Our latest visit to the bank highlighted flat loan growth recorded in 2Q09, yet the bank still expect the bottom line to improve on quarterly basis. Such flat loan growth was as a result of tighter underwriting criteria adopted since the beginning of the year due to uncertainties in the macro economic condition.
However, new booking for mass market businesses has shown improvement from Rp170bn in May09 to Rp250bn in Jun09. Overall, the bank expects its mass market loans to grow by over 20% yoy this year from its Dec08’s figures of Rp13.1tn.
Up to May09, NPL was recorded at 3.5%, yet concerns remain on the bank’s exposure to CMM (Consumer Mass Market) segment due to increasing possibility of employees being laid off.
At current price, Bank Danamon is trading at 2009F P/BV of 2.4x and PER of 20.3x. Even though Bank Danamon will benefit most from the declining SBI rates as its funding are biased toward high cost deposits, we still believe that the current valuation is already high. We therefore have a sell recommendation on the stock.
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