CIMB Banks Sector Note - Preventive restructuring

Sector Note - Preventive restructuring - by Mulya Chandra CFA
( - )

Indonesia's central bank has clarified that the early restructuring of performing loans can be done without marking them as NPLs first. This should encourage bankers to embark on the early restructuring of grading-2 loans and fight NPLs early. Unofficial data indicated that sector gross NPL ratio reached 4.2% in Mar 09, a level similar to Feb 08, but much lower than 2005-06's 6-8%. Although the NPL cycle is very likely to extend into early 2Q09, we expect the ratio to stabilise by end-2Q09. Maintain Overweight on the sector. Mandiri, Danamon, and BRI remain as our top picks.