Bank Danamon: 1H11 results 42% of ours and consensus estimates (BDMN, Rp5,700, Neutral, Rp6,300) - Mandiri

􀂄 Bank Danamon recorded a net profit of Rp1.5tn (+3% yoy) in 1H11, which was below our expectation and consensus estimates
􀂄 The bank reported lower than expected net interest income, which the management claimed to be a result of tighter competition that pushed lending rates to fall. The lending rate for motorcycle financing, for instance, has been dropped from previously 25% p.a in 1H10 to 22% p.a in 1H11.
􀂄 The bank actually managed to book strong loans growth in 1H11 (+31% yoy), which was extended to wholesale segment (=33% yoy), SME segment (+29% yoy) and mass market segment (+36% yoy). Included in the mass market segment was loans booked by Adira Finance which grew by 46% yoy. Such strong growth in ADMF has caused a significant decline in the bank’s CAR (as the risk weighted assets for consumer financing is 100%) thus trigger the need for capital raising.
􀂄 We are reviewing our forecast for the bank as we have been underestimating the impact of stiffer competition to the bank’s NIM. At present, BDMN is traded at 2012F P/BV of 2.0x and PER of 10.7x. We are maintaining our neutral recommendation on the counter.