PT Bank Negara Indonesia (Persero) Tbk (BBNI)
Banking Sector
Slightly Weaker with Lagging Valuation
Weaker NIM and Slightly Slow Bottom Line
BBNI booked net profit of IDR7.63 trillion or grew by 2.65% YoY and showed 45% of our estimate, whereas net interest income remained flat at around IDR17.61 trillion in 1H19. We see that this was improvement in bottom line, compared to 4M19 results due to KRAS exposure. Loan yield remained flat with slightly decrease to 9.30% in 1H19 (vs 9.40% in 1Q19) because of lower corporate loan yield at 9.20% (-40bps QoQ). Therefore, NIM was decreased to 4.90% along with industry condition, hence the management revised down its full year target of NIM to around 5%-5.10% from 5.3%-5.4%, which our forecast in FY19E at 4.96% due to limited downside of cost of fund. We see that there will be an increase in provisioning expense by ~19.57% YoY in the end of the year, although BBNI are planning to cover it through its capital which will impact by ~70bps in FY19E. We cut down our estimate in FY19E/FY20F by -5.77%/-2.25% to IDR16.18 trillion/IDR18.79 trillion because of higher provision expense.
Stronger Asset Quality and Adequate Liquidity
We see that there was improvement in asset quality which NPL gross is lower at 1.80% in 1Q19 with higher recovery at IDR1.13 trillion. Loan at risk was lower by 50bps YoY (+30bps QoQ) at 8.60%, which we think that exposure to Duniatex (IDR459 billion) is still manageable due to management statement with its coverage had already reached 200%. Meanwhile, management guidance in CAR related to PSAK 71, will decrease by 50-70bps; hence its CAR will still be healthy at around 16%-17% in FY19E. The liquidity is better than its peers at 92.30% in 2Q19, which banking system rose to 95% in 5M19. Even with frontloading strategy last quarter, we see that BBNI will be able to maintain its liquidity at the end of this year and will be helped by further 7DRRR cut rate.
Recommendation: BUY at Target Price Rp9,800
We recommend BUY for BBNI with target price at Rp9,800 (from IDR10,000) with implied PBV FY19E/FY20F at 1.51x/1.36x and is traded in STD-0.5 of average 5 years PBV band, which there was some lagging valuation compared to PBV banking sector at 2.80x. We analyze that its quite strong asset quality, and manageable liquidity which drives BBNI’s performance with downside risk: macro economy and NIM pressure.
