Company Update

05 November 2018

PT Bank Tabungan Negara Persero Tbk BBTN - 05112018

Small House is Booming


IFRS 9 Anticipation
During 9M18, BBTN booked net profit of IDR2,24 trillion or grew by 11.51% YoY, which
was driven by 15.29% YoY growth of net interest income to IDR7.55 trillion. Strong loan
disbursement that grew by 19.28% YoY helped to boost interest income. NIM was
decreased to 4.35% (vs 4.49% in 3Q17), but it was stronger if it was compared to NIM in
2Q18 at 4.17%. BBTN’s bottom line growth was hampered by IFRS 9 application in 2020
which BBTN will thicken its coverage ratio gradually, as the coverage ratio was increased
up to 46.19% in 3Q18 (vs 40.01% in 3Q17). Hence, provision expense grew by 44.84% YoY
up to IDR867 billion in 3Q18. The management is still discussing with BBTN’s consultant
about the coverage ratio level that is suitable for BBTN’s risk management and to comply
with IFRS 9. Therefore, we recalculate our forecast in the upcoming years and lower our
net profit estimation of FY18E/FY19F by -2.08%/-5.99% from our previous estimate to
IDR3.33 trillion/IDR3.69 trillion, respectively.

High Demand of Subsidized Mortgage Loan
Loan disbursement still went strong, along with high demand from middle class segment,
especially from subsidized mortgage loan scheme which grew by 30.11% YoY to IDR88.92
trillion with its composition reached up to 54% of total mortgage loan (vs 51% in 3Q17).
Meanwhile, non-subsidized mortgage loan was also remain strong with 13.22% YoY
growth. In the middle of hawkish trend environment of interest rate, BBTN’s management
maintains its asset quality by adjusting loan interest gradually in accordance with debtor
profile. Therefore, NPL gross was improved to 2.65% in 3Q18 (vs 3.07% in 3Q17). We see
that there is still room for BBTN to grow in terms of low-middle class house demand along
with subsidized program and economy growth.

Recommendation: BUY at Target Price IDR3,000
We recommend BUY for BBTN with target price at IDR3,000 with implied PBV FY18E/FY19F
at 1.31x/1.18x with its current PBV at 1.00x (2 November 2018). We see that BBTN is
traded below average 3 years PBV band at STDEV –1 is attractive, along with the demand
of middle class house demand. BBTN downside risk is higher than expected about IFRS 9
application and slower macroeconomy growth.


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