Bank BJB's First Quarter of 2013 results is within expectations

Bank BJB - 1Q13 results within expectations (Rp1,240; Neutral; TP Rp1,300)

Bank BJB posted IDR371 Billion net profit in first quarter 0f 2013, up 37% YoY, and this account for 26% of the market and 27% of our full year expectations. Strong loan growth, leading to higher NIM, is the main reason for the good performance.

Net interest income was up 38% YoY with NIM improved to 7.2% in 1Q13 from 6.0% in 1Q12 and 5.4% in 4Q12. This was due to the 38% YoY consolidated loan growth which came from mortgage (+225% YoY, from the low base), micro loans (+65% YoY), commercial (+33% YoY) and consumer loans (+24% YoY). Of the total loans, consumer loans remain as the largest contributor, accounting for 60% compared to 67% in March 2012. This comes from loans to the civil servants and teachers as well as pension loans. Commercial loans come second with 22% of total, micro at 12% and mortgage at 6%. With contraction in total deposits of 5% YoY, LDR increased to 84% in Mar 13 from 58% in Mar 12 but the bank is likely to see higher deposits growth.

Non-interest income also showed strong growth rate amid the low base while given the rising NPL, the bank saw its provisioning charges increase 168% YoY. NPL rose to 2.1% from 1.2% a year ago and this increase came from commercial and micro loans (for which the bank just started two years ago). Both segments made up 87% of the total NPL in March 2013, down from 93% in March 2012. However, the significant increase in mortgage loans NPL resulted in their contribution to total NPL increased to 9% from 1% over the last one year.

We expect loan growth to slow down towards 27% at the end of the year with NIM to decline o 6.6% as Bank BJB has started attracting time deposits again by raising the rate by 25 bps in April. NPL is expected to remain at the current level of 2.1% with coverage ratio of 84%. We maintain our Neutral rating for the counter which is trading at 1.8x P/BV 2013F.