Sound result on the backed of corporate loan
Shinhan Sekuritas Indonesia
Bank BNI posted a satisfactory result for the full year of 2018. The net profit increased by 10.3%yoy to IDR15,015bn or slightly lower than our estimation at IDR15,901 but remain acceptable. This was as a result of the higher net interest income that expanded by 11%yoy to IDR35.4tn. This translated into the higher pre provisioning operating income (PPOP) that was up by 10.7%yoy. The efficiency has also improved due to the improvement in the business process which was indicated by the cost to income ratio that recorded at the lower level at 42.5% from 43.9%.
The loan increased higher than the expectation due to the loan take over at the last quarter. The loan grew by 16%yoy to IDR512.77tn or higher than our estimation that expect the growth at 15%yoy. Despite of the loan increased, the yield was slightly lower to 9.7% from 10% that resulted in the modest interest income growth. The loan improvement was underpinned by an increase in corporate SOE loan that was up by 31.6%yoy to IDR110.9tn or representing 21.6% while the first largest loan composition came from corporate private that improved by 12.9%yoy to IDR151.7tn. The private corporate loan was 29.6% of the total loan.
The synergetic between corporate SOE (state owned enterprise) and corporate private loan as the key strategy to penetrate the corporate loan. The achievement was as the result of the company’s effort to elaborate the loan opportunity started from the high quality SOE loan and its supply chain as the loan target. The loan offering would flow down to the medium and small business at the down-stream as part of the supply chain from the high quality corporate loan. The product service improvement and the strong relationship have been capitalized as reflected in the strong growth in corporate loan.
Higher CASA has reduced the NIM compression. The company was able to manage the NIM at 5.3% in full year of 2018 from 5.5% at previous year or only 20bps lower. The lower loan yield to 9.7% from 10% that was caused by the industry pressure has been detained by the improving of low cost of fund as seen in the CASA composition that was up to 64.8% from 63.1%. This resulted in the lower cost of fund to 2.8% from 3%. In term of the liquidity the company would maintain its LDR at around 90% going forward while at the last full year the LDR was at 88.8% or at the manageable level.
Valuation. We consider upgrading our target price to our new TP at IDR10500 from our previous TP at IDR9200 on the back of the improvement of the loan, stable NIM outlook. We adjusted our risk free to our GGM calculation do to the more stable outlook ahead which implying the PBV at 1.6X and 1.4 for 2019F and 2020F respectively.
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