Results review:
Bank Negara Indonesia (BBNI IJ, BUY, TP: IDR6,800)
Beating All Expectations
Bank Negara Indonesia (BBNI IJ, BUY, TP: IDR6,800)
Beating All Expectations
We
expect BNI to continue focusing to provide loans for government infrastructure
projects despite the lower loan yield. To reduce further NIM decline, funding
structure would become an important matter. As such, BNI would push its CASA
deposits by tapping more institutions and their employees. Wholesale
fundingalso forms part of its main strategy this year amid a volatile global
environment. This is done through NCDs, IDR bond issuance and obtaining
bilateral USD borrowings. Maintain BUY with an unchanged GGM-based TP of
IDR6,800 (24% upside).
¨ A manageable funding
structure,
from both retail and wholesale instruments. For retail, Bank Negara Indonesia
(BNI) would push its CASA deposits by tapping more institutions and their
employees for CASA products. On wholesale funding, BNI would issue negotiable
certificates of deposits (NCDs), IDR bonds, medium term notes (MTN) and secured
bilateral USD borrowings. All in, we expect a relatively stable contribution
from customer deposits, at 89.3% of the funding mix by end-2017 (end-2016:
89.6%).
¨ Better proper credit
risk management. Post
FY16's lower credit cost of 219bps (our forecast: 242bps) – which resulted in
higher net profit – management continues to implement more stringent credit
risk management. For instance, the credit risk review function now conducts a
periodic review, starting from the loan center level up to the head office, in
order to identify potential NPL borrowers. All in, we expect such ongoing
progress to support our FY17F gross NPLratio of 2.5% by year-end.
¨ Maintain BUY. We maintain our BUY
recommendation on BNI, which remains as one of our Top Picks, supported by its
strong loan growth from infrastructure projects, a more manageable funding mix
and better asset quality. Our GGM-based TP of IDR6,800 implies1.35x 2017F P/BV
(-0.15SD of its historical mean).
Kindly click the following link for the full report: Bank Negara Indonesia : Beating All Expectations
Eka Savitri
Vice President
Research Analyst - Banking
PT. RHB Securities
Indonesia
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