CIMB Company Update – Bank Danamon – Shift to higher gear

Several vital indicators showing a bottoming of the economy have encouraged Danamon to revisit its business targets, especially its loan-growth target. Its capital is now the strongest among peers, enabling Danamon to take up more leverage to support high growth. We still expect NPL hiccups and write-offs in 2H09, but recoveries should become a theme for 2010 given Danamon's record of a 46% recovery rate for written off loans in the past. On the back of a more upbeat outlook, we upgrade our FY09-10 loan growth assumptions to 15-20% (from 9-19%), raising our FY09-10 EPS estimates by 11-27% and our DDM-based target price to Rp5,200 (from Rp3,675). Maintain Outperform.