Bank Danamon
Result note - Bulk of unwinding expenses - by Mulya Chandra CFA
(BDMN IJ / BDMN.JK, UNDERPERFORM - Maintained, Rp2,175 - Tgt. Rp2,400, Financial Services)
Danamon's FY08 results were in line with our expectations, but below consensus. Unwinding its foreign-currency forward contracts, Danamon booked Rp804bn of losses in 4Q08. Its CAR dropped to 13.4% as the bank plans to retire its subordinated debt in Mar 09. Cost-to-income ratio rose to 57% from 48% for FY08, on business expansion. Provisioning coverage went down to 102% from 127%, to minimise the provisioning/unwinding impact on P/L. We maintain our Underperform rating, on anxieties of low loan growth and high possibilities of rising provisioning expenses in 2009. Our DDM target price has been maintained at Rp2,400.
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