Danamon seeks more profit from fee income

JAKARTA. Indonesia’s sixth-largest lender Bank Danamon (BDMN), controlled by Singapore’s investment fund Temasek, will increase the contribution of fee-based income to the bank’s total revenue.

Bank Danamon’s president director Henry Ho said on Monday that fee-based income would account for between 30 and 35 percent of revenue in the medium-term of about three years, compared with 25 percent at present.

“Fee-based income in many financial institutions in Southeast Asia contributed about 30 percent. We hope Danamon could increase fee income’s contribution to 30 percent in the first stage and 35 percent in the future,” he told a press briefing announcing Bank Danamon’s strategic partnership with PT Asuransi Jiwa Manulife Indonesia.

The banks’ main income comes from its primary business of disbursing credit, but analysts have said that Indonesian lenders’ net interest income, which is derived from interest charged on loans, will be under pressure in the near-term as the central bank sets a low interest rate environment to spur growth in the country’s economy.

Indonesia’s commercial banks have seen strong fee income recently on the back of rising transactions amid booming economic activities, helping offset pressures on net interest income.

One of the ways to boost fee income, according to Ho, is through bancassurance, in which banks partner with insurers to offer insurance products and get fees for every premium sold.

“Many people still don’t have insurance. This is a huge opportunity,” he said, expecting between 20 and 30 percent growth in Bank Danamon’s bancassurance business in the medium-term. “One way to drive growth [in fee income] is through bank assurance.”

Bank Danamon has begun selling Manulife Indonesia’s insurance and investment products earlier on July 2 through 523 Bank Danamon retail branches for the bank’s broad range of customers in the retail, small and medium enterprises (SMEs), sharia, and commercial segments — from micro to wealth management clients.

“The main difference of this partnership is that we will offer the ‘Plan Right’ sales tool, which is designed to help financial specialists and bank staffs to better identify [customers’] needs to be able to decide on the right product solution for them,” Manulife Indonesia CEO Alan Merten said.

More than 200 financial specialists and 60 sales leaders have been hired to handle Manulife Indonesia’s insurance and wealth management products at Bank Danamon’s outlets, after 185 training classes with more than 2,400 hours spent to certify 3,500 staffs. “Manulife-Danamon’s partnership has evolved to beyond products, which include people, sales tools and technology,” Manulife Indonesia Hans said, expecting the partnership to grow Manulife’s business in Indonesia.

Bancassurance accounts for a third of Manulife Indonesia’s book, and the company aims to grow its premium by 20 percent throughout this year. The broader Manulife Financial, which operates in Asia, Canada and the United States, has US$512 billion funds under management as of March this year.

“With Manulife, which is a world class life insurance and wealth management provider, we could facilitate our customers to face risks in life and to benefit from investment opportunities in planning their life and career,” Danamon’s Ho said.

Manulife Indonesia’s new products to be offered at Bank Danamon’s outlets include Proteksi Prima Maxima, Proteksi Prima Rencana Flexi, Proteksi Prima Rencana — which offer a number of life insurance protection and investment choices to accumulate customers’ wealth. It also combined life insurance products with Bank Danamon’s two savings products: Danamon Lebih and Si Pinter. (Esther Samboh/ The Jakarta Post)