Equity Research

PT BANK NEGARA INDONESIA (PERSERO) TBK 

A Satisfying 1Q19 Result

BBNI managed to book a satisfying result in 1Q19, in which net interest income (NII) and net profit figures covered by 24% to our 2018 forecast of Rp 37.14 trillion in NII and Rp 17.10 trillion in net profit. Meanwhile, its NPL maintained at the low level of 1.9% in 1Q19 thanks to a write-off of Rp 1.5 trillion and Rp 30.3 trillion in restructuring loan which resulted in better coverage ratio at 153%.  Recently, BBNI’s share price increased by 10% YTD 2019 which was precisely traded to its 5 years average forward PBV + 1std dev of 1.49x, hence, we downgrade our BUY rating to NEUTRAL since our fair value only offer limited upside potential of 10%.

1Q19 Inline Result

During the 1Q19 period, the company booked Rp 8.86 trillion in net interest income (NII) which only advanced by 4.3% YoY (vs Rp 8.50 trillion in 1Q18) since the company reduced its average lending rate by 30 bps to the level of 9.4% (vs 9.7% in 1Q18, mainly came from corporate and consumer segments). Meanwhile, the net profit during the same period grew by 11.5% YoY became to Rp4.08 trillion (vs Rp3.66 trillion in 1Q18) due to the declining in provisioning cost allocation by 9.5% YoY, which was in line with its low NPL. All in all, BBNI’s 1Q19 NII and net profit figures came in line with our expectation, which were covered by 24% to our 2018 forecast of Rp37.14 trillion in NII andRp17.10 trillion in net profit.

Maintained NPL at low level of 1.9%

BBNI managed to maintain its NPL at low level of 1.9% in 1Q19 which improved by 40 bps compared to the 1Q18 at the level of 2.3% thanks to a write-off of Rp1.5 trillion and Rp30.3 trillion in restructuring loan (mainly came from plantation, hospitality and pharmaceutical sectors). We note that the NPL from corporate, medium, small and consumer segments improved to1.6% (vs 1.7% in 1Q18); to 2.7% (vs 3.1% in 1Q19); to 1.9% (vs 3.0% in 1Q19) and to 2.2% (vs 2.5% in 1Q18), respectively. As a result, the company’s coverage ratio strengthened to the level of 153% in 1Q19 (vs 148% in 1Q18).

Loan grew by 18.6% YoY, higher than industry

BBNI’s 1Q19 total loan increased by18.6% YoY to reached Rp521.3 trillion (vs Rp439.5 trillion in 1Q18) which higher than banking industrygrowth of 12.1% YoY in February 2019. The company’s total loan was mainly dominated by corporate and SoE segments (52%) which grew by 24.6% YoY to Rp269.3 trillion. Meanwhile, BBNI’s loan from consumer and small segments increased by 8.5% YoY and 18.5% YoY attained to Rp80.1 trillion and to Rp68.4 trillion which contributed 15% and 13% to the company’s total loan, respectively.

1Q19 declining NIM as a result of lending rate reduction and higher CoF

On the profitability side, the company’s NIM in 1Q19 decreased by 40 bps to the level of 5.0% (vs 5.4% n 1Q18), entirely affected by 1) lending rate reduction; 2) 40 bps increases in CoF (3.2% vs 2.8% in 1Q18) mainly from time deposit hike of 22.5% YoY and 3) lower CASA ratio (60.5% vs 62.4% in 1Q18). We noted that the company’s total customer deposit grew by 16.8% YoY in 1Q19 to Rp575.7 trillion (vs Rp492.9 trillion in 1Q18) which translated into an ample liquidity with LDR ratio at the level of 91%.

DG to NEUTRAL since the price increased by 10% YTD 2019

Recently, BBNI’s share price increased by 10% YTD 2019 which was precisely traded to its 5 years average forward PBV + 1std dev of 1.49x, hence, we downgrade our BUY rating to NEUTRAL since our fair value only offer limited upside potential of 10%.