Bank Danamon - 1Q11 PPOP in line with our forecasts - Credit Suisse

● BDMN reported 10% YoY, 5% QoQ 1Q11 PPOP growth, 22% of our forecasts, in line with our expectations. 1Q11 earnings up 9% YoY, 12% QoQ, 20% of our forecast and 21% of consensus forecasts, given higher-than-expected 2011E provision expense.
● BDMN reported 29% YoY CASA growth, higher than 25% YoY of total deposit growth. Given BDMN’s relatively lower CASA franchise, we believe that the bank’s earnings is relatively less resilient towards risk of higher competition for funding.
● While we remain comfortable with BDMN’s fundamental outlook, we believe that BDMN’s stock price is fairly valued. BDMN is trading at the fourth highest 2011E P/E and 2011E P/B of all Indonesian banks under our coverage.
● We maintain our NEUTRAL rating on BDMN. We increase our target price for BDMN from Rp6,300 to Rp7,000. Our new target price for BDMN is based on Gordon’s Growth model, assuming 8% risk free rate (from 8.5%) and market premium of 5%, implying 2.8x 11E P/B, 2.5x 12E P/B, 15.1x 11E P/E and 13.1x 12E P/E