PT Bank Negara Indonesia (Persero) Tbk (BBNI IJ)
Banking Sector
Providing Security in Uncertainty
1H20 Performance: Slightly Below Expectation
BBNI managed to score a net profit of IDR4.45 trillion (-41.60% YoY) in 1H20 with 4.5% NIM, reflecting 40.74% of our estimates which is slightly lower than expected. Net interest income booked an increase of 1% YoY to IDR17.79 trillion, followed by the 3.2% YoY growth on Non-Interest Income to IDR5.55 trillion. ATM & e-channel (+9.2% YoY), Debit Card Maintenance (+6% YoY) and Account Maintenance (+5.6% YoY) contributed to the growth on Non-Interest Income. Subsequently, BBNI managed to achieve efficiency by lowering the operating expense by -0.3% YoY. However, provisioning were being increased by 88.20% YoY to IDR7.47 trillion to anticipate deflation on asset quality. For FY20E, NIM is set to be at the 3.7% -4% level, from previously around 5%.
CASA Optimalization and Efficiency
Third Party Funds successfully grew by 11.3% YoY to IDR662.37 trillion in 1H20. This is supported by the substantial increase on Current Account (+18.4% YoY), along with Time Deposit (+8.8% YoY) and Saving Account (+7.1% YoY). Current account growth was supported by loan and non-loan related business while e-banking and online account activation contributed on the saving account growth. Thus, CASA stood at a higher level of 65.4% (vs 64.6% in 1H19). Efficiency is also reflected on the lower Cost of Fund which remains at 2.9% in 1H20 from previously at 3.2% throughout FY19.
Provisions always at the ready!
Loan stood at IDR576.77 trillion in 1H20, increased by 5% YoY which is still higher than the industry growth of 3.1% YoY (as of May-2020). Corporate segment as the largest contributor rose by 12.6% YoY this period, SOE segment also grew by 6.1% YoY followed by small segment which increased by 3.4% YoY. Medium segment (12%), on the other hand, slipped by -9.1% YoY. We see this is quite fair as medium segment was the largest contributor of Non Performing Loan or NPL (6.7% in 1H20). Moreover, NPL escalate to 3% (vs 1.8% in 1H19) due to worsening Loan at Risk (LAR) which prompt BBNI to increase provision by IDR4.4 trillion in the 2Q20, resulting in 214.1% coverage ratio in 1H20. Following the loan restructuring, non covid loan restructured reached 6.4% of the total loan with manufacturing sector as the largest contributor (39.7%) followed by trading, restaurant and hotel (28.4%). Likewise, covid loan restructured has reached 68.2% of the pipeline or amounted to IDR99.96 trillion in 1H20. The targeted covid restructured loan amount is around IDR126 - 130 trillion in 3Q20, lower than the pipeline of IDR146 trillion. Whilst, BBNI revised their Loan Growth target to 2% - 4% (from 10% - 12%), followed by LDR at 90% - 92%, NPL at 3.7% - 4.5% and credit cost at 3% - 3.5% for FY20E.
Ample Liquidity and Generous Loan Disbursement
Liquidity might be a challenge for banks as issues arises from loan payments and defaults during the pandemic season. However, BBNI has ensure that asset and liability are still well managed. This is shown in the ever increasing Liquidity Coverage Ratio which now stood at 189%. Moreover, through tight requirements and criteria, BBNI has disbursed IDR9.5 trillion of loan to more than 36,000 clients which is 1.83x more than the given national economy recovery fund amounting to IDR5 trillion. Disbursement made easier through BNI Move, a new application made specifically for Small Medium Enterprises (SMEs) located in remote areas to make funding reachable.
Recommendation: Maintain BUY at Target Price IDR5,700
We continue to maintain our recommend BUY for BBNI with a renewed target price at IDR5,700 (from IDR4,300)with implied PBV FY20E/FY21F at 0.95x/0.87x and is traded at -1.5 STD of average 5 years PBV band. We see that BBNI's strategy to increase provision in order to secure the liquidity is quite decent amidst the uncertain time, which is also align with their lower performance guidance for FY20E.
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