JPM Research call – Buy Bank Danamon

2Q10 net profit of Rp732bn came in below Aditya’s preview of around Rp850bn, but still looking strong YoY and QoQ (if we smooth out the expensing of management stock options). Key surprise is the Rp90bn stock option expense, half of which should have been expensed in 1Q10. Key achievement is the 10% QoQ growth in loans, declining cost of funds with a recent 3-year money costing BDMN 8.5% and 1-2 year money costing sub 7%, after swapping into Rupiah. With an average lending rate still above 21%, BDMN stands to benefit from continuing inflow into IDR bonds. 1H10 net profit of around Rp1.4trn is tracking slightly ahead of consensus of Rp2.8trn; full year profit of Rp3.0-3.1trn is looking more likely. A more detailed research note to follow.