by Samuel Securities
BBNI booked flat growth on main business income on 3M11, reflected by flat net interest income. Meanwhile, bottom line increased by 22.1% to Rp1.25 tr but it was mainly due to recovery loan and efficiency. Result on 1Q11 is better than 4Q10, but it was caused by cyclical business. Bottom line is still in line with our forecast and market consensus.
Loan grew by 16.6% but earning yield declined to 10.4% from 12.1% and slightly· lowered interest income. In our view, the decline in earning yield was due to: 1) the low bond rate (majority of corporation have other option for raising fund from bond) and 2) tight competitive lending rate on consumer loan. Meanwhile, interest expense also fell by 3.9% due to the decreasing cost of fund.
Recovery loan on 3M11 was recorded at Rp338 Bn or 37% from write off and· management target recovery loan will reach Rp2.2 Tr at the end of 2011. Cost to income fell to 44.5% (from 50.4%) as personal expenses declined to 17.6%. Therefore, 3M11 net income was mainly caused by recovery and efficiency (not from main business).
We change our net interest income regarding the bad performance on 3M11. However,· we increase our non-interest income as the impact of recovery. Previously, we had not booked recovery to income statement due to implementation of PSAK 50&55 effective since 2011 (D: cash; K: income from recovery). On pervious PSAK 31, recovery was classified on balance sheet item (D: loan K: provision). Our bottom line does not have a significant change because low net interest income can be compensated by recovery.
Action and recommendation:
Based on Gordon Growth Model (GGM), target price will not change if net income· remains (other assumptions on GGM do not change too). Therefore, we maintain target price at Rp4,500 (imply PBV’11 2.6x) but we downgrade recommendation to Hold because our target price only offer 9.7% upside. Downgrade to Hold