Delivers Significant Improvements
1H21 Results Beat Estimates: Better NIM and CASA
• BBNI's net profit jumped 12.8% YoY to IDR5.03tn in 1H21. Net profit achieved 55%/58% of consensus and our FY21E targets.
• BBNI's double-digit growth of NII (+8.6% YoY) and Non-Interest Income (+19.2% YoY) drove up PPOP to increase by 20.7% YoY, offsetting +12.7% YoY opex hikes in 1H21.
• CoF dropped by 40bps YoY, helping NIM to be maintained at 4.8% (vs 4.5% in 1H20) and still in line with FY21E management guidance within the range of 4.7%-4.9%.
• Meanwhile, Non-Interest Income grew by 19.2% YoY, primarily driven by the banking businesses that grew 30.9% YoY, including trade financing, syndication, and marketable securities.
• Strong CASA franchise, which stood at 69.6% (+440bps YoY), supported CoF to drop by 120bps YoY to 1.7%. CASA grew more than 11% YoY while time deposits contracted by -8.7% YoY.
• Personnel expense in 1H21 increased significantly by 29.1% YoY and became the main contributor for driving up total operating expense growth of 12.7% YoY.
• BBNI successfully posted 4.5% YoY in loan growth as of June-21 after managing healthy growth from lower-risk segments on corporate, private, small business, and payroll loans, contributing to more than 50% from the total loan.
• NPL (gross) stood at 3.9% or 90bps YoY higher than in 1H20. However, restructuring trends have declined by IDR18.2tn to IDR81.76tn or equivalent with 14.4% of total loan in 1H21. This is also in line with LAR drop from last year's figure of 28% to 25.8% in June-21.
• BBNI maintains a sufficient provision policy amid the threat of worsening asset quality. As of June-21 LAR coverage stood at 32.9% and NPL coverage ratio improved to 215.3%.
FY21E Management Guidance
BBNI's management updated its FY21E guidance as follow:
• Management expects loan to gradually pick up by 5%-7% YoY (vs 6%-9% YoY previously)
• NIM expected to come in 4.7%-4.9% (vs 4.6%-4.8% YoY previously)
• Credit Cost expected to recover at 3.3%-3.6% (unchanged)
Maintain BUY with Unchanged TP of IDR7,800
We continue to maintain our recommendation BUY for BBNI with an unchanged target price of IDR7,800, implying PBV FY21E/FY22F at 1.22x/1.10x. BBNI is currently trading at -1.5STD PBV (5-years average) at 0.87x level, offers attractive valuation. We believe that BBNI's strategy to increase its provision to secure the liquidity is quite decent amidst the difficult time. The bank also delivered significant improvements in NIM, better CASA, higher LAR coverage, as well as higher ROE. Moving forward, BBNI will combine conventional banking strategy and expanding its digital ecosystem strategy through partnering with e-commerce and fintech players. Hence, we believe that FY20 performance has already bottomed out, and earnings should start to bounce back by 163% YoY in FY21E. Potential downside risks include a slower economic recovery amid pandemic. Any recoveries from written-off loans may be a positive surprise.
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