an improving trend. That's basically the reason for the decline in the credit cost, basically. Your other question is, are we confident? Okay. Yeah, we believe that at the moment, we've been growing relatively cautiously. Although we've been growing in the previous years at low double- digits, or in this case, this year, in the first half at 6%, but we've been growing cautiously so that we believe that our NPL level should be relatively well-maintained in the near future. If you're also looking at the 2025 and 2026, in terms of credit costs, I don't think we can continue the declining trend. I believe this is basically more or less the bottom, but we also do not foresee an increase, basically. That's basically a guidance that I can share.
I also see more question relating to loan write-off. I think that I can probably answer. I think the question is from Pak [Andre]. So loan write-offs in 2025 in second quarter compared to the first quarter, it is basically comparable. So it didn't increase or it didn't go down significantly. Basically, it remains very much flat in the first quarter and the second quarter. That's from me, Marcella.
Thank you, Pak Dadi. The second question from Pak [Andre Wijaya] is, what is the loan growth driver in second half of 2025?
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The question is from Pak [Andre Wijaya].
Okay. So, I'm going to answer this question from Pak [Andre] together with [Feraya] from [Bernstein]. The overall bank's BDI year-to-date consolidation, we grow single- digits, I think it's around 6%- 7% on the top line. That consists of the bank-only, which is the corporate banking, EBFI, the SME banking, the consumer banking, that grow basically double digits. And being offsetted by the two-wheeler and four-wheeler from Adira, right? Consolidated because slightly lower than planned. That take down the growth rate. The segment to grow still because we look the demand of the two and four-wheeler still weak for this year. We will be relying on the banking side and mostly from the corporate and the SME banking. I think that will be the driver.
About the ecosystem, not only we rely on the Japanese ecosystem and automotive ecosystem, but also we are now expanding the ecosystem. The way we structure the Danamon, w e consist of 11 regions all over Indonesia. We are now introducing what's called a region-based ecosystem. We ask the branches to reach out to our group companies to grow both funding and lending. For example, we have Zurich as our partner, or we have a small investment in Zurich. The Mitra, which is the — what you call it — let's say auto body shop or body repair from Zurich, which in the past was not 100% banking with us.
Now we're asking all the regions to reach out. The automotive-related, like the tire, selling the accessories, we also ask them to reach out. The answer is yes, the ecosystem remains intact. We even expand to the Danamon Group. As Pak Ejima, our President Director, mentioned in the beginning, we want to grow by group, right? The financial group to grow.
Made, you want to add something?
No. No, Pak. Thank you.
Okay. Thank you
Honggo. Let me add a few more points. In my presentation slide, there were four business engines as Honggo explained, large corporate segment, SME, consumer, and Adira Finance. This Adira Finance part, in the past, we relied on Adira only, but in the future of financial holding company concept, within next 12 months, it will become the Mandala Finance going to this umbrella, also Home Credit Indonesia, et cetera. So this multi-finance segment, hopefully, even if the Adira Finance top line is seeing some declining trend in terms of loan growth, hopefully, with including other segment- other entity, sorry, we are able to make up. Also, as whole business lines, hopefully, the cycle of loan growth will be different. So that although Adira is minu this time, but banking segment, we are seeing a stronger growth.
Vice versa, if the auto market is gradually catching up in the near future, hopefully, Adira, Mandala Finance, they will make up. So that even if the banking segment is relatively weak, we are able to show growth as a financial group wide. So those are something we are expecting to grow as a bank financial group.
Thank you, Pak Honggo and Pak Ejima for your answer, and also thank you, Pak [Andre] and [Bu Feraya] for your questions. We have another question from Ibu [Posmarito]. The first question is, with CAR at 25.9%, are there plans for capital deployment, dividend enhancements or another acquisition? If yes, what companies or segments would Danamon be interested in? I think we answer the first question first before we go to the next question.
Thank you for the questions, [Posmarito Pakpahan]. The policy of the Danamon and MUFG as our holding company, the commitment to invest Indonesia is always there, right? The appetite to invest, always there. One of the proofs, the MUFG even together with Danamon even form Garuda Fund, to invest in the startup company in Indonesia. That will show that the appetite's always there. Given the situations, of course, we are not going to recklessly invest, and there are a couple of the target, I have to say, now being under microscope and under discussions. I cannot disclose the name, but still, the segment and the company has, of course, related to the financial, because you cannot invest in the manufacturer, for example. Just a clue, there are a couple of companies that being discussed and being under our microscope.
Then the strategic outlook for Adira and Mandala consolidations. As Pak Ejima explained, the legal day one will be the 1st of October. We got the approval already, both to merge Adira and Mandala. The benefit is we don't need to wait until the legal merger. At the moment MUFG announced they are buying Mandala, the following months, we got the benefit already, which is the cost of funds of Mandala reduced by, I think, at least 200 basis points. That's the obvious benefit.
The synergy between Adira and Mandala, I think Made will explain in a different time maybe, because I just had a meeting today to discuss how to do the legal merger, the operational merger, how we're going to consolidate all the process improvement and all, including how to deploy, redeploy all the human resources of these two, Adira and Mandala. And definitely, there are going to be some synergies.
The timeline and the expectations, yeah. The synergy and the benefits start not only now, but start when MUFG announced their owning Mandala. The benefits are already there, especially from the financing cost. The rest will follow. Thank you.
Thank you, Pak Honggo, for answering the questions. We have another question from Pak [Boby]. The first question is: With the potential merger between MUFG and BDMN, your total capital perhaps could exceed BBNI's. Would you be more aggressive in tapping the corporate segment? In doing so, from 100 points, how much can you attribute your future corporate loan growth through the expansion of numbers of clients? And how much can you attribute to the expansion of current lending facilities to existing clients? Or do you have any other strategies, perhaps using capital to build transaction banking franchise, et cetera? What is management's grand plan in utilizing this excess capital?
Thank you, Pak [Boby]. I don't think I can answer this straightforward, yeah. We never announced officially or formally about the merger between Danamon and MUFG branch. As one of the foreign banks, we got the privilege to have branches because we are one of the first foreign banks opening in Indonesia. If you ask me whether internally we exercise several options, of course, from time to time, we look at the, do some exercise. But at this point, we cannot say yes or no because all still on the paper that we are doing the exercise. I don't think we ever announced that we are going to merger between MUFG and Danamon. And then question number two, the risk perspective, do you have certain guidance and sector that you are seeking more exposure? I think, Dadi and Thomas, you better take the question number two. Thank you.
Thank you, Pak Honggo. Thank you, [Boby]. On the sectors that we have appetite to grow more, these are basically — I don't think, because you're actually emphasizing the sectors that are currently underserved, right, by Danamon. I think we do not currently have any, like, let's say, sectors that we previously underserved because, let's say, we have certain reservation of appetite, and then now we believe that we should actually expand our appetite on those sectors. But as far as the sectors that we would like to, let's say, limit our exposures, basically, it remains the same sectors. There are certain sectors where, because of, let's say, environmental concerns, right, we do have a preference not to expand our appetite to, but this is something that is generally shared by other banks also.
Obviously, with the weakening of, let's say, in the auto sector, for example, right? It's not that we are reducing our exposure to the auto sector. Automotive ecosystem remains our priority, right? It's not that we are reducing our exposure or anything like that, but we are more cautious basically. In terms of how we select our customers, how we acquire our customers, how we actually consider to expand exposures to certain customers, we are much more cautious. That's basically what I can share with you. Thank you.
Thank you, Pak Dadi, for the answer. We will wait for another two minutes. If you have any last questions, you may drop your questions on the chat box. Since there are no more incoming questions, we will close the Q&A session. Ladies and gentlemen, the respected investors and analysts, once again, thank you for taking part in the PT Bank Danamon Indonesia Tbk's financial results for first half 2025. For any further interest and questions, please do not hesitate to reach us through our investor relations mailbox at investor.relations@danamon.co.id. See you at the next Danamon corporate event. Thank you.
Thank you.
Thank you, everybody.
Thank you.