NIM tends to get pressure this year
We are not going to discuss much about 2008. However, we notice that the NIM in 4Q08 has fallen below 11%. The management shared that the declining NIM was due to high pricing of time deposit. We view that the NIM tends to get pressure this year, as the funding option through time deposit would the one that BDMN will utilize in the current lack of liquidity.
Conservative mode on in 2009
The bank has not changed its view for this year. The assumptions that the company shared last month is maintained. Being conservative and tightening underwriting process would the attitude to cope the gloomy economic outlook. Loan growth in 2009 will be driven by micro lending, while motor financing is expected to post flat growth. BDMN will reduce exposure on lending of corporate, commercial and long term loan. As a result, this year loan book is expected to expand by 8% only.
Things to be done in 2009
This year the bank is going to execute two important matters:
1. BDMN is going to call back the US$300million sub debt on March 2009. Cash has already in hand to buy back the sub debt. 2. The bank intends to exercise the option to buy the remaining 20% stake of ADIRA, so that BDMN’s ownership in the company would be 95%. High ROE earned by ADIRA is one of the attractiveness to exercise the option.
We adjust some of our assumption, especially lower the fee based income in 2009. Low loan growth and reducing derivative transaction would potentially reduce fee based income in this year. With Gordon Growth Model we get the fair value of BDMN at Rp 2250 for the next 12 months. For the ROE, we plug in 19%, as the sustainable ROE. For
2009 and 2010, we forecast BDMN to book 15.7% and 17.5% ROE. We maintain the HOLD recommendation.
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