Index of /enm/images/dokumen

Deutsche Bank

Indonesian Banking Sector
Update on Indonesian Banking Sector – Oct 2008

All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters,
Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies
covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain companies
covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access IR at http://gm.db.com or by calling 1-877208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1

Raymond Kosasih +6221 3189 525 raymond.kosasih@db.com

Deutsche Bank

Relatively sound macro
Indonesia real economy is still largely unaffected and banking system remains
sound
Indonesia is more sheltered against global recession
– Domestically centric economy
– Other cushions include lower personal and corporate tax (+8-10% take-home)

– Easing food inflation and possibly fuel price cut ahead of election

So far, policy makers have been able to contain macro risk
It wont immune from global slow down
– Slowdown in exports
– Near term risks : Rupiah weakness
– Risks on confidence and fundamentals
– Near-term US$ debt and asset held by foreigners ~US$67bn vs. reserves
US$57bn
– Current account US$1.5bn deficit in 2Q and BOP very dependent on portfolio flow
– Impact: wide ranging implication, higher imported inflation, cost push and margin
squezze, forex losses, higher rates, etc. but don‘t foresee capital flight
Raymond.kosasih@db.com 28Oct2008 · · page 2

Deutsche Bank

Maintaining confidence is key for Rupiah
Flow in SBI affects the Rp/US$ significantly

Foreign position in govt bonds and SBI– US$mn

20 .0

40%

18 .0

35%

16 .0

10,000

25
20

9,800

15

30%


12 .0

25%

9,600

10 .0

20%

9,400

8 .0

15%

SU N + SB I U S$ b n (LH S)

(5)

(10)

9,000

(15)

Source: Deutsche Bank and CEIC

1,100

1,067

Oct-08

Sep-08

Jul-08

Aug-08


Jun-08

Apr-08

M ay-08

M ar-08

Jan-08

Feb-08

Dec-07

Oct-07

Nov-07

Sep-07


Jul-07

Indonesia

Philippines

Korea

Thailand

Indonesia CDS bps

900

China

800

440


IDR/USD

Source: Deutsche Bank and CEIC

540
1,000

Aug-07

SBI m thly changes - Rp trn (RHS)

% in SB I

CDS sovereign bonds in the region
490

Jun-07

Apr-07


Jan-07

(20)
M ay-07

8,800

Oct-08

Sep-08

Jul-08

Aug-08

Apr-08

Jan-08

Dec-07


Oct-07

Nov-07

Sep-07

Jul-07

Aug-07

Jun-07

Apr-07

M ay-07

M ar-07

Jan-07


Feb-07

Figure 5: CDS Sovereign bonds spiked

Jun-08

0%
M ay-08

-

M ar-08

5%
Feb-08

2 .0

-


9,200

10%

4 .0

5

M ar-07

6 .0

10

Feb-07

14 .0

700

390

600

340

400

500
300
200

290

25Jul

240

1-

8-

Aug Aug

15Aug

22-

29-

Aug Aug

5-

12-

19-

26-

3-

10-

17-

Sep

Sep

Sep

Sep

Oct

Oct

Oct

190
140
90
25Jul

30Jul

4Aug

9Aug

14Aug

19Aug

Base period 7/25/2008

Source: Deutsche Bank and Bloomberg

Raymond.kosasih@db.com 28Oct2008 · · page 3

24Aug

29Aug

3Sep

8Sep

13Sep

18Sep

23Sep

28Sep

3Oct

8Oct

13Oct

18Oct

Deutsche Bank

Exports slowdown
Exports ~ 1/3 of GDP and Exports to US and EU ~ ¼ of exports
Impact: Negative impact is inevitable but shouldn‘t be too severe
– Export growth has been important economic driver.
– Government has lowered FY09 growth of 5.5% (from 6.3%), but could
undershoot. DB estimates at 5% growth.
– Traders holding back purchases and lack of working capital.
– Outer islands will see slower growth, but won‘t be too damaging as it has evolved
into larger and broder economies in the past years
Exports – Top 10 by product

Exports by country

Exports Contri.
Japan
USA
Singapore
China
South Korea
Malaysia
India
Australia
Thailand
Netherlands
Others

US$114.1bn
21%
10%
9%
8%
7%
4%
4%
3%
3%
2%
28%

Source: Deutsche Bank and BPS

+31% yoy%
19%
17%
34%
37%
56%
61%
56%
19%
35%
66%
26%

CPO
Coal
Rubber
Electronic
Machinery
Iron Ore
Pulp and Paper
Clothings
Logs and Timber
Textile
Top-10
Others non Oil&Gas
Oil & Gas
Total Exports
Source: Deutsche Bank and BPS

raymond.kosasih@db.com · date · page 4

% Contri
11%
7%
6%
5%
3%
3%
3%
2%
2%
2%
45%
32%
23%
100%

yoy%
98%
44%
33%
7%
8%
-25%
21%
2%
-6%
12%
26%
17%
63%
30%

Deutsche Bank

Macro risk assessment
Lower oil price eases oil subsidy pressure on budget
– Budget deficit reduced to 1.0% of GDP in FY09 from 1.7% in FY08.
– Bond issuance halved to Rp54.7tr given difficult environment

BI’s tight interest rate policy
– To maintain Rupiah stability, less so in keeping inflation
– Rates may rise to 10% or more
– Comparatively higher real interest rates
– Inflation at 12.1% is peaking out. Easing food prices from 20% yoy helps as low-end
income spends >60% on food.
– BI expects inflation of 6.5-7.5%

Current account deficit – near term weak currency
– Reflects economic resilience given strong imports, incl. capital goods
– But, this is mostly funded by portfolio inflow, so BOP is at the whimp of sentiment
– Weaker oil price also lower forex reserves accumulation Rupiah weak currency

Raymond.kosasih@db.com 28Oct2008 · · page 5

Deutsche Bank

Macro risk assessment
BI rate – real and nominal %

Food price rising at fastest pace since 98 crisis

13.0%

6.0%

18%

12.0%

4.0%

16%

11.0%

20%

2.0%

14%

0.0%

10.0%

12%
10%
8%

-2.0%

9.0%

9.5% -4.0%

8.0%

-6.0%

7.0%

-8.0%

CPI yoy%

SBI 1mth (real) - RHS

Food yoy%

Jul-08

Jan-08

Jul-07

Jan-07

Jul-06

Jan-06

Jan-05

Sep-08

Jul-08

M ay-08

M ar-08

Jan-08

Nov-07

Sep-07

Jul-07

M ay-07

M ar-07

Jan-07

4%

Jul-05

6%

SBI 1mth

Source: Deutsche Bank and CEIC

Source: Deutsche Bank and CEIC

Current account deficit – structural

Current account a function of investment

11
8
5

6%

31%

4%

29%

2%

6.0%
4.0%

27%
25%

2.0%

0%

23%

0.0%

(4)

-2%

21%

(7)

-4%

Current Account US$ bn (LHS)

Current Account % GDP

Source: Deutsche Bank and CEIC

Raymond.kosasih@db.com 28Oct2008 · · page 6

-2.0%

19%

Current A/C (RHS)
Source: Deutsche Bank and CEIC

2Q08

FY07

FY05

FY03

FY01

FY99

-4.0%
FY97

17%
FY95

2Q08

FY07

FY05

FY03

FY01

FY99

FY97

FY95

FY93

(1)

FY93

2

Investment to GDP %

Deutsche Bank

Banking system remains healthy
The blessing in disguise from the Asian financial crisis
BI a lot more effective and conservative on banking regulations
– No exposure to CDOs and the likes
– Arresting liquidity issues

Prudent lending : Psychological mark steered bankers from careless lending





New owners promoting corporate governance
Building credit culture
Mortgage is still plain vanilla and accounts for 2-3% of GDP.
Confidence took time to recover, avoided the build-up of overly unjustified confidence

Sound system:
– Debt to GDP at less than 30%,
– NPL trending down to abt 3% with high coverage ratio
Low FX loans exposures (abt 18% now vs over 50% in 1997/8)
Manageable risks of default in consumer loans
– CAR stands at a healthy 17%
But prolonged credit crunch could affect sub-debt issuance
Implementation of Basel II could cut CAR by 200-300bps

Longer term, normalising profitability
Raymond.kosasih@db.com 28Oct2008 · · page 7

Deutsche Bank
Banks remain well capitalized - CAR

LDR drivers
80%

120%

60%

100%

40%

25.0

20.0

80%
15.0

20%
60%
0%
40%

-20%

LDR (RHS)

Deposit %

Aug-08

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

0%
1994

-60%
1993

20%

1992

-40%

10.0

5.0

0.0
2001

2002

2003

2004

2005

2006

2007F

2008F

Loan %

Source: Deutsche Bank and CEIC

Source: Deutsche Bank and CEIC

Still lowly leveraged economy and NPL remains in check

Money market increase by predominantly deposit funding

27%
12%

25%

10%

88%

8%

86%

6%

21%

4%

18%
17%

0%
2001

2002

2003

2004

NPL (LHS)

2005

2006

2007

Loan to GDP %

Source: Deutsche Bank and CEIC

Raymond.kosasih@db.com 28Oct2008 · · page 8

80%

2%

78%

0%

76%

Aug-08
Debt

M oney M arket

Source: Deutsche Bank and CEIC

Aug-08

19%

2%

82%

2007

20%

84%

2006

4%

22%

2005

6%

2004

23%

2003

8%

2002

24%

90%

2001

10%

92%

26%

2000

12%

3rd party (RHS)

Deutsche Bank

Arresting liquidity issues
LDR and Adjusted LDR

Input cost increases fueling working capital loans

100

40%

90

35%

80

30%

70

25%

60

20%

W PI

W C loan

15%

50

Adj LDR

40

10%

Reported LDR

5%

30

May-08

Jan-08

Sep-07

May-07

Jan-07

Sep-06

May-06

Jan-06

Sep-05

Jan-05

May-08

Jan-08

Sep-07

May-07

Jan-07

Sep-06

May-06

Jan-06

Sep-05

Jan-05

May-05

Sep-04

Jan-04

May-04

Sep-03

May-03

Jan-03

Sep-02

May-02

Jan-02

Source: Deutsche Bank and company data

May-05

0%

20

Source: Deutsche Bank and CEIC

Low real WC growth

BI regulations help easing constraints

20%

16

15%

14

10%

12

5%

10

0%

8
6

-5%

4
May-08

Jan-08

Sep-07

May-07

Jan-07

Sep-06

May-06

Jan-06

Sep-05

May-05

Jan-05

-10%

2
BBCA

BMRI

Rp reserve ratio %

Source: Deutsche Bank

Raymond.kosasih@db.com 28Oct2008 · · page 9

BBNI

BBRI

BDMN

BNII

Release of cash reserve (Rptr)

Source: Deutsche Bank and company data

BNGA

PNBN

As % of loans

Deutsche Bank

Liquidity imbalances
Cheap funding is key to weather liquidity risks

DB’s estimate of liquidity as % of loans

30

160,000

100
90
80
70
60
50
40
30
20
10
-

140,000

FY07

1H08

25.2

24.0
25

120,000

18.5

20

100,000
13.8

15

80,000
60,000

10
3.7

3.3

3.1

2.8

2.6

20,000

Cheap fundings (Rpbn)

1.3

-

NISP

Panin

5

Share of cheap fundings (%) RHS

Source: Deutsche Bank and company data

Source: Deutsche Bank and company data

Deposit franchise is key (ratios of CASA to total deposits)

Funding costs comparison

80

Niaga

BII

Danamon

Lippo

BNI

BRI

BCA

Mandiri

BNGA

BNII

BMRI

BDMN

Average

BBNI

BCA

BRI

-

1.7

Buana

40,000

8.0
07

70

08F

09F

6.0

60
50

4.0
40
30

2.0

20

Source: Deutsche Bank and company data

Raymond.kosasih@db.com 28Oct2008 · · page 10

BNGA

BDMN

Source: Deutsche Bank and company data

PNBN

NISP

BDMN

PNBN

BNII

BNII

BNGA

BBNI

BBIA

LPBN

LPBN

BBRI

BBRI

BMRI

BBNI

BCA

BMRI

-

BBCA

-

10

ERROR: undefined
OFFENDING COMMAND: f‘~
STACK: