CIMB Banks Sector Note - Asian road-show feedback

Maintain Overweight on banks. Danamon, BTN and Mandiri remain our top picks. We met investors in Singapore, Kuala Lumpur and Hong Kong recently and came away with the impression that there is growing interest in Indonesian banks. Slightly underperforming the market by 1% YTD but with expected stronger earnings, valuations for banking stocks are increasingly attractive to some investors. Excluding the pricey BCA, major banks are trading at 12.5-10.0x CY10-11 P/Es, at discounts to the market's 14.3-11.7x. We highlighted to investors that the yield curve is flattening, where we argued that potential interest-rate hikes should not constitute a worry. There were intense discussions on the cyclical Danamon, on which some investors have started to turn bullish. Still, many expressed doubts over BTN, for which we have the highest conviction, but that is where we believe there could be fundamental upside surprises. Most investors were happy with Mandiri's long-term performance, and intended to keep their holdings. While the majority agreed with our grouse about a lack of upside for BCA (Underperform), those who held the shares seemed comfortable keeping them as a market-risk hedge, rather than upside driver.