BNP Paribas Bank Mandiri - raising earnings and TP to IDR5,500 - BUY

We maintain our BUY call on Bank Mandiri with the revised TP of IDR5,500 based on 2.9x P/BV 2010E due to:

1. The expected lower provisioning charges in 4Q09 prompts us to raise earning forecast by 14% for 2009. NPL is expected to decline to 3.9% by end 2009 from 4.1% in September 09 while the bank still anticipates some write backs as well. Some NPL upgrade, repayment and expected 15% loan growth for 2009 should lead to the lower NPL going forward.

2. We have yet to recognise in the forecast the additional IDR3.4t write backs from the exposure to Garuda Indonesia of which IDR1.4t is expected to be booked when GI goes public next year and the rest to be billed to the government.

3. Higher equity base leads to the TP upgrade, based on 2.9x P/BV 2010. If we include the IDR2.55t net proceed from the GI write back in 2010, our fair value for Mandiri is 2.7x P/BV.