BNLI
Contact our analyst Lingga
11% upside. hold.
4 July, 2020
Price Rp1265
Target price Rp1410
Sustainable funding focus
In 1Q20, the CASA ratio increased to 54% from 47% in 1Q19 driven by an 40% increase in new account flows. BNLI will continue to focus on low costs through sustainable funding. We estimate this year's CASA ratio will be still higher at 55.56%
Mitigating Asset Quality
The gross NPL ratio of 3.2% in 1Q20 increased 60 bps from FY19 2.8%, but decreased compared to 1Q19 which was 3.8%. The net NPL ratio increased slightly to 1.2% compared to 1.3% as of December 2019. The NPL replacement ratio also increased to 152%, from FY19 133%. This relates to efforts to mitigate bad credit potential through caution in channeling new loans and increasing restructuring and liquidation.
CAR above minimum capital requirements
In 1Q20, the Capital Adequacy Ratio (CAR) was still stable at 19.6%, from 19.9% in 1Q19, which is higher than the minimum capital requirements. The capital ratio has remained strong even after implementing PSAK 71 concerning effective financial instrument provisions starting Jan 1, 2020. We estimate the CAR will decline this year to 19.27% because of the pandemic conditions
Valuation: 11% Upside, Hold.
Based on our DDM Valuation, we have a target price within one year of IDR 1410, which would mean the shares trading at 1.4x PBV and gives 11% potential upside. Hold.
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