Why Mandiri does not need to compete aggressively for deposits

It has low loan-to-deposit ratio.

According to Maybank Kim Eng, Mandiri’s low funding cost is underpinned by increased deposit taking on increased transactional banking capability which makes it well placed to achieve higher CASA growth.

Here's more from Maybank Kim Eng:

In response to BCA’s aggressive expansion in deposits, Mandiri increased time deposit rates by made 50bp from July 2013. Nevertheless, Mandiri’s low LDR means the bank does not need to compete aggressively for deposits when liquidity tightens. 

Mandiri has huge lending capacity in terms of both, liquidity and capital. Its increased proportion of micro lending generates higher yields. Mandiri has put its expansion plans on hold for the time being so as to reassess its revised risk-reward profile and has created additional buffer for the rising CoF.

To offset the increase in cost, Mandiri raised its lending rates by 50bp across the board. Generating higher yields in future should not be an issue as the bank can leverage on its strong corporate lending franchise and focus on downstream value chain.

Mandiri proved that having the highest exposure to the commodity sector does not translate into high NPLs. In fact, the overall NPL rate has been steadily declining and the bank has built a sufficient buffer against deterioration in asset quality.

The main risk to our earnings estimates is provisioning of more than our conservative estimate of IDR4.5t in FY13.