BNI (BBNI.JK, Rp 3,675, O, TP Rp 4,300) – Looking for acquisition? - Credit Suisse

Bisnis Indonesia reported that BBNI may be looking to acquire Bahana, a state-owned investment bank.
With Bahana’s 9M10A earnings coming in only 1.28% of BBNI’s, we see limited direct impact on BBNI’s earnings even if the acquisition goes ahead. In addition, investors may prefer BBNI to focus on the operational restructuring of its core business and the current timing may not be suitable for acquisition.
However, with Indonesia moving into investment grade, we are seeing risk of disintermediation in the future, particularly for corporate loans (the largest component of BBNI’s loan portfolio). We believe that BBNI is currently seeking to mitigate the issue by expanding into providing services for clients seeking to rise funding from capital and debt market. Thus, we can see the long-term benefit for BBNI to acquire an investment banking arm.
We maintain our OUTPERFORM rating on BBNI and target price of Rp4300, based on Gordon’s Growth model, implying 2.1x FY11E P/B and 14.5x FY11E P/E