Indonesia Market Summaries 17 May 2013

Bank BNI is reviewing investment in Bahana

The management is studying two options to acquire Bahana Pembinaan Usaha Indonesia (BPUI), which is owned by the Ministry of SOE. First is 100% direct investment which will take a long process as it needs the parliament approval. The second is through additional share issuance in which BNI will own 40% of BPUI while the government will still own 60%. This does not need the parliament approval and earlier the bank mentioned to pay the shares using part of their Rp17tr recapitalization bonds. (Kontan)

Investment to ease in 2Q13

The chairman of the Coordinating Investment Board Chatib Basri anticipated easing investment in 2Q13 affected by declining capital goods imports since 1Q13. Though so, the FDI to GDP ratio is expected to increase to above  5% from 3% in 1Q13 and 1.7% in 1Q12 (Investor Daily)

Subsidized fuel price hike compensation program set at IDR 20 trillion

The number is registered in the 2013 Revised State Budget Proposal (RAPBN-P 2013). A big chunk of the amount is allocated to the temporary direct aid (BLSM), reaching IDR 13 to 14 trillion according to the Coordinating Minister of Citizen’s Welfare,  while the rest to enhance existing social programs already budgeted this year. The government reportedly has submitted the budget proposal to the parliament in Tuesday (5 May13) and the related discussion is expected to be done in a month (Kontan)

for Indonesia Market Summaries 17 May 2013

News For March 27 2013 in brief

The second electricity tariff increase to be effective 1 April 2013

The electricity tariff for household and industry will be raised by another 5% starting 1 Apr13 as part of 15% increase for the whole 2013. The raise will affect above 1,300VA subscribers. (Bisnis Indonesia)

BII right issue

Bank Internasional Indonesia (Not rated) – will conduct a 1-for-12 rights issue at Rp320 to strengthen its capital base. A maximum total of 4.69bn new shares, representing 7.67% of the enlarged capital, will be issued to raise Rp1.5tr which will lift its total CAR to around 14.5% from 12.9% in December 2012. Maybank as the major shareholder (97.29%) will exercise their rights. Ex-date for the rights issue will be on 13 May with the rights tradable between 17 May to 23 May 2013. (Bisnis Indonesia)

BNI to sell life insurance

Bank BNI is reported to sell up to 40% of BNI Life Insurance and they expect the valuation of up to US$2bn for the life insurance business (US$800m for 40%), a level that is far too high for a company with Rp2.6tr assets as of December 2012. For Indonesia Market Summaries, in addition to the sale of its life insurance business, they also plan to seek shareholders’ approval to conduct a Rp4.5tr haircut on bad debts, starting 2013, that is made possible since the constitutional court cleared the way for the state banks to restructure or sell their NPLs late last year.  (Jakarta Post)

Agus Martowardjojo has been chosen as governor of Bank Indonesia

The parliament finally approved Agus Martowardjojo as Governor of Bank Indonesia (BI) for 2013-2018 with a voting mechanism. 46 member voted Agus as BI Governor from total 54 votes. 7 votes rejected Agus Marto whereas 1 was abstained. (Bisnis Indonesia)

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.

Related article: Bank Negara Indonesia pay up to Rp25b for Bahana