Company update:
Bank Negara Indonesia (BBNI IJ, BUY, TP: IDR6,200),
In Better Shape
Bank Negara Indonesia (BBNI IJ, BUY, TP: IDR6,200),
In Better Shape
We
maintain our BUY call and IDR6,200 TP (11% upside) on BBNI due to:
1.
Softer pressure in asset quality with a supportive macroeconomic environment;
2.
The easing monetary stance from regulators.
Its
commitment to support key government infrastructure projects should also be the
main loan growth driver. The bank’s blended CoF dipped 18bps to 3.1% in 1Q16
following its parting with TD customers that seek preferential rates and we
forecast for this to fall further to 2.6% in FY16.
¨
Milder
pressure in asset quality. Bank Negara Indonesia (BBNI) has faced several
challenges in managing its asset quality since mid-2015 amidst a gloomy
macroeconomic environment and stagnant commodity prices. Gross non-performing
loan (NPL) ratio soared to 3% as at Jun 2015 due to deterioration in asset
quality of medium-sized customers (NPL ratio: 5.4% at end-Jun 2015),
particularly those in the trading, restaurant and hotel sector. New management
conservatively raise its loan loss coverage (LLC) ratio above the 130% level
(Dec 2014: 128.2%). Nonetheless, NPL pressure should gradually ease, given the
recent relaxation by regulators. We expect the gross NPL ratio to fall to 2.4%
with a decent LLC ratio of 142.6% by year end.
¨
Full
commitment to infrastructure loans. Under its new management, BBNI has refocused
its loan segment towards infrastructure and state-owned enterprise
(SOE)-related loans, leveraging its position as one of the SOE banks. This is
reflected through a higher infrastructure loan proportion, ie 21.9% of total
loan book by end-March. It is also in line with the Government’s key target to
build interconnecting roads mainly to reduce logistics costs via toll roads and
construction loans, and increase electricity access domestically by providing
power plant-related loans. Looking ahead, we anticipate contributions from
infrastructure loans to elevate to 22.2% of total loans by end-2016.
¨
Second-lowest
blended cost of funds
(CoF) after Bank Central Asia (BBCA). On funding, BBNI has a relatively
stable market share in current account savings account (CASA) for the past five
years. It improved its blended CoF to 3.1% in 1Q16 – the second lowest in
industry after BBCA’s (BBCA IJ, BUY, TP: IDR15,700) 2.2% – due to its
willingness to part with customers that seek time deposit (TD) preferential
rates. We expect that, with a lower policy rate, favourable inflation rate
outlook and pickup in GDP growth, BBNI’s blended CoF will be lowered to
2.6%/2.3% for FY16-17 respectively.
¨
Maintain
BUY, TP IDR6,200.
Maintain BUY with an unchanged GGM-derived TP of IDR6,200, implying 1.4x/1.2x
P/BV multiple for 2016-2017 respectively. An overhang from the single-digit
lending rate issue earlier this year should be lifted, as BBNI now offers a
9.95% lending rate for loans less than IDR5bn. We view that smaller banks will
be affected by this move, given the TD dominance in their deposit structures.
We expect strong bottomline growth in 2Q16 coming from high loan growth and
manageable opex with slight uptick in the gross NPL ratio. The key risk to our
call is slower-than-expected GDP growth.
Best
regards,
Eka Savitri
Vice President
Research Analyst - Banking
PT. RHB Securities
Indonesia
