Subject: FW: Banks' results - key takeaways from analysts meet
Erwan Teguh/RES/JK/GKGOH
04/26/2007 07:40 PM
To
cc
Subject Banks' results - key takeaways from analysts meet
Bank Danamon (BDMN IJ, Rp6,750) - The good
a.. Earnings grew 92% YoY;
b.. Strong asset growth, NIM expansion (2nd highest after Bank Rakyat at 10%
in 1Q07) and well provisioned;
c.. Diversified on high yielding assets, with exposure to micro financing,
therefore cushioned from brewing price war among banks vying for so called SME
commercial and more mundane consumer loans such as mortgage;
d.. Momentum is building and should see better quarters ahead;
e.. Under performed thus far after a strong share price surge in 4Q06, likely
upgrades and therefore expect robust share price from now;
f.. Valuations at 3.2x and 16x PBV and PER respectively;
Bank Rakyat (BBRI IJ, Rp5,500) - The poor
a.. Tepid earnings growth of 4.6% YoY, weighed down by high provisioning at
Rp667.4bn in 1Q07;
b.. Provisioning is on conservative side, more than what Central Bank's
requirement, claimed the management, and largely due to customers with direct
exposure to Lapindo mudflow disaster;
c.. The management said the bank has fully provisioned for Rp932bn exposure
to mudflow victims as well as Yogja's earthquake which it had Rp212bn exposure;
d.. Judging from recent settlement between government and representatives of
victims, there's a very low probability loans written off can be recovered;
e.. On the contrary, more may have to be provisioned for, given the
ever-spreading mudflow. The management seemed to concur;
f.. That aside, core businesses are doing ok, though 1Q was less impressive
than others, its past seasonality suggests better quarters ahead, 2Q in
particular;
g.. Having said that, its core business, currently at over 86% of total
portfolio, may come down (threshold is 80%) as the bank is 'asked' to finance
large infra and agri related projects, which give lower yields;
h.. Valuations at 3.5x and 13x PBV and PER, most expensive on PBV front
suggest little room for errors.
Bank International Indonesia (BNII IJ, Rp200) - The ugly
a.. Significant earnings decline of nearly 35% YoY, worst bank performance
thus far;
b.. Not much respite from the analyst meet as more provisioning expected as
the bank absorbed the motorcycle financing company, WOM Finance (WOMF IJ), into
its fold. The management expects the process completed by YE07;
c.. Its loan book exposure to the competitive SME commercial and mostly urban
consumer segments suggests pricing pressure. At the same time, its
uncompetitive liability side, with 60% of high cost deposit, suggests NIM has
little room for expansion despite declining interest rate. Not makes things
any easier is its government bond holding is almost entirely floating rate
base;
d.. Cost to income at over 60% is also above industry and given increasing
talent constraints, its CIR may stay high for a while;
e.. Valuations at 1.7x PBV, 13.5x PER.
Fig 1. Valuations
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