Need to Focus on Improving Asset Quality
Key Takeaways :
• BBTN posted net income of IDR3.05tn in FY22 forming 101.6/105.1% of ours and consensus estimate despite earnings contraction in 4Q22 largely driven by provisioning charges.
• BBTN has successfully executed its right issue obtaining IDR4.13tn of fund from shareholder resulting in higher CAR and better liquidity.
• Outlook remain positive yet the bank need to focus on asset quality improvement given BBTN LaR was still the highest among KBMI IV & SOE peers at 23.2% by the end of Dec-22.
• BBTN has set some initiatives to improve its asset quality that we think could avert the worst scenario by : 1) bulk asset sales and 2) focusing on lower risk segment with attractive yield such as KUR. Note that BBTN has secured IDR3tn KUR quota from government.
• Reiterate BUY with TP of IDR1,900/share. We arrived at lower TP (previously IDR2,300/share) to reflect the EPS dilution impact due to right issue. Our new TP implies 0.9x FY23F/FY24F P/B.
• Key upsides to our call : 1) higher than expected NIM & 2) lower than expected CIR. Key downside remain on slow progress in asset quality improvement.
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