Bank Negara Indonesia better than expected

Bank Negara Indonesia – FY2012 results better than expected

BNI came out with better result than expected with net profit of IDR7,046bn (+21% YoY), beat ours and consensus forecasts by 5-6%. This achievement was mainly due to better asset quality maintenance which contributes to significant reduction in provisioning charges.

Total consolidated loans grew 23% YoY (+9% QoQ), higher than their 2012 guideline of 18-20%. The growth came mainly from corporate loans which increased 25% YoY (accounted 36% of total loans) followed by consumer loans at 31% (21%) and medium at 24% (18%). Of the consumer loans, mortgage increased 40% YoY followed by credit card at 23% YoY. On the other hand, auto loans only increased marginally at 2%.

Total deposit only grew 11% YoY (8% QoQ), below the company’s expectation. However, the CASA to total deposits improved to 66% from 63% as BNI is targeting to move to low cost funding by expanding their cash outlets and e-banking services. Cost of funds improved to 2.8% in 2012 from 3.5% in 2011 as the bank was reducing term deposit cost with tiering rate system. Gross LDR increased to 78%  which helped improve NIM to 5.6% in 2012 and 5.8% in 4Q12.

Asset quality improved with gross NPL of 2.8% in Dec 12, down from 3.6% in Dec 11 and 3.5% in Sep 12. The marked NPL improvement was seen in loans to medium segment to 4.5% in 2012 from 8.0% in 2011 while the NPL level to loans to the small segment increased to 5.3% from 4.4%. While the bank wrote off Rp3.17tr of bad debts in 2012, it also recovered IDR 2.27tr, translating into recovery rate of 71% in 2012 (vs. 72% in 2011). Coverage ratio improved slightly to 123%.

Fee based income grew significantly 68% YoY due to higher insurance premium rate (+85% YoY) and more active investment transaction (+147% YoY) in 2012.

Cost to income ratio declined to 52% while total consolidated CAR declined to 16.5% in 2012.  

Going forward BNI strategic policy for 2013 includes focus on synergizing business banking with consumer and retail banking, improving asset quality, optimizing fee based income and low cost fund and improving operating efficiency.

Their 2013 targets are as follows:

• Loan growth of 23-25% with consumer and retail loans at 27-29%, indicating that the bank is ready to be at full steam now that the problem loans have declined to a comfortable level.
• Deposit growth at 16-18% with CASA growth of 16-18%
• Gross NPL at 2.5-2.75% with coverage ratio of 121-125% and recovery of IDR 1.6-1.9tr
• Cost to income ratio of 48-49%
• ROE of 20-22%

The counter has outperformed the market by 10% and the financial index by 5% over the past one month and is trading at 1.7x P/BV 2013E and 10.9x PE based on the consensus numbers. We are reviewing our numbers and call on the stock, which has been one of our top pick in the sector.

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