Prasetya Gunadi, BCA Sekuritas Research

Facts: Loan growth accelerated further in 4Q18

· BBNI recorded 4Q18 net profit of IDR3.6tn (+3.4% YoY, -10.6% QoQ), which is in line with our own numbers (98.5%) and 97.5% of Cons’ estimate. The growth was driven by better COC, at 1.4% in FY18, against 1.6% in FY17. At PPOP level, BBNI was able to book 10.7% YoY growth, supported by NII growth of 11.0% YoY. 4Q18 NIM of 5.3% was flat compared previous quarter, as BBNI still maintained its loan yield at 9.7% since 4Q last year. BBNI also managed to maintain its COF at 2.8%, supported by CASA ratio of 64.8% still improving in Dec-18.

· Loan growth accelerated at end of Dec-18. Total loans grew 16.2% YoY as of end Dec-18; corporate SOE sector was the key driving factor, rising 31.6% YoY. On the deposit side, growth reached +12.1% YoY in Dec-18, on 18.2% YoY higher current account figure, along with savings account growth of 13.0% YoY. CASA ratio was up to 64.8% in Dec-18, from 63.1% in Dec-17, and 61.9% set in Sep-18; note how it was slightly improved, to 88.8% as of end Dec-18, down from previous level of 89.0% in Sep-18, but still higher than 85.6% reported in Dec-17.

· NPL improved QoQ at 1.9% in 4Q18, from 2.0% the previous quarter, up by 40bps YoY, from 2.3% in 4Q17. The main NPL relief was seen in small business segment, which recorded 1.6% in 4Q18 vs. 2.4% in 3Q18, and medium segment NPL recovered by 40bps QoQ. BBNI’s end Sep-18 loan book was cleaner, thanks in part to the write-off of IDR2.0tn in 4Q18. SML slightly rose to 3.9% in 4Q18 vs. 3.8% in 3Q18, and 3.8% in 4Q17.

Outlook: positive outlook to persist on cleaner loan book

In 2019, the company guided slower loan growth of 14%-15% vs. 16% in FY18. Corporate loans (especially SOE loans) will still be the main driver this year, even though growth is expected to decelerate to around 15%, while medium-segment loan demand will still be soft. BBNI’s main focus this year is to maintain its NIM at 5.3%; hence the company will start to increase its loan yield this year, while still trying to lower COF by pumping up the CASA ratio, utilizing its digital business model more actively, while wooing corporate / institutional clients. As for its asset quality, SML is expected to improve, as BBNI has found a strategic investor to acquire the cement producer in Central Java, which is stuck with an outstanding loan of IDR1.6tn recorded as SML. Acquisition is expected to be completed in 1Q19. The total write-off in FY19 is expected to remain elevated at ~IDR5tn to support its NPL level at ~2%.

We maintain our rating and upgrade TP to IDR10,800; BUY

At this stage of the market cycle, we maintain our BUY rating on BBNI. Our TP upgraded to IDR10,800/share, based on 1.7x 2019’s PBV, on the back of lower risk free rate to 8.0%. Risks to our call: tightening liquidity, leading to higher cost of funds, weaker-than-expected loan growth, due to various factors, more loan write-offs and lower loan yields, which would put more pressure on NIM.

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