Mandiri Sekuritas Banking Sector: BBRI provides room for another upside

􀂄 Banks’ share price posted a significant increase yesterday with BBNI posted the highest gain (+8.8%), making limited room for another upside based on our current valuation.

􀂄 Based on our TP, only BBRI remains as a buy, with 18.8% potential upside from our TP of Rp12,000/share. Please note that BBRI will not be impacted from the recent RR ruling since its LDR is above 78% and below 100%. We still like BBRI for its ability to maintain high profitability marked by high ROAE of 32.8% in 2011F (note: the difference in net profit between ours and consensus estimates for 2011F is 16% as we have projected lower impairment expenses for 2011F).

􀂄 As we believe that such increase is mostly due to substantial liquidity entering into the Indonesian capital market rather than a fundamental change of the companies (in fact, most banks will be negatively affected by the recent RR ruling), we maintain our current valuation on the bank.