BBNI
Contact our analyst Lingga
13% upside. HOLD.
24 January, 2020
Price Rp7,650
Target price Rp8,640
Reducing Corporate Assets
BBNI will make changes to the composition of the portfolio, by reducing corporate assets and concentrating more on lending to small business and consumers, which provide higher returns via higher NIM and have lower risk than large companies. In the small business segment, KUR will be one of the main engines of credit growth this year, while the driving force for consumer credit will still come from payroll loans. BBNI continues to improve its digital marketing in collaboration with Tokopedia, Traveloka, Bukalapak and continues to optimize opportunities by cross-selling to the customer database of its Corporate segment.
Restructured Loan Increased
Restructured Loans to total loans ratio increased from 6.1% in 3Q19 to 6.9% in 2019, mostly contributed by KRAS (IDR5.4tn) which was downgraded to SML in 4Q19, while the downgrade to NPL came from tin manufacturing & mining in Bangka (IDR877bn), IT trading in Jakarta (IDR682bn), and Duniatex (IDR464bn). BBNI has set aside a 38% provision on KRAS and 100% on Duniatex in 2019.
Additional Provision IDR 13-15 Trillion
In 2019, the NPL coverage ratio came down to 133.5% from 152.9% in 2018. However, NPL coverage is projected to reach 180-200% as the company is guiding IDR 13-15 trillion of additional provisions for IFRS9 which will be charged to retained earning based on IFRS 9 by Januari 2020 for the Manufacturing, Trading, Hotel and Mining Sectors.
Cost Of Fund still rising
In 2019, CASA increased to 66,6% from 64.8% in 2018, but Cost Of Funds has not yet come down in 2019 and even increased by 3.2%. This is because the banking industry is still affected by the tight liquidity,, however, BBNI will remain focused on maintaining CASA growth through its relationships with corporate and institutional clients. We estimate CASA in 2020 will be 68.77%.
Valuation: 13% Upside, Hold.
Based on our DDM Valuation, we have a target price within one year of IDR 8640 or trading at 0.8x PBV which gives 13% potential upside, Hold.
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