Bank Negara Indonesia performance semester I/2013

PT Bank Negara Indonesia Tbk (BBNI, Rp4.350, BUY, TP Rp5.300) exposing its financial performance throughout the semester I/2013 yesterday. Net profit recorded Rp 4, 27 trillion (+30% YoY).

BBNI net interest income increased by 23%, supported by lending up 24% and an increase in third-party funding (TPF) 9% YoY. Corporate loans increased by 52% YoY and accounts for 42.5% of total loans, while consumer loans grew 29% and contributed 20.6% of total loans.

Small business loans up 12% and -16% YoY for medium businesses. Negative growth in the medium business segment due to the reclassification of corporate loans in the quarter I/2013.

In terms of assets, government bonds (SUN) worth Rp 40.3 trillion or become 11.6% of assets BBNI put in available for sale (AFS) category that affected the bond market correction in the secondary market.

Asset quality rises, while non-performing loans (NPL) fell to 2.6% in June from 2.8% in March 2013 and 3.4% in June 2012 supported by decreasing in NPL from all segments, except for small business loans increase.

Decreasing in the number of non-performing loans encourage BBNI to improve their credit more aggressively. BBNI also able to improve the performance of loans that had written off due to poor quality, which is valued at an average of Rp 2 trillion per year and reached USD 1.2 trillion in the first semester I/2013 than Rp 1 trillion in semester I/2012.

Write-off of bad quality loans reached Rp 1,6 trillion in semester I/2013 compared with Rp 1,5 trillion in the same period last year.

BBNI still optimistic to record loan growth of 23% -25% in 2013, which will be driven consumer goods and retail loans, while DPK predictable rise 16% -18%, the NPL rate of 2.5% -2.8%.

BBNI share value is in the range of Rp 4,325, traded on the valuation of price to book value (PBV) ratio 1.6 x, price per earnings ratio (PE ratio) 10x for 2013 and 1.4x PBV and 8x PE ratio for 2014.

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Bank Negara Indonesia First Quarter 2013 Results is in line with expectations

Bank Negara Indonesia - 1Q13 results (Rp5,350Buy; TP Rp5,500)

Results in line with expectations. BNI reported Rp2.1tr net profit in 1Q13 (+34% YoY, +3% QoQ), accounting for 26% of ours and the market expectations. The results were achieved on the back of strong loan growth, high recovery of written off loans and stable provisioning charges.

23% YoY loan growth was recorded in March 2013 (19% in 1Q12) and this was particularly due to strong growth of 44% from the corporate segment, which made up 42% of the total loans compared to 35% in Mar 12. Part of the reasons of the strong growth was the migration of medium-sized loans into corporate and adjusting this additional loans, total corporate loans would have been growing at 26% YoY while the medium loans at 20%, instead of the reported -17%. In addition, consumer lending grew 29% YoY and now make up 21% of total loans compared to 20% a year earlier.

NIM improved to 5.9% in 1Q13 from 5.3% in 1Q12. The strong loan growth was not followed by the deposits which grew 10% YoY leading to rising LDR to 83% in Mar 13 from 75% in Mar 12 and 78% in Dec 12. This, coupled with stronger growth in CASA (+22% YoY, 65% of total deposits), helped improve NIM to 5.91% in 1Q13 from 5.28% in 1Q12 but it was lower than 6.0% recorded in 4Q12. Net interest income hence increased 23% YoY.

Asset quality maintained. Total NPL remained the same at 2.8% with coverage ratio of 122% after the bank wrote off some Rp736bn of bad debt. It was however, was able to recover Rp648bn of the previously written off loans, indicating improving recovery ratio of 88% from 71% in FY12. Of the segment, the small loans (
Rising cost to income due to expansion while CAR at 17.5%. Cost-income ratio was 51% in 1Q13, up from 49% in 1Q12, and this was due to expansion (number of offices increased 8% YoY and ATM 30% YoY), salary adjustment and higher annual bonus.

Maintain Buy. The counter is trading at 2.0x P/BV 2013F and has outperformed the index by 29% YTD. We will review our numbers but keep our Buy call for now with TP of Rp5,500.

Indonesia Market Summaries, April 29 2013

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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