by CLSA Securities : BDMN
Bank Danamon (BDMN IJ): counting on cars, downgrade to UPF with new TP6,200
Nick “Chindonesia” Cashmore is downgrading Danamon to an UPF. In spite of having a smaller balance sheet amongst the larger Indonesian banks, Danamon has the most employees and therefore largest fixed cost (largest personnel expenses/earning assets). And although only 3% of BDMN’s loans are non performing, another 10% are special mention. Almost half of the NPLs are from the mass market segment, which also account for 89% of special mention loans. We prefer Bank Mandiri (BMRI IJ) and Bank Negara (BBNI IJ) in the sector.
Danamon is the sixth largest largest bank in Indonesia with one of the most diversified lending bases
Adira Finance accounts for 65% of the mass market loan portfolio and 38% of total loan book
BDMN’s personnel cost/earnings assets are the highest amongst peers at 3.8%. The bank has over 35,000 employees, more than even Bank Rakyat.
Although only 3% of loan are NPLs, 47% of all non-performing loans comprise mass markets loans which also amount to 89% of special mention loans
Capital remains high at 18% but the group is adding leverage to sustain ROA of 3%
Valuations will tighten to towards the mean. Downgrade to UPF. New TP6,200 implies 12.5x 2012 earnings.