by Batavia Prosperindo Securities : BDMN
Falling NIM affects 1H11 performances
Intensified competition as the industry’s loan growth continued to outpace the industry’s deposit growth resulted in higher cost of fund for the bank. In 1H11, the bank’s time deposit grew 26% yoy and CASA grew 18% yoy. Meanwhile, as competition got tougher in almost all segments, the bank’s loan yield reduced. Consequently, NIM decreased from 11.6% in 1H10 to 10.0% in 1H11. However, this decline was offset by the bank’s aggressive loan growth of 30%, which was above the industry average of around 23%. NPL was trending down from 3.4% in 1H10 to 2.9% in 1H11. Net interest income raised 8.2% yoy to Rp 5.2 trillions and in the bottom line, net profit increased 2.8% yoy to Rp 1.5 trillions.
Although 1H11 net profit only achieved 41.5% of our 2011 expectation, we believe the bank still has potential to catch up with it. At present, the relatively under-control inflation and potential decrease of overnight rate may prompt BI to maintain interest rate and hence, affect positively on cost of fund.
Strengthen mass market and SMEC segment penetration
Mass market and SMEC segment currently account for 57% dan 25% of the total loan. By the current rights issue which can reap Rp 5 trillions for both segments, the bank can further penetrate both segments and strengthen its total loan growth. However, the currently high LDR remains a concern as the bank needs to raise more deposits.
Recommend Buy with TP: Rp 6,100
Even though NIM is trending down, the bank has successfully offset it with its loan growth that beats industry average. Supported by the bank’s track record and its rights issue proceeds to fund expansion, we believe the bank will triumph over intensified competition in the future. We recommend Buy with target price of Rp 6,100 based on 2.3x 2011F PBV. With the current price of Rp 5,100 there is potential upside of 19.6%.