Kamis, 26 April 2012

PT Bank Mandiri Tbk, 1Q results: 29% loan growth, seeking a solution to variable bond holdings, JP Morgan

BMRI’s 1Q profit came in at Rp3.4T, in line with our estimate and slightly
ahead of consensus. We see moves to reduce variable bond exposure as a
positive, but wonder whether it is premature to price upside on that count
into the stock price; hence, we maintain our Dec-12 Rp7,250 PT.

 Healthy results: At Rp3.4T, BMRI’s 1Q FY11 PAT was up 10% q/q
and came in 4% ahead of our estimate. Adjusted for one-off recoveries
last year, PAT grew by 39% y/y. Growth was driven by volumes – loans
grew by 29% y/y (in line with JPME), while margins (NIM 5.65%) have
been rangebound over the past five quarters. As 1Q PAT was 25% of
FY12E consensus, it might result in mild upside to estimates.


 Seeking options to cut variable bond exposure:
BMRI’s variable rate
bond portfolio remains a drag on asset yields. Management said that it
was exploring three options to reduce its holdings of VR bonds. These
are: a) a gradual sale to BI; b) the finance ministry buying
back/switching bonds; c) market transactions, including swaps and
bundling the bonds into securities. This is a positive development, in our
view, but we think it might be too early to start pricing in a resolution of
this issue.

 Stay Neutral: We are positively disposed towards BMRI, but our Dec-
12 Rp7,250 PT does not imply much headroom on the stock. We
therefore maintain our Neutral rating, looking to buy on dips. Evidence
of progress on a variable rate bond transaction would be a catalyst for us
to be more aggressive in seeking upside and is an upside risk to our PT.

 Risks: BMRI’s LDR stands at 80%. Management articulated a long-term
85% LDR target. Given that 13% of BMRI’s assets are illiquid variable
rate bonds, liquidity may pose a risk to medium-term growth. BMRI’s
auto loans grew at 69% y/y. Rapid growth might sow the seeds of future
risks. Despite rapid growth, BMRI’s micro portfolio is forming NPLs at
an annualized rate of 6%, which could pose a risk to our PT.

Download file : BMRI 1Q result

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