Monday, March 21, 2011

PT. Bank Negara Indonesia. Tbk (BBNI)

by Samuel Securities

In line FY10 result

As of FY10, BBNI posted net interest income and net income of Rp11.7 trillion and· Rp4.1 trillion, respectively, in line with our projection and slightly above market consensus


Net income increased signicantly due to the following reasons; 1) solid cost of funds, 2) good efficiency and 3) fee income increased significantly. Cost of funds declined to 3.6% from 4.7% due to the increased portion of low cost· fund to 59% (from 55 % previously) and low deposit rate. As a result, interest expense declined by 14% compensated by 3% decline of interest income. Interest income declined due to the low asset yield, even though loan increased by 13% to Rp136 trillion. Cost to income was booked only 51%, it was supported by reversal on allowances of· Rp1.8 trillion aside from the low cost of funds. We believe cost of fund can be maintained in good level which will be supported by strong loan and low cost fund growth.

On 4Q10, loan increased by Rp11 tr or +11% QoQ and was recorded as the highest· growth on quarterly basis and we believe it was caused by the Rp10 trillion impact of right issue on 4Q10. Rights issue also swelled liquidity and it will be a good buffer to support loan growth in this year. We expect 16% loan growth this year.

Action and recommmendation:

Currently BBNI is trading at PBV’11 2.0x vs sector 2.6x. With improving ROE and NPL,· we believe BBNI is feasible to trade at PBV’11 2.6x that reflects target price of Rp4,500. Our target price is still discounted to peers because of lower ROE than peers.

Maintain BUY


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