Indonesia Banks - 2010 Ended Strongly: Recent Data Points and Result Preview - Citigroup

 Record loan disbursements and deposit mobilization in December— The key takeaways from Dec 2010 industry data are: 1) strong loan growth of 23% in 2010, led by Private National Banks; 2) Deposits rising sharply near year-end (2010 growth of 19%) with State-Owned banks raising CASA by 17% (m-o-m); and 3) lending-deposit spreads narrowing to 3-year low of 8%. Sustaining loan growth into 2011, in our opinion, will be constrained by inflation. Bank Indonesia expects loan growth of 19-23%, and Citi forecasts are based on 20% loan growth (management guidance).

 Out and Under Performers? — BBCA and BDMN are likely to be beneficiaries of strong 2010 loan growth (inferring from 28% loan growth for Private National banks). BBNI and BBRI are most likely to be laggards, as State Owned banks loan growth was only 18% (BMRI has indicated above 20% loan growth for 2010). SOE banks though will show a healthy balance sheet due to December surge in CASA deposits, which tend to reverse in Q1.

 Result Calendar — BDMN will kick off the FY10 result season on Feb 17, with expected 88% EPS growth. Results from other banks are expected, based on initial management guidance, in end Feb (BBNI and BBTN) and end March (BBCA, BMRI and BBRI). Citi forecasts are above Consensus for BBCA and BBTN, below for BBNI, BBRI and BDMN and in line with for BMRI.

 Surprise Factor — Credit costs and in particular cash write backs are the biggest unknowns (BBCA and BBNI in particular). Additional Reserve Requirements for banks from Nov 2010 and declining spreads are negative for NIMs but may be offset by higher loan growth and lower dependence on Time Deposits. Consensus EPS growth forecast is 28% for 2010F and 19% for 2011F. Recently, both have been revised down marginally. Amongst banks, down revisions have been for BMRI, BBCA and BBRI while BBNI has been revised up for 2011.