Bank Danamon Indonesia tbk (BDMN) encounters the weakening of third-party fund because the company cut the portion of deposit by 19% yoy. Giro fell by 45% compare to the highest position in 2014 so the current account saving account (CASA) fell to 42% on the first semester 2016 rather than in December 2014 by 49%.
UOB Kay Hian considers that the competition and the stronger ability of other bank to collect the third-party fund will push BDMN ability to collect low fund.
The company also has to increase the revenue and credit. BDMN credit didn’t grow in 2013 and its credit distribution fell by 6% yoy on the first semester 2016. BDMN consolidates mass market segment, contributing 46% to its credit distribution.
“The economy recovery could raise its multi-finance business but the competition reduces Adira Finance Tbk (ADMF), its subsidiary strategy. The lower yield curve also reduces its net interest margin (NIM),” said Alexander Margaronis, Analyst of UOB Kay Hian.
The company’s NIM will be pushed because its credit focus changed to small and medium enterprises (SMEs) and corporations. The low CASA will limit the bank ability to reduce the cost of fund because the deposit could only be temporarily decreased. UOB Kay Hian recommended SELL for BDMN with a target price of IDR 3.300. (*)
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BDMN Performance |
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In billion rupiah |
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Note |
2015 |
2016F |
2017F |
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Net interest income |
13,648 |
14,187 |
14,533 |
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Non interest income |
4,379 |
4,262 |
4,476 |
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Net profit |
2,393 |
3,150 |
3,562 |
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EPS (IDR) |
249.7 |
328.7 |
371.6 |
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PE (x) |
15.3 |
11.6 |
10.3 |
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P/B (x) |
1.1 |
1 |
0.9 |
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NIM (%) |
8.2 |
8.5 |
8.4 |
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Source: UOB Kay Hian |
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