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. 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.
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, is through bancassurance, in which banks partner with insurers to offer insurance products and get fees for every premium sold.
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