Bank Panin: Interim results are better than expected (Tjandra) - BNP Paribas

Price 960, TP 1100, Mkt cap $2,691m, Avg t/o $0.5m

* Net profit declined 7% y-y to IDR733b in 1H11, accounting to 57% of our full year forecast but within the market expectation. We expect low non-interest income on the back of declining marketable securities.

* Supported by 31% y-y loan growth and 25% y-y deposit growth (more growth rate in the low cost CASA), while NPL was on the decline, net interest margin improved q-q to 5.1% in 2Q11. However given the low NIM in 1Q11 cumulative margin in 1H11 was still below 5% level. Nevertheless, net interest income increased 25% y-y in 1H11. Non-interest income improved more than expectation in 2Q11, likely from recovery from previously written off loans.

* NPL level declined both in percentage and absolute amount to 3.7% in June 2011 and coverage ratio improved to 71% from 63% in March. The lower NPL was also helped by loan write off in the amount of IDR350b in 2Q11, equivalent to 0.5% of total loans outstanding.

* Cost-income ratio went back to 39% level in 2Q11 after reaching 72% in 1Q11 and this is expected to reach 50-55% level as the bank is expanding business.

* Minority interest increased 59% y-y in 1H11, supported by Clipan Finance which concentrates on automotive leasing. Given its low ROE, we believe the stock is fairly traded at 1.5x P/BV 2012.

2011E: Rec EPS 53, P/E 18.0, P/B 1.7, ROE 10.0, Yld -
2012E: Rec EPS 70, P/E 13.7, P/B 1.5, ROE 11.8, Yld 1.1
2013E: Rec EPS 82, P/E 11.7, P/B 1.4, ROE 12.6, Yld 1.5