Bank Mandiri (Persero) (BMRI.JK), Bond Yield and Key Takeaways from Analyst Day, Citi

Bank Mandiri (Persero) (BMRI.JK)
Bond Yields and Key Takeaways from Analyst Day
 3M yields at record low — In today’s auction, 3M Tbill yields declined to a record low
of 1.69% (prev. 1.92%). Against our base case of 4% for 2012, a sustained low yield
could impact earnings by 10%. If bond yields remain low, they could overshadow the
progress made by the bank in building and expanding its business.


 Achieved 2011 targets, except NIM (5.3%) — During the Annual Analyst Day Briefing
on Feb 6, management discussed medium-term initiatives and shared selected Dec
2011 balance-sheet numbers (bank-only). It has met/exceeded targets in higher yield
assets, low-cost deposits, network expansion and strengthening of the balance sheet.
Loans expanded by Rp58trn (high yield Rp20trn) and CASA by Rp50trn (SD > TD).
NIM, however, was impacted by lower bond yields.
 2012 outlook — Loan growth is expected to be 20-22% (lower than 28% of 2011) due
to a large base, lower FX lending and global slowdown. Low bond yields could result in
net interest income growth lagging fee-income growth. Operating expense discipline
will be maintained to keep cost to income in the 45-48% range. Credit cost is expected
to remain near record lows (1-1.2%).
 More than a corporate bank — Retail loans are now 30% of total loans (bank only).
Subsidiaries’ net profit reached Rp1.6trn (13.3% of the consolidated bank).
Management admits that it is No. 2 in key areas like 1) business banking (SME), 2)
micro lending, and 3) electronic banking. Thrust of the strategy is to narrow the gap
with BBRI (micro) and BBCA (business banking), leveraging its existing customer base.
 5 major initiatives to leverage position — Management is focusing on 5 initiatives
that aim at 1) growing business banking for higher yield loans and low-cost deposits, 2)
micro banking to increase funding and capture the value chain, and 3) strengthening
subsidiaries and 3rd party relationships to boost fee income and cross-sell products.

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