Citigroup Bank Mandiri - Alert: 2009 Profits Well Above Expectations

BMRI profit of Rp7.2Trn (+35% y-o-y) is 16% above our forecast and 13% above
consensus. The Q4 profit of Rp2.5trn is up 50% from Q3 CY09, in an environment
of declining interest rates. The two key drivers of this strong performance in Q4
were 1) higher than expected Gross Interest Income supported by unchanged
asset yield and 2) Reversal of provision of Rp336bn, against guidance of Rp200bn
provision (Citi had assumed Rp400bn).
We maintain our Buy rating based on its potential to improve asset yield, strong
deposit franchise and upside from large written-off loans.

NIMs improved from 4.9% to 5.3%, supported by stable lending rates in Rp loans
and 50bps decline in Cost of Funds to 4.3%. Higher yields on FCY loans cancelled
the impact of lower yield on SBIs. Loan and Deposit growth were 14% and 11%
respectively, with lower deposit growth due to the retirement of expensive FCY
Term Deposits. Saving Deposit growth was 20%, with slight decline in market
share. Management is maintaining its guidance of 15-18% loan growth in 2010
and NIMs of 5.35%. There is room for upward revision in loan growth, though
management will wait till June before revising its guidance. While loan growth may
exceed expectations, in our opinion, there may be pressure on NIMs in 2010 due
to lower asset yields.

Gross NPLs have declined from 3.8% in Sep 2009 to 2.8%, due to a combination
of Upgrades and Write-offs. Credit Cost for the year declined to 1.1%, from 1.9%
in 3Q. Based on first two months of 2010, management expects Credit Cost in
2010 to be even lower, in both percentage and value.

Valuation
Our target price of Rp5,770 is based on a 2011E P/E of 13.5x, derived from a 10%
premium to the 5-year forward P/E average of 12.3x for the 4 banks in the MSCI
Index. We ascribe a premium in recognition of a potential earning surprise, BMRI's
earnings power, and use 2011E as the base year because we expect earnings to
normalize in 2011E after a volatile period in 2008-10E.