Credit Suisse: PNBN Strong 1Q10 on strong earnings and lower operating expenses

● PNBN reported 1Q10 net income of Rp420 bn, up 221% YoY, 32% of our old FY10 estimates and 33% of consensus’ estimates.
● PNBN’s positive earnings surprise was driven by higher-thanexpected operating income and lower-than-expected operating expenses. In addition, 1Q10 gross NPL dropped to 2.9% from 3.2% in FY09 while maintaining robust 1Q10 provision coverage. In light of PNBN’s robust 1Q10, we raise our earnings estimates for PNBN by 4.8-9.5%.
● PNBN is one of those few mid-size Indonesian banks that are being considered as potential takeover targets, and is thus trading at a premium to its local and regional peers.
● We raise our target price for PNBN from Rp1,100 to Rp1,220 in light of our higher earnings estimates. However, we maintain our NEUTRAL rating on PNBN, as it is still trading at a premium to its regional peers (based on P/B versus ROE measure).
PNBN delivered robust 1Q10, with gross NPL down to 2.9% from 3.2% in FY09 while maintaining robust 1Q10 provision coverage. In light of PNBN’s robust 1Q10, we raise our earnings estimates for PNBN by 4.8-9.5%.