Infrastructure as Driver of Loan Disbursement
BBNI reached Rp412.17 tn of loan disbursement or grew by 15.38% YoY during 1H17. Company’s loan growth was above the industry and we predicts that it will last in 2H17 along with Rp25 tn pipeline for infrastructure loan. SOE loan (20% of total loan) was the main driver of loan disbursement which grew by 26.95% YoY along with infrastructure and government related projects, such as power plant, toll road, and also agriculture sector. On the other hand, the company has good liquidity to fund the disbursed loan, where the Company still has spare room to issue new bond worth Rp7 tn (after issued Rp 3 trillion from PUB 1 2017) and has bilateral loan pipeline amounted US$500 million.
Improving Asset Quality
Company’s asset quality improves, as reflected from the decreasing NPL gross from 3% in 1Q17 into 2.8% in 1H17. Write-off had been carried out by the Company towards PT. Trikomsel Tbk (TRIO) worth Rp1.2 trillion, so that the NPL in the corporate segment decreased. However, SML decreased into 3.9% in 1H17 in 4.3% in 1Q17 which was caused by downgrade of corporates which plays in plastic industry named Namasindo Plas valued Rp1.5 trillion. We predicted the Company’s NPL gross will be at the level of 2.8% in the end of the year. That was based on the loan at risk which is on decreasing trend, indicating the NPL volatility begins to stabilize.
Solid Performance in Bottom Line
Along with asset quality improvement, Company succeed to obtain net profit Rp6.41 tn or increased by 46.72% YoY during 1H17 which in-line with our estimate for FY17E at Rp13.47 tn. This was caused by decreasing cost of fund, lower provision, and also higher fee-based income in 1H17.
Recommendation: BUY with TP Rp8,200
We recommend BUY for BBNI with implied PBV 17E/18F at 1.58x/1.42x in accordance to 1) Improving asset quality with its coverage, restructured loan and write-off, 2) Infrastructure and government related program to boost loan disbursement, and 3) Solid net profit supported by higher fee-based income. The risk investment are macroeconomic uncertainty and change in regulation.
