EQUITY RESEARCH

PT BANK DANAMON TBK

Company Update Chichen TN | chichentn@ipc.co.id | (62-21) 5793 1168 21 February 2011

BDMN
Target Price
Consensus (Bloomberg) Current Price Upside (downside) Share Performance 1M 3M 12M

HOLD
Rp6,500
Rp6,600 Rp6,650 -2.3%

Mixed Result
Mixed result came from BDMN FY2010 performance. In full year basis, net profit has showed remarkable growth by 88.2% YoY to reach Rp 2.8 tn, thanks to robust loan expansion and low cost of credit. Look deeper on quarter basis, 4Q10 net profit was lower 11.6% QoQ to Rp 680.2 bn due to falling assets yield, higher cost of fund, and higher operational cost. Mixed impact will come to BDMNs performance in 2011 in our view. BDMN has plenty room for growth, however it may be limited by funding constraint. Hold recommendation for BDMN with TP Rp 6,500 per share. Our TP implies 2.3% potential downside.
Rally with Motorcycle BMDN registered 30.6% YoY 2010 loans growth to Rp 82.7 tn, or above industry growth of 18.9% YoY. The growth was sustained by robust growth of mass market loan which enlarged by 40.4% YoY. Adira loan book increased by 60.3% YoY to Rp 30.6 tn due to automotive sales recovery, while Danamon Simpan Pinjam (DSP) recorded 24.6% YoY increase to Rp 15.3 tn on the back of strong GDP growth of 6.1%. We foresee Adira will deliver robust loans growth in 2011 as it would benefit from limitation of subsidized fuel for cars, given approximately 75% of Adira financing are distributed to motorcycles and the remaining to cars. In addition, we expect BDMN to set aside higher portion for DSP, SME and commercial loans instead of wholesale due to pass-through downward pressure to its funding. An Interest Rate Uptrend Interest rate uptrend is a risk for banks with tight funding, including BDMN. As of Dec 2010, BDMNs LDR stays at vulnerable level of 103.9% and CASA at low gear of 39.6%. With high LDR, BDMN should work hard to collect more funding, while on the other side it will need additional cost to escalade funding given BDMN depends on above-the-market-deposit rate as marketing arms of funding. BI rate has increased 25bps to 6.75%, and we expect the central bank would need to escalate the benchmark rate further. Thus, we forecast cost of fund remains under pressure and it will press the net interest margin (NIM). Valuation HOLD recommendation for BDMN with TP of Rp 6,500 per share. Mixed result will come to BDMNs upcoming performance on the back of strong mass market loans and rising BI rate. Our TP implies 14.8x and 2.7x of PE11 and PBV11.
2008
Year End 31 Dec

11.8% -2.2% 30.4%

Price Chart
160

BDMN
140

JCI

120

100

80

60

40

20

Jan08

Apr08

Jul08

Oct08

Jan09

Apr09

Jul09

Oct09

Jan10

Apr10

Jul10

Oct10

Jan11

Source: Bloomberg

Share Data
Out shares (b) Market Cap (Rp b) Major Shareholders Asia Financial (Indonesia) Pte. Ltd. Public 52-WK range (Rp) 12-m average daily T/O (Rp) 67.42% 32.58% 6,950 4,650 5,665 8.33 55,417

2009 10,493 2,371 1,533 183 0 1,895 24.9 2.4

2010E 2010E 9,912 4,300 2,884 344 88 2,135 16.6 2.7

2011F 2011F 10,761 5,145 3,683 439 28 2,399 15.2 2.8

2012F 2012F 11,875 5,831 4,174 497 13 2,675 13.4 2.5

Net Interest Income Income Before Tax Net Income EPS EPS Growth (%) BVPS PER (x) PBV (x)
Source: company, IPS calculation

9,523 2,678 1,530 303 (28) 2,202 7.7 1.1

Refer to important disclosures on the last page

PT Bank Danamon Tbk

Loans Performance
90 80
71 77 67 61 56 67 63 63 64 83

Mass market Loans Break Down

35% 30% 25% 20% 15% 10% 5% 0% -5% -10%

Adira Quantum, 2.5% SEMM (DSP), 32.0%

70 60 50 40 30 20 10 0

62

62

CMM, 1.4%

Adira Finance, 64.1%

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Loan QoQ YoY

Sources: BDMN

Sources: BDMN

LDR
130.0% 120.0% 110.0% 100.0% 90.0% 80.0% 70.0% 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

CASA
13.0% 12.5% 12.0% 11.5% 11.0% 10.5% 10.0% 9.5% 9.0% 8.5% 8.0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 NIM 3Q10 4Q10 CASA (RHS) 16% 24% 20% 28% 36% 32% 40%

Sources: BDMN, IPS Research

Sources: BDMN, IPS Research

PT Bank Danamon Tbk

Balance Sheet As at 31 Dec (Rp bn) Assets Cash Placements Government Bonds Loans Allowance for Losses Fixed Assets Other Assets Total Assets Liabilities Third Party Fund Fund Borrowing Other Liabilities Total Liabilities Stockholders' Equity Total Liabilities & Equity BVPS (Rp) 2008 2009 2010E 2011F 2012F Income Statement Year-end 31 Dec (Rp Bn) Interest Income Interest Expense Net Interest Income Other Operating Income Other Operating Expense PPOP Provision Non Opr Income (Expense) Income Before Tax Income Tax Net Profit (Loss) 2008 2009 2010E 2011F 2012F

4,162 14,053 13,083 66,880 (1,593) 1,905 8,779 107,268 73,969 10,018 12,172 96,159 11,109 107,268 2,202

2,117 14,349 11,011 63,251 (2,229) 1,802 8,297 98,598 67,216 6,382 9,098 82,696 15,902 98,598 1,895

2,365 15,743 11,172 82,656 (2,381) 1,981 9,126 120,662 79,541 10,289 12,906 102,736 17,926 120,662 2,135

2,224 18,283 11,429 97,482 (2,475) 2,160 8,297 137,399 94,551 10,458 12,253 117,262 20,137 137,399 2,399

1,678 20,423 11,712 114,511 (2,408) 2,338 9,126 157,381 110,655 10,307 13,960 134,922 22,459 157,381 2,675

16,640 (7,117) 9,523 611 (5,628) 4,506 (1,835) 7 2,678 (272) (876) 1,530 -28% 303

18,299 (7,806) 10,493 901 (5,722) 5,672 (2,890) (412) 2,371 (81) (757) 1,533 0% 183

18,154 (8,241) 9,912 3,350 (6,584) 6,678 (2,379) 4,300 (147) (1,268) 2,884 88% 344

19,469 (8,708) 10,761 4,034 (7,663) 7,132 (1,987) 5,145 (176) (1,286) 3,683 28% 439

22,044 (10,169) 11,875 4,876 (8,429) 8,321 (2,490) 5,831 (200) (1,458) 4,174 13% 497

Growth
EPS (Rp)

Key Ratio Analysis Year-end 31 Dec (%) Earnings Assets Yield Cost of Fund NIM ROA ROE Opr. Exp to Opr. Inc Cost-to-Income Ratio CAR LDR CASA NPL Gross Coverage Ratio

2008 18.8% 7.0% 10.8% 1.6% 13.7% 55.5% 84.5% 16.0% 90.4% 26.7% 2.3% 102.5%

2009 20.0% 7.7% 11.5% 1.5% 11.3% 50.2% 85.5% 22.3% 94.1% 33.1% 4.4% 78.9%

2010E 18.3% 7.9% 10.0% 2.6% 17.1% 49.6% 80.0% 16.0% 103.9% 39.6% 3.0% 94.8%

2011F 16.4% 7.2% 9.1% 2.9% 19.4% 51.8% 78.1% 17.3% 103.1% 40.1% 2.8% 91.6%

2012F 16.1% 7.4% 8.7% 2.8% 19.6% 50.3% 78.3% 15.5% 103.5% 41.3% 2.3% 92.2%

Interim Result Net Interest Income Other Operating Income Other Operating Expense PPOP Provision Net Profit NIM ROE CAR LDR NPL Gross Coverage Ratio

4Q09 3.4 (1.3) (1.6) 0.5 (0.2) 0.2 12.5% 18.5% 20.7% 84.1% 4.5% 78.9%

1Q10 2.9 0.2 (1.5) 1.6 (0.5) 0.7 11.7% 18.0% 21.5% 83.9% 4.0% 90.5%

2Q10 2.1 1.5 (1.7) 1.9 (0.7) 0.7 11.6% 19.3% 19.5% 89.6% 3.4% 100.1%

3Q10 2.7 1.0 (1.7) 1.9 (0.7) 0.8 11.4% 19.7% 19.1% 93.4% 3.1% 107.3%

4Q10 na na na na na 0.7 10.6% 17.1% 18.6% 86.2% 3.0% na

Wisma GKBI 7th Floor Suite 718, Jl, Jenderal Sudirman Kav,28, Jakarta 10210 Tel, (62-21) 5793 1168, Fax, (62-21) 5793 1167

Research Team
Lily Sentosa Dang Maulida Chichen TN Victor G. Murthi Muhammad Iqbal Ikhsan Binarto Seto Wardono Myrdal Gunarto Fachrini Zanuba A. Head of Research Telco, infrastructure, Construction Banking, Multifinance Property, Cement Technical Technical Senior Economist Economist Research Support lily.sentosa@ipc.co.id dang.maulida@ipc.co.id chichentn@ipc.co.id victor.murthi@ipc.co.id m.iqbal@ipc.co.id ikhsan.binarto@ipc.co.id seto.wardono@ipc.co.id myrdal.gunarto@ipc.co.id fachrini@ipc.co.id

Branch Office
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