Hold with Upgraded TP on the back of Earning Surprise
1Q22 Performance : Earning Surprise on the back of Strong Non-II & Lower Provision
• BBNI booked a net profit of IDR12.2tn in 1Q22 (+25.7% QoQ/+63.2% YoY), above our estimate and implying 28.7% of our FY22F projection.
• The increase in BBNI’s bottom line was supported by higher non-interest income (+17.7% QQ/+25.6% YoY) and lower provisional expense (-20.0% QoQ/-26.1% YoY).
• BBNI’s fee income solid growth was attributable to improving business banking segment which grew +52.1% QoQ/+45.5% YoY thanks to stellar performance of marketable securities as well as FX and derivatives businesses.
• Lower provision expense was in line with improving BBNI’s asset quality reflected on its gross NPL decline (-20 bps QoQ/-60 bps YoY) as well as consistent downtrend in LaR (-120 bps QoQ/-480 bps YoY).
• Despite successfully managed to book lower CoF (-30 bps YoY), the earning assets yield continued to decline particularly driven by -39 bps QoQ/-180 YoY lower corporate loan yield.
Boosting Loan Growth and Strengthening CASA Franchise to Maintain NIM
• Given BBNI’s current LDR stood at 85.2%, we still see room for loan to expand by 10% for FY22F.
• In addition, we think BBNI’s strong CASA franchise to remain. Under this scenario, we expect BBNI’s NIM could be maintained around 4.5% for FY22F.
Inorganically Establishing Ecosystem through Digital Bank
• BBNI takes different path to establish its own ecosystem compared to other SOE banks. BBNI aspires to establish new digital bank by acquiring majority stake in Bank Mayora (63.92%).
• The acquisition cost was IDR3.5tn for 2.0x P/B pre-money valuation and 1.3x P/B post money valuation.
• BBNI is also working closely with Sea Group and Mayora Group in order to establish its digital ecosystem leveraging Sea’s competitiveness in digital business and Mayora’s extensive value chain in FMCG market.
Key Catalysts and Risks
• We expect potential +37.6% YoY EPS growth on the back of : 1) well maintained CoF; 2) strong non-II; and 3) lower CoC (2.2-2.4%) along with improving asset quality and ample coverage.
• BBNI’s stock price has risen 40% YTD along with : 1) massive foreign inflows and 2) positive financial outlook for FY22F.
• We think BBNI’s decision to disburse dividend payment to shareholders with payout ratio only 25% was a positive catalyst for its share price given 75% of its bottom line was retained and thus increasing BBNI’s BVS.
• Another positive catalyst come from recent heightened geopolitical tension between Russia and Ukraine.
• Along with China’s struggle to control Covid-19, potential asset class and geographical rebalancing is likely favoring India and SEA particularly Indonesia, given its positive investment outlook.
• The downside risks come from unfavorable macro condition with high inflation environment as well as slower execution in digital banking business.
Hold Rating with Upgraded TP at IDR9,000/share
During Covid-19 BBNI was one of the laggard performer compared to other big 4 banks. BBNI’s share price recovered slowly, but rising significantly in 4Q21 along with its impressive turnaround story. Currently BBNI share is traded near +2STD of its 3-year forward P/B. Albeit We upgraded BBNI’s TP at IDR9,000/share with Hold rating on the back of earning surprise yet already priced in by the market. Our TP implies 1.3x and 1.2x FY22F and FY23F P/B.
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