Bank Jatim FY12 results are below estimates

Bank Jatim – FY12 results are below estimates (Under review; Rp440)

During the analyst meeting Bank Jatim reported net profit of Rp725bn (-16% YoY) in 2012 from IDR 860bn in 2011, below ours and consensus forecasts by 10-20%. This translates into Rp235bn net profit in 4Q12 (+22% QoQ ) as the bank suffered a surge in bad debts in 3Q which resulted in higher provisioning.  

NIM reduced to around 7% in 2012 (subject to revision when the financial data is available on 11 Mar13) from 9.0% in 2011 because of declining yield (while cost of funds were relatively stable) and rising NPL.

Total loans growth increased 17% YoY (-0.5% QoQ) in 2012 from 23% YoY in 2011, contributed by consumer loans which grew 14% YoY (accounted of 64% of total loans), followed by SME (+21% YoY, 19% of total loans) and commercial (+11% YoY, 17%).

Total deposits grew 10% YoY (-16% QoQ) in 2012 compared to +23% YoY in 2011 with LDR rising to 83%, above the bank’s 2012 target of 80%. The growth of deposit portfolio came from current account (+18% YoY) and savings (+15% YoY) while time deposit slowed down (-9% YoY). As a result CASA to total deposits improved to 80% from 76%.

Total NPL rose to 2.95% in 2012 from 0.97% in 2011 with the worst deterioration was seen in commercial and SME loans, where Keppres NPL increased to 14.02% in Dec 12 from 0.16% in Decd 11 and 9.75% in Sep 12 while KUR NPL rose to 10.87% from 4.10% and 9.11% over the same period. With Rp307bn impairment in 2012, we estimate the bank wrote off Rp152b of bad debts last year while coverage ratio declined to 57% in 2012 from 65% in 2011. The management is confident that they can lower the NPL level substantially this year through better credit monitoring and higher collateral requirement for certain loans and the resolution of the Rp106bn (0.5% of total loans) NPL in syndicated loans.

Cost to income ratio improved to 43% in 2012 as compared to 46% in 2011 while CAR remained high at 24-25%.  

Going forward, Bank Jatim’s guideline for 2013 are as follows:
-Loan growth of 20% YoY with multipurpose loans above 60%
-Deposit growth of 23% YoY, to achieve LDR of 78-80%.
-NIM of 6-7% due to slower loan growth.
-Improving NPL and execute recoveries from fraud and bad debts.
-ROE of >17.5%.

Up to Feb 2013 the bank has recorded Rp220bn unaudited pretax profit, up 16.5% YoY while NPL level still creeping up to 3.2% due to continued rising problem loans in KUR, as expected. We are reviewing our forecast and call on the stock which is trading at 1.1x P/BV 2013 consensus. An AGM is set for 27 March in which the bank will decide on the dividend payment, expected at 80% payout ratio or around Rp39/share with the cum date before 18 April. At Rp440 this translates into gross dividend yield of 8.8%.