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Monday, May 2, 2011

PT. Bank Negara Indonesia. Tbk - Moderate But Impressive

by Indopremier Securities

For 1Q11, BBNI booked modest asset performance, where loans only grew by 16.7% due to negative growth of medium business. However, BBNI drove solid bottom line growth of 22.1% on the back of lower expenses, especially cost of deposit and operating expenses. LDR increased to 73.3%, or on track to meet BI requirement of 75%, and assisted with improve NPL to 4.1% from 4.7%. We project loans to grow 16.3%, adequate to boost FY11 bottom line to 28.8% triggered by lower expenses. BUY Recommendation for BBNI with new TP of Rp 4,900 per share, provides 21% upside potential.

Moderate Loans Growth of 16.7% YoY

BBNI reported remarkable loans growth in corporate, consumer and international business for worth above 27% YoY in 1Q11. However legacy problem in middle business, particularly on its NPL ratio. Middle business loans reported negative growth of 7% YoY, with NPL of 10.6%, improved figure than 11.9% in 1Q10. It also has become the management concern of casing loans to meet LDR ratio >75%. Management is in the process to re-established middle business and expect to meet normal grow in year end 2011. We forecast BBNI to deliver 16.3% loans book in 2011 with improve NPL to 4%.

Solid Bottom Line

Despite moderate loans growth, BBNI achieved net profit of Rp 1.25 tn, 22.1% YoY increase. Deposits modest growth of 7.8%, combine with 600bps CASA improved to 60% has drag down cost of fund (IDR only) to 3.3% in 1Q11 from 3.8% in 1Q10. The sluggish was the function of management strategy to slow down deposit growth after equity insertion, and seasonal factor which we anticipate to gradually improves in the next three quarters ahead. Operational expenses decrease 7.6% YoY due to normalized PSAK 24, which benefit 1Q11 to record lower operating cost. Additionally, BBNI also embarked to demonstrate centralize operation system, which pools the back office function in one center office and let branch office fulfilled by front liners. Benefit to more consumers while cost is minimized. We estimate BBNI to delivered Rp 4.999 bn net income this year, or increase 21.9% YoY.

Write off and Recovery on Going

In line with improving NPL to 4.1%, BBNI started to maintain modest coverage ratio (LLR/NPL) of 120.2% in 1Q11, decline 90bps from 121.1% in 1Q10. Significant write off still the main factors of improved NPL. During 1Q11, BBNI wrote off Rp 917 bn loans, or increase from Rp 906 bn in 1Q10. We anticipate the lofty write off episodes will continue through this year in order to settle benign NPL.

BNI Securities to Right Issue of Rp 114 bn

The strategic investors to invest in BNI securities is SBI Securities Co Japan, which is expected to acquire approximately 25% of BNI ownership through rights issue scheme that will be conducted by BNI Securities in 2Q11. BNI Securities is estimated proceeding Rp 114 bn from this right issue. SBI Securities Co is the largest online trading securities company in Japan that expected to strengthen BNI Securities online trading business.


2009
2010
2011F
2012F
2013F
Year End 31 Dec





Net Interest Income
11,133
11,721
13,618
15,370
17,583
Income Before Tax
3,444
5,485
6,945
8,073
10,104
Net Income
2,484
4,102
4,999
5,811
7,273
EPS
133
220
268
312
390
EPS Growth (%)
36
104
27
29
16
BVPS
1,027
1,776
2,000
2,221
2,502
PER (x)
14.4
18.6
15.3
13.2
10.5
PBV (x)
1.9
2.3
2.0
1.8
1.6
Source: BBNI, IPS calculation

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