PT Bank Negara Indonesia (Persero) Tbk (BBNI)
Banking Sector
Speed Bump Ahead
Slightly Lower Bottom Line-In Line with Expectation
BBNI booked net profit of IDR15.38 trillion or grew by 2.46% YoY, reaching 98.42%/96.78% of full year Consensus/MNCS estimate, whereas net interest income remained flat at 3.26% YoY in FY19. Loan growth slightly decrease to 8.60% in FY19 (vs 16.19% in FY18) because of lower corporate loan yield at 9.00% (-90bps YoY) while the SOE and medium growth declined by 3.60%/2.70% YoY. Therefore, NIM was decreased to 4.90% in 4Q19 along with the industry condition, hence the management revised down its full year target of NIM to around 5%-5.10% from 5.3%-5.4%, which our forecast in FY19E at 4.94% due to limited downside of cost of fund. Management estimate loan growth of 10%-12% in FY20E in line with BI and OJK forecasts, while focusing on small and consumer segment with a relatively high yield and manageable risk. Therefore, we forecast loan growth of 11% in FY20E. We cut down our earnings estimate in FY20E/FY21F by 5.5%-6.0% to IDR17.13 trillion/IDR19.37 trillion because of higher provision expense.
Asset Quality Worsen on Rising NPL
Gross NPL increased to 2.30% in FY19 (vs 1.90% in FY18) with the net NPL at 1.20% due to the strategy to downgrade some stress loan from a corporate segment in steel manufacturer, a marble miner and a hotel which have been restructured. This has led to the improvement of Loan at Risk (LAR) at 9.4%, while coverage ratio is at 133.5%. Total asset grew by 4.60% YoY to IDR845.60 trillion in FY19, supported by Loan growth of 8.60% YoY to IDR556.77 trillion, which is well above the industry growth average of 6%, as well as Third Party Fund growth of 6.10% YoY to IDR614.31 trillion in FY19. CASA stood at 66.6% which is being improved by several strategies such as: 1) increasing number of accounts; 2) loan and non-loan related business; and 3) optimizing digital banking. Moreover, in order to anticipate their provision level, management guidance in CAR related to IFRS 9 will decrease by ~200bps; hence its CAR will still be healthy at around ~17% in FY20E/FY21F.
Recommendation: Maintain BUY at Target Price IDR8,500
BBNI has increased it’s CASA market share by 1.6% to 10.7% in 4 years (2015 to 2019) with CAGR 14.7%, above the industry of 8.9%. While the deposit and loan market share increased by 2%/2.4% to 9.1%/9.5% with CAGR 13.9%/15.3%. We maintain our recommend BUY for BBNI with a lower target price at IDR8,500 (from IDR9,800) with implied PBV FY20E/FY21F at 1.34x/1.21xand is traded at -1 STD of average 3 years PBV band. We believe the company strategy to focus on asset quality and manageable liquidity will drives BBNI’s performance, with several downside risks: IFRS 9 implementation, macro economy and NIM pressure.
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