Corporate Result Flash Bank Rakyat Indonesia - Bahana

4Q10 performance
§ On the back of a jump in net interest income to IDR11.9t (+62.2% q-q and +90.2% y-y), BBRI booked 4Q10 net profit surge of 105.9% q-q and 140.0% y-y to IDR4.8t, and surprisingly brought FY10 net profit to IDR11.5t (+57.0% y-y), way above our and consensus estimates. 4Q10 NIM spiked to 14.6% from 9.7% in 3Q10.
§ Loans grew 8.0% q-q in 4Q10, bringing FY10 loan growth to 21.3% y-y to IDR252t while third party funding surged 25.6% q-q to IDR328t. This brought down LDR to 76.8% in 4Q10 from 89.3% in 3Q10.
§ Gross NPL improved significantly to 2.8% at end 2010 from 4.3% at end 3Q10, pushing up NPL coverage ratio to 199% in 4Q10 from 156% in 3Q10.

Outlook
While 4Q10 earnings results had surprised us and the market, we question the sustainability of this high NIM going forward. Our preliminary assessment suggests that this is unlikely to hold up in the future.

Recommendation and valuation
Judging from this recent 4Q10 results, we are likely to revise our 2011 earnings forecast. Meanwhile, we maintain our HOLD recommendation on the counter with target price of IDR5,800, or at an implied 2011 P/BV of 3.4x.