BBNI
Contact our analyst Achmadi Hangradhika
20% upside. Buy
May 22nd, 2023
Price Rp8,850
Target price Rp10,600
Net Income grew almost 32%
In the first quarter of 2023, Bank Negara Indonesia (BBNI) reported a net income of IDR 5.22 trillion, which represents a significant increase of 31.76% YoY from IDR 3.96 trillion in Q1-22. The growth was driven by operating income, such as income from investment in associates, which grew by 35.79% YoY. The growth was also driven by the decrease in provision expenses, which deflated by 40.31% YoY. BBNI’s interest income also grew significantly by 23.4% YoY, leading to an NIM of 4.67%, an increase by 17 bps YoY, although quarterly it decreased by 18 bps. The largest contributor to interest income was income from loans and government bonds, accounting for 81.01% and 10.19% respectively, while the highest annual growth was seen in income from placement from other banks and Bank Indonesia and Bills and Other Receivables, which grew by 172.66% and 75.43% respectively. We forecast that BBNI will continue to improve its performance, growing net income by 44% to reach IDR 26.37 trillion in FY23.
Moderate growth in loans and third-party funds
As of March 2023, BBNI recorded a moderate consolidated loan growth of 7.21% YoY. Most segments grew positively except for the small loans, which decreased by 1.53%. The highest growth was seen in the Consumer segment, which grew by 11.83% YoY. Other segments, such as Corporate and Medium loans, also grew by 8.18% and 4.09%, respectively. On the other hand, Third Party Fund also increased modestly by 7.21%. The highest growth came from Current Accounts, which grew by 10.44%, followed by time deposits, which grew by 8.44%. However, saving accounts only grew by 2.74%, which led to a decrease of the CASA ratio by 30 bps YoY to 68.90%. We forecast that at the end of 2023, consolidated loans will grow by 10.73%, while the CASA ratio will also grow by 145 bps to a level of 73.85%.
Improved Asset Quality
As of March 2023, BBNI improved its asset quality, with the bank-only NPL ratio declining by 69 basis points to 2.77% compared to March 2022, while the NPL coverage ratio increased by 367 bps to 286.80%. Consumer loans had the lowest NPL ratio at 1.80%, down 30 bps annually, but it increased by 10 bps quarterly. Medium loans showed the best performance, decreasing NPLs by 240 bps annually to a level of 6.00%, even though it was lowest in terms of quality. Corporate loans also improved with a decrease of 50 bps to 2.10%. Small loans was the only segment that deteriorated, with the NPL ratio increasing by 10 bps to 2.60%. We predict that BBNI will continue to improve its asset quality, lowering its bank-only NPL by 15 bps to a level of 2.65% in FY23.
Valuation: 20% Upside, Buy.
Based on our Multi-Stage DDM valuation, we have a one-year target price of IDR 10,600, which implies a PBV multiple of 1.22x and a potential upside of 20%. Therefore, we recommend "Buy".
In the first quarter of 2023, Bank Negara Indonesia (BBNI) reported a net income of IDR 5.22 trillion, which represents a significant increase of 31.76% YoY from IDR 3.96 trillion in Q1-22. The growth was driven by operating income, such as income from investment in associates, which grew by 35.79% YoY. The growth was also driven by the decrease in provision expenses, which deflated by 40.31% YoY. BBNI’s interest income also grew significantly by 23.4% YoY, leading to an NIM of 4.67%, an increase by 17 bps YoY, although quarterly it decreased by 18 bps. The largest contributor to interest income was income from loans and government bonds, accounting for 81.01% and 10.19% respectively, while the highest annual growth was seen in income from placement from other banks and Bank Indonesia and Bills and Other Receivables, which grew by 172.66% and 75.43% respectively. We forecast that BBNI will continue to improve its performance, growing net income by 44% to reach IDR 26.37 trillion in FY23.
Moderate growth in loans and third-party funds
As of March 2023, BBNI recorded a moderate consolidated loan growth of 7.21% YoY. Most segments grew positively except for the small loans, which decreased by 1.53%. The highest growth was seen in the Consumer segment, which grew by 11.83% YoY. Other segments, such as Corporate and Medium loans, also grew by 8.18% and 4.09%, respectively. On the other hand, Third Party Fund also increased modestly by 7.21%. The highest growth came from Current Accounts, which grew by 10.44%, followed by time deposits, which grew by 8.44%. However, saving accounts only grew by 2.74%, which led to a decrease of the CASA ratio by 30 bps YoY to 68.90%. We forecast that at the end of 2023, consolidated loans will grow by 10.73%, while the CASA ratio will also grow by 145 bps to a level of 73.85%.
Improved Asset Quality
As of March 2023, BBNI improved its asset quality, with the bank-only NPL ratio declining by 69 basis points to 2.77% compared to March 2022, while the NPL coverage ratio increased by 367 bps to 286.80%. Consumer loans had the lowest NPL ratio at 1.80%, down 30 bps annually, but it increased by 10 bps quarterly. Medium loans showed the best performance, decreasing NPLs by 240 bps annually to a level of 6.00%, even though it was lowest in terms of quality. Corporate loans also improved with a decrease of 50 bps to 2.10%. Small loans was the only segment that deteriorated, with the NPL ratio increasing by 10 bps to 2.60%. We predict that BBNI will continue to improve its asset quality, lowering its bank-only NPL by 15 bps to a level of 2.65% in FY23.
Valuation: 20% Upside, Buy.
Based on our Multi-Stage DDM valuation, we have a one-year target price of IDR 10,600, which implies a PBV multiple of 1.22x and a potential upside of 20%. Therefore, we recommend "Buy".
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