CLSA Bank Mandiri Preview

Bank Mandiri is going to report its 1Q10 financial results at the close of business
today.
• We think the numbers will be strong on a YoY basis, but expect QoQ contraction in loans and deposits due to seasonality. Key will be the numbers for the month of March, a period where lending and deposit generation tend to pick up. In our view, earnings will likely be boosted by lower provisions, cost of funds improvements and lower non interest expenses. We note that gross NPL's have decreased by 300bps from
1Q09-4Q09.

• Our forecast for full year 2010 stands at Rp8.3tn and EPS of Rp391 per share. We believe earnings of Rp1.6tn or Rp79 per share would represent very strong results.

• This would follow the trend for slower loan and deposit growth being supported by improved funding costs, lower provisioning and an improvement in expenses across the earnings we have seen to date.

• Generally speaking, after 1Q we will have to tweak our estimates higher to reflect the improved credit metrics that have been reported.

• OWT the banks our top picks are Bank Mandiri, BCA and BTN

Additional takeaways:
The banks shareholders meeting is scheduled for May 4, 2010, we expect Agus Martowardojo (Pres. Director and CEO) to remain at the helm.
We believe with the BP Migas guideline for foreign production companies to use state owned banks that BMRI and BNI could see significant positive impacts to their fee income in 2011 and possibly 2H10. Any agreements announced with Chevron or Total would be a tremendous coup for the banks as we calculate that they are the two largest foreign players.