Indonesian banks 1Q09 net profit was in generalwithin expectations - Danamon reported the weakest result i.e. below expectations, while BCA and Mandiri were in-line and BRI the strongest.
Outside our coverage, BNI also posted strong headline numbers, but if we exclude Rp221bn of non-recurring fees net profit was in-line with consensus.
Post release of results and discussing with managements, we still maintain our view that in the next few quarters earnings momentum for all banks will slow dramatically and we cannot annualize what appears to be a decent 1Q09 results.
NIM, for example, on average declined QoQ and flat at best with state-owned banks experiencing the worst NIM performance despite surprisingly strong credit growth.
Managements continue to guide for lower NIM in the future driven by a combination of lower lending rates and bottoming cost of funds.
It is interesting that state owned banks posted strong loans growth in a typically weak 1Q and in the face of sharply rising NPLs, while private banks such as BCA and
Danamon continue to tighten the credit spigot. BCA and Danamon saw loans contract QoQ, while all state owned banks showed 1-3% QoQ loans growth mainly to the corporate segment
NPL rose for all banks with BCA experiencing the sharpest increase to 1.6% of loans in 1Q09, albeit from a low base.
Provisioning charges were also high, offsetting some of the positive increase in NIM.
In summary, while 1Q09 results were within expectations we would be selling into any share price rally as underlying drivers are weak with state-owned banks in particular exacerbating NPL risk with continued strong credit growth. As a result, provisioning burden should remain at high levels driving down lower ROE for all banks.
We currently only have a positive rating on BRI (O-PF)
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