Ray YP
Oktavianus Audi
Oktavianus Audi
BMRI
Rebalancing the loan portfolio with the more retail-centric

Shinhan Sekuritas Indonesia
Helmi Therik

Back ground. BMRI is the largest bank in Indonesia and become the systematic and important financial institution in Indonesia with the total assets reached IDR1,155tn. The company is a state owned company which plays important rules in Indonesia through its synergetic between government and other SOE business that support the government related projects. The bank is positioned as a corporate bank with the total loan shares in Indonesia at 15.2% while the shares of its customer deposit is about 15.3% of the national saving.

Balancing the corporate exposure to be more retail centric. Bank Mandiri is benefiting by its position as the largest state bank that have higher a business exposure in the corporate and SOE. However, on the other side the portfolio mix with higher exposure in corporate loan is a disadvantageous due to its lower yield compares to the consumer segment. The stiffer competition in the corporate loan also limits the margin expansion. To mitigate this situation, the company aims to raise its exposure in the consumer segments that could provide better yield than the corporate segments. The corporate segment contributes 66% of its total assets portfolio in 1H’18 while the small-medium-micro and consumer segment contributes 34%. The company is aiming to re-profiling its business exposure by expanding the consumer and small medium segment to 40% while at the same time reducing the corporate portion to 60% by 2020. This would maintain the NIM at above 5.4%. The company is well capitalized with its CAR stood at 20% and sound assets quality as shown in NPL at 2.5%.

Satisfactory growth with improving assets quality. The company booked the loan growth at 11.8%yoy in 1H to IDR762.5tn. However the NIM was slightly declined by 14bps to 5.74% mainly due to the lower assets yield to 7.8% from 8.2% last year. The expectation of higher economic growth this year and stabilize provisioning due to the better asset quality improvement is expected would reduce the impact from the margin compression. We estimate the net profit would accelerate by 24%yoy to IDR 26.6tn while the NIM is expected to hover at 5.6% and the loan growth would be maintained at 10%yoy to IDR828tn.

Risk. The unanticipated downward credit quality, stiffer interest rate competition, slower GDP that could slash down the earning outlook.

Valuation. Our TP at IDR8,500 is calculated from the GGM approach which implying the PBV at 1.11 and 1.06 for 2018F and 2019F respectively. The CoE and the ROAE is set at 14.7 % and 15% respectively.

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Oktavianus Audi
Oktavianus Audi
BBNI
Capitalizing the synergetic between SOE & corporate growth

Shinhan Sekuritas Indonesia
Helmi Therik

Back ground. BBNI is a state owned company which plays an important role in Indonesia through its synergetic between government and other SOE business that support the government related projects. The bank is positioned as a corporate bank with the total loan shares in Indonesia reached 9.1% while the shares of its customer deposit is about 10% of the national saving.

Riding the infrastructure and corporate loan growth. We overweigh this counter due to its well positioned to gain the SOE and infrastructure theme. The company drives the loan from the corporate loan and SOE segments. The acceleration of the government infrastructure program as shown in the higher infrastructure spending would triggered the loan demand. About 49% came from corporate and SOE loan while 15% from medium scale, 16% from consumer and the rest from small commercial segment. The asset quality is remains at the manageable level as indicated in the NPL at 2.1% while the ability to absorb the deterioration of the loan quality is solid. The loan coverage ratio at 150.2% is believed would be the cushion to anticipate the risk from the unfavorable economic condition. The widespread of its distribution network couples with its status as government has made the capacity to collect the third party fund grew steadily at 13.5% to IDR526tn while the LDR at 87.3%. The liquidity is satisfactory enough to meet the short term needs as reflected in the LCR and NSFR at 239% and 140% respectively.

Sound earning profile with the stabilizing NIM. The company books a decent loan growth that remains above the national growth (11% vs 9%). The company expects to book the same loan growth this year and the corporate-SOE would become one of the engines especially from manufacture and infrastructure sector. The big three subsector in manufacture in the portfolio are pulp and paper, palm oil company and chemical manufacture while in infrastructure the company remains focuses in toll road, power plant, gas and water. We expect the PPOP could grow by 11% while the net profit would reach IDR15.9tn or up by 15% on the back of the stable NIM and stable provision charges. The NIM is estimated to be contained at 5%.

Risk. The unanticipated downward credit quality, stiffer interest rate competition, slower GDP that could slash down the earning outlook.

Valuation. We drive our TP at IDR9200 based on GGM which implying the PBV at 1.5X and 1.3 for 2018F and 2019F respectively. The CoE and the ROAE is calculated at 12.7% and 15% respectively.

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