Contact our analyst Lingga
39% upside. BUY.
26 May, 2020
Target price Rp5,040
Good Loan Growth
Total Loans in 1Q20 grew by 11.2% YoY, and 4.1% QoQ with growth contributed by the private corporate segment, with some impact fro m the weakening of the rupiah against the US dollar. The growth of Business Loans came from Private companies which grew by 24.8% YoY. SOEs grew more slowly, while the growth of Medium, Small and Consumer Loans began to slow down. We estimate loan growth in the range of 2-3% in 2020.
Asset Quality drops
SML was at 6.5% in 1Q20, an increase from 4.6% in FY19, this increase was due to a decrease in credit quality in all segments, especially the medium and small business segments. The Corporate Segment rose to 5.5% in 1Q20 from 5.1% in FY19 mainly because of a Palm Oil plantation debtor in Riau with loans totaling IDR. 733 billion. The Medium segment which is dominated by the Trading, Restaurant & Hotel sectors with IDR. 2 Trillion of loans, increased to 11.7% in 1Q20 from 6.7% in FY19. The Small segment rose to 7.8% in 1Q20 from 2.9% in FY19 due also to trading, Restaurant & Hotel borrowers. NPLs increased by 2.4% due to downgrades in 1Q20 of borrowers which were previously included in Loans at Risk. The loan Coverage Ratio increased significantly by 243.2%, partly caused by the implementation of IFRS 9. As of April 2020, BBNI had Restructured Loans of IDR. 69,789Bn of which 28.5% came from the Corporate segment and 24% from the Medium.
CASA is a priority
In 1Q20 Third Party Funds grew 10.4% YoY, and 3.5% QoQ with the CASA Ratio growing to 64.9%. As the LDR is being maintained in the range of 90-92%, CASA is a top priority to reduce the Cost of Fund and keep the net interest margin stable. We estimate the CASA ratio to be in the range of 62-66% in 2020.
Non-Interest Income decreased -19.4% YoY, because a subsidiary BNI Life suffered a loss. In the Bank Only, total Non-Interest Income still grew by 17.8%.
Valuation: 39% Upside, Buy.
Based on our DDM Valuation, we have a target price within one year of IDR 5040 or trading at 0.5x PBV which gives 39% potential upside, Buy.