Lehman gives '1-buy' rating to BDNI

JAKARTA (JP): Global investment bank Lehman Brothers has assigned a '1-buy' rating to PT Bank Dagang Nasional Indonesia (BDNI) on the grounds of its bright performance outlook.

Lehman Brothers Asia bank analyst Raymond Lee said yesterday the recommendation was based on significant improvements in the bank's performance which were expected to boost earnings by 70 percent this year.

Lehman Brothers predicted BDNI's return on equity would increase to 18 percent in 1997 and 20 percent in 1998. It predicted BDNI's return on assets would climb to 1.78 percent this year and 1.97 percent in 1998.

Interest margins would rise toward 4.5 percent in the next few years from 3 percent in 1995, Lehman said.

Lee said improved interest yields would offset the diluting impact of the recent 3-for-4 rights issue. He said the plan to raise lending rates by 50 basis points was expected to add Rp 35 billion (US$ 14.6 million) to this year's results.

He said BDNI's improving fundamentals and strong earnings growth had been largely overlooked although the bank could outperform the local market by as much as 15 percent in the next 12 months. The bank's shares currently trade at a 45 percent discount to the market.

"BDNI's shares performed in line with the Indonesian market in 1996. However, against the other leading banks in Indonesia, BDNI was a lagger despite a strong recovery in the final quarter," Lee said.

BDNI, the country's third largest bank in terms of market capitalization and one of Indonesia's fastest growing commercial banks, extends working capital loans to small and medium size business.

It has 4 percent of the Indonesian banking market. Last year, the bank's net profit was Rp 190.7 billion, up 36 percent on 1995. (02)