Company update:
Bank Tabungan Pensiunan Nasional (BTPN IJ; BUY; TP: IDR3,400)
Profitable Bank With Appealing Valuation
Bank Tabungan Pensiunan Nasional (BTPN IJ; BUY; TP: IDR3,400)
Profitable Bank With Appealing Valuation
BTPN
would continue to focus on the small ticket size segment with high yields by
tapping into the productive poor and iSME loans. To manage a further decline in
loan yields, it also plans to enter the smaller ticket size segment called
picco loan with maximum 3-months tenure. On funding, it would benefit from its
branchless banking products to enlarge its CASA deposits by end-2017, in our
view. Valuation is attractive at 0.9x 2017F P/BV with potential dividend
distribution, as we rollover our valuation to 2017F compared to 1.06x P/BV of
medium-sized banks. Upgrade to BUY (from Neutral) with a new IDR3,400 TP (from
IDR2,900, 22% upside).
¨ Aims to maintain its
high loan yield segment. Bank Tabungan Pensiunan Nasional (BTPN) would maintain
its focus on the high yield loan segment to maintain its superior NIM level.
Its micro lending is facing a difficult period due to close competition with
the People's Business Credit (KUR) programme. The productive poor and iSME loan
segments are its current growth engine. Aside from the high growth of the iSME
loan, BTPN also plans to launch new lending product with short-term tenure
(maximum three months) and small ticket size (IDR500,000-1m or c.USD37-74)
called picco loan. We expect this loan segment would compensate it for the
lower loan yield from iSME loan. All in, loan yield would dip to 20.5% in FY17
(FY16: 21.2%) based on our model.
¨ On progress to
reprofile its funding mixture, since it has been BTPN’s challenge due to
the domination of expensive instruments, ie time deposits (TD) and bonds. As
such, amid aggressive policy rate cuts by total 150bps this year, blended cost
of funds (CoF) has significantly fallen to 6.7% in 3Q16 (vs 3Q15: 8.1%). Given
such sharp volatility in its funding cost, management has continued to invest
in branchless banking products to provide stronger base for its current
account, saving account (CASA) deposits. We thus project that CASA deposits
would significantly improve to 16% of customer deposits by end-2017 (end-2016:
13.5% of customer deposits).
¨ Potential dividend
distribution to boost return on average equity (ROAE), as BTPN’s
management has had zero dividend payout policy since 2008 to maintain an ample
capital position. However, due to concerns from most investors’ that its ROAE
would continue to decline, management is considering to distribute dividend as
the most reasonable solution. We moderately anticipate a 20% payout ratio only
as a one-off corporate action. This translates to 12.7% ROAE and 24.3% capital
adequacy ratio (CAR) in 2016F. Our sensitivity analysis suggests that for every
10% payout ratio, it would elevate BTPN’s ROAE by 10bps while CAR compressed by
28bps.
¨ Upgrade to BUY, new
IDR3,400TP
derived from a GGM-based valuation. Our TP implies 1.1x 2017F P/BV multiple
(-1SD of its historical mean). BTPN’s current valuation is attractive compared
to average medium-sized banks of 1.06x P/BV. The downside risks are:
i. Tight liquidity
within the banking system would trigger a higher blended CoF;
ii. Lower KUR lending rate would further affect its micro lending;
iii. More banks to aggressively tap the pension loan segment due to its attractive yields and lower NPLs would reduce BTPN’s market share.
ii. Lower KUR lending rate would further affect its micro lending;
iii. More banks to aggressively tap the pension loan segment due to its attractive yields and lower NPLs would reduce BTPN’s market share.
Kindly click the following link for the full report: Bank Tabungan Pensiunan Nasional : Profitable Bank With Appealing Valuation
Eka Savitri
Vice President
Research Analyst - Banking
PT. RHB Securities
Indonesia
