BMRI 3Q14: NP +4% qoq; tracking our FY14e
Tracking our FY14e; Buy with TP of Rp12,900
Mandiri reported 3Q14 results with NP of Rp4.9tr (+4% qoq). This translates
into 9M14 NP of Rp14.5tr (+13% yoy), which tracks our FY14e NP of Rp12.1tr.
It implies B/S ROAE of 20.2% while CAR rose to 16.5%. The bank’s focus on
liquidity has resulted in a lower LDR of 86% (-170bps qoq; +80bps yoy), yet it
maintained a stable NIM of 5.8%. We expect NIM to remain elevated (if not
marginally higher in 4Q14). Asset quality has also been maintained with NPL at
2.2% (1.8% ex BSM). With liquidity in the system still tight, we see Mandiri
increasing its dominance in the banking industry and reiterate Buy.
Overall balance sheet remains healthy
Loans and deposits grew 12.4% yoy (+4.2% qoq) and 14.9% yoy (+6.3% qoq) –
implying LDR of 86% (-170bps qoq; -200bps yoy). Despite tight liquidity,
Mandiri maintains its high CASA at 61.2%. While special mention loans
showed an uptick to 4.4% (+30bps qoq; +60bps yoy), NPLs stabilised at 2.2%
(1.7% ex BSM), with coverage at 160%. Yet, restructured loans have declined.
CAR remains high at 16.5%.
Outlook: focusing on liquidity, asset quality and growth in infrastructure
Following the results, Mandiri maintains a loan growth target of 16-18% (bank
only). This is achievable but not easy, in our view (given YTD growth of 8%).
The impact on our earnings projections should be muted. In 2015, Mandiri will
begin its next transformation phase and the bank has set out a five-year plan
focused on growth in retail (micro, SME, individuals) and deepening client
relationships (corporate). It will also continue to invest in technology to further
enhance its franchises, saying that 40% of its IT spending will be focused on
areas such as relationship management and customer data architecture.
Still attractive; risks: higher NPL formation/CoF, slower loan growth
Despite strong 29% YTD share performance, Mandiri remains attractive at 2.0x
15F PBV (below its historical average). As such, we retain our Buy rating with a
TP of Rp12,900, using Dupont (15.7% CoC; see page 7 for details).