Bank Negara Indonesia, Tbk

(BBNI)
Backed by Infrastructure Loan
Disbursement
Company Update 2Q17 | July 18, 2017

Loan Growth and NPL Improvement: Net Profit Sustainer

Decrease in non-performing loan (NPL) and growth in loan distribution
sustained BBNI 1H17 performance. Its net profit reached IDR6.4 trillion
Buy
edged up 46.7% y-y and pursuant to analysts estimate. NPL ratio edged Dec 2017 TP (IDR) 8,200
down 2.8%. It caused decrease of 1.8% (vs decrease of 2.7% in 1H16 credit Consensus Price (IDR) 7,340
cost) in 1H17 credit cost and decrease in provision for loan loss. TP to Consensus Price +11.7%
vs. Last Price +16.7%
On the other side, third party fund (Dana Pihak Ketiga, DPK) grew by
18.5% y-y with current account saving account (CASA) edging up by 19.4% Shares data
y-y into 60.9% from the total DPK (vs 1H16 total DPK of 60.4%). Thus, loan
Last Price (IDR) 7,025
to deposit ratio (LDR) was 88.9% (vs 1H16 LDR of 91.4%). Although LDR
Price date as of July 17, 2017
slipped down, BBNI was still capable of distributing substantial amount of
52 wk range (Hi/Lo) 5,000/7,100
loan.
Free float (%) 40.9
Government Infrastructure Project: Loan Growth Booster Outstanding sh.(mn) 18,649
BBNI 1H17 loan grew by 15.4% y-y boosted by construction, electricity, gas, Market Cap (IDR bn) 132,405
and water utility management sectors. We estimate that its 2017 loan Market Cap (USD mn) 9,874
growth will be consistently high, particularly loan deriving from government Avg. Trd Vol - 3M (mn) 24.0
infrastructure projects potential for reducing NPL into 2.7% in the end of Avg. Trd Val - 3M (bn) 156.8
2017 (vs 2Q17 NPL of 2.8%). Foreign Ownership 22.2%
However, the loan to the Indonesia government results in a relatively low
net income margin (NIM). We estimate that its NIM will slip down to 5.5% Finance
in 2018 (vs its current NIM of 5.6%). However, low risk of loan to Bank
government will be positive catalyst for BBNI. Bloomberg BBNI IJ
Reuters BBNI.JK
Target Price of IDR8,200
We use an estimate of forward P/B of 1.4x as our basis of valuation method
to obtain the target price. This target price implies a 2017/E P/B of 1.5x (vs Bima Setiaji
2017/E P/B of 1.3x by now). +62 21 797 6202, ext:114
[email protected]
Bank Negara Indonesia , Tbk | Summary (IDR bn)
2015/12A 2016/12A 2017/12E 2018/12E
Revenue 36,895 43,768 48,667 55,914
Revenue growth 10.6% 18.6% 11.2% 14.9% Share Price Performance
Operating Profit 11,412 14,368 17,682 21,113
Net profit 9,067 11,339 14,264 16,907
EPS (IDR) 486.2 608.0 764.9 906.6
EPS growth -15.9% 25.1% 25.8% 18.5%
BVPS (IDR) 4,206 4,786 5,412 5,906
NIM 5.2% 5.6% 5.6% 5.5%
NPL 2.7% 3.1% 2.7% 2.5%
ROE 13.0% 13.5% 15.0% 16.0%
ROA 2.0% 2.0% 2.2% 2.3%
LDR 87% 86% 88% 88%
P/BV 1.2x 1.2x 1.3x 1.2x
P/E 10.3x 9.1x 9.2x 7.7x YTD 1M 3M 12M
DPS (IDR) 145 122 213 222 Abs. Ret. 27.9% 6.5% 12.0% 28.4%
Dividend yield 2.9% 2.2% 3.0% 3.2% Rel. Ret. 17.2% 5.4% 7.4% 14.2%
Source: Company Data, Bloomberg, NHKS Research
Please consider the rating criteria & important disclaimer

NH Korindo Sekuritas Indonesia

Company Report
July 18 2017

Stable NIM and Loan Distribution: Booster for Net Profit Increase
BBNI succeeded to distribute 1H17 loan of IDR412.18 trillion growing by
15.4% y-y compared to 1H16 loan distribution of IDR357.22 trillion. The
loan distribution was booster for 1H17 net interest income (NII)
increasing by 10.7% into IDR15.40 trillion.
Growth in BBNI net profit is boosted by
loan distribution and maintained NIM. The increase in NII contributed to the growth in BBNI 1H17 net profit
soaring by 46.7% y-y into IDR6.41 from 1H16 net profit gain of IDR4.37
trillion. The solid net profit growth was primary factor boosting growth of
15.0% in 1H17 return on equity (ROE) from 1H16 ROE of 13.7%.

Solid NII caused maintainable NIM at the level of 5.6%. The decrease of
3.1% in 1H16 credit cost into 3.0% in 1H17 credit cost was factor
maintaining NIM at stable level.

BBNI NPL Ratio| Q4 2014 - Q2 2017 BBNI NIM breakdown | Q4 2015 - Q2 2017

Source: Company, Bank Indonesia Source: Company

SOE Infrastructure Sector: Booster for Credit Growth

BBNI 1H17 loan distribution to SOE (State Owned Enterprises) grew by
27.0% y-y into IDR82.54 trillion. The high loan distribution was boosted by
demand from construction, electricity, gas, and water utility sectors.
Massive government project surges the Meanwhile, the loan from private corporation only grew by 6.7% y-y into
loan demand from construction sector. IDR95.65 trillion.

BBNI is one of banks the Indonesia government trusts to provide

infrastructure finance. It helps BBNI 1H17 loan to grow above the average
of banking industry. BBNI 1H17 loan portfolio in infrastructure sector
reached IDR136.6 trillion or equal to 33% from the total loan of IDR412
trillion.

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Company Report
July 18 2017

Infrastructure Loan Disbursement: Fortune for BBNI

The optimism for better economic conditions triggers infrastructure
industry to disburse the approved loan. The accelerated infrastructure
project will boost the trend of loan disbursement. According to the
Financial Services Authority (OJK), 1Q17 undisbursed loan decrease from
Loan disbursement by infrastructure IDR39.58 trillion into IDR1,314 trillion.
industry is a positive catalyst for BBNI.
We estimate that BBNI 2017 loan distribution will grow by 18%. It is
triggered by massive loan disbursement to finish the completion target of
varied infrastructure projects such as toll road and power plant in the
period of 2018-2019.

Banking Undisbursed Loan | 4M 2016 - 3M 2017 Loan Breakdown | Q2 2017

Source: OJK Source: Company

Potency for Revenue from Non-Interest Income

BBNI 1H17 books fee based income of IDR4.64 trillion (+17.9% y-y). One of
fee based income contributors is remittance service primarily deriving
BBNI is potential for increasing revenue from two countries such as Malaysia and Hong Kong where many
from fee based income until the year Indonesian labors work.
end.
We estimate that fee based income from digital banking and trade finance
segments can give substantial contribution for non-interest income. Trade
finance revenue majorly derives from corporation segment, particularly
from SOE.

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Company Report
July 18 2017

Multiple Valuation
Forward P/B band | Last 3 years Dynamic Forward P/B band | Last 3 years

Source: NHKS research Source: NHKS research

Rating and target price update

Target Price
Date Rating Target Price Last Price Consensus vs Last Price vs Consensus
2/1/2017 Buy 6,900 5,850 6,491 +17.9% +6.3%
5/5/2017 Buy 7,500 6,500 7,016 +15.4% +6.9%
7/18/2017 Buy 8,200 7,025 7,340 +16.7% +11.7%
Source: NHKS research, Bloomberg

Analyst Coverage Rating Closing and Target Price

Source: Bloomberg Source: NHKS research

NH Korindo Sekuritas Indonesia (NHKS) stock ratings

1. Period: End of year target price
2. Rating system based on a stocks absolute return from the date of publication
Buy : Greater than +15%
Hold : -15% to +15%
Sell : Less than -15%

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Company Report
July 18 2017

Financial Summary
BBNI Summary
Last Price (IDR) July 17, 2017 7,025 PROFITABILITY & STABILITY
Target Price (IDR) Dec 2017 8,200 2015/12A 2016/12A 2017/12E 2018/12E
Analyst: Bima Setiaji Rating: Buy ROE 13.0% 13.5% 15.0% 16.0%
ROA 2.0% 2.0% 2.2% 2.3%
ROIC 9.1% 8.8% 9.4% 10.1%
INCOME STATEMENT NIM 5.2% 5.6% 5.6% 5.5%
in IDR bn 2015/12A 2016/12A 2017/12E 2018/12E BOPO 67.6% 64.1% 60.3% 60.3%
Interest income 36,895 43,768 48,667 55,914 EBITDA/Equi ty 15% 16% 18% 19%
Growth (% y/y) 10.6% 18.6% 11.2% 14.9% EBITDA/As s ets 2.2% 2.4% 2.6% 2.7%
Interes t expens e (11,335) (13,773) (15,500) (17,615) Ca s h Di vi dend (IDR bn) 2,696 2,267 3,969 4,137
Net interest income 25,560 29,995 33,167 38,299 Di vi dend Yi el d (%) 2.9% 2.2% 3.0% 3.2%
Non Interes t Income 9,698 10,065 11,343 14,876 Pa yout Ra ti o (%) 30% 20% 28% 24%
Net Revenue 35,258 40,060 44,510 53,176 Ca s h Ra ti o 9% 8% 7% 7%
Gross Margin 95.6% 91.5% 91.5% 95.1% Common Equi ty/Tota l As s ets 15% 15% 15% 14%
Provi s i ons for Loa n Los s es (7,336) (6,754) (5,469) (6,705) Book Va l ue per Sha re 4,206 4,786 5,412 5,915
Opera ti ng Expens e (16,510) (18,938) (21,358) (25,358) Provi s i ons for Loa n Los s es (7,336) (6,754) (5,469) (6,705)
Operating Profit 11,412 14,368 17,682 21,113 Tota l Ri s k Ba s ed Ca pi ta l 73,799 87,199 94,662 104,999
Operating Margin 30.9% 32.8% 36.3% 37.8% Non-Performi ng Loa ns 2.7% 3.1% 2.7% 2.5%
Non-Operating Income 54 (65) 287 157 Loa ns to Depos i t Ra ti o 87% 86% 88% 88%
EBT 11,466 14,303 17,969 21,270 CASA 61% 65% 63% 64%
Income Ta x (2,326) (2,893) (3,562) (4,280) Ca pi ta l Adequa cy Ra ti o 19% 19% 19% 18%
Non Control l i ng Interes ts (74) (71) (143) (83) Pa r Va l ue (IDR) 50 50 50 50
Net Profit 9,067 11,339 14,264 16,907 Tota l Sha res (bn) 18.6 18.6 18.6 18.6
Growth (% y/y) -16% 25% 26% 19% Sha re Pri ce (IDR) 4,990 5,525 7,025 7,025
Net Profit Margin 24.6% 25.9% 29.3% 30.2% Ma rket Ca p (IDR bn) 93,057 103,034 131,007 131,007

BALANCE SHEET VALUATION INDEX

in IDR bn 2015/12A 2016/12A 2017/12E 2018/12E 2015/12A 2016/12A 2017/12E 2018/12E
Ca s h & Nea r Ca s h Items 43,823 47,613 50,506 53,353 Pri ce /Ea rni ngs 10.3x 9.1x 9.2x 7.7x
Interba nki ng As s ets 42,792 35,326 45,951 62,084 Pri ce /Book Va l ue 1.2x 1.2x 1.3x 1.2x
Inves tments 57,186 86,771 93,357 97,248 Pri ce/Sa l es 2.5x 2.4x 2.7x 2.3x
Net Loa ns 322,898 376,595 444,355 517,723 PE/EPS Growth -64.5x 36.3x 35.6x 41.8x
Other & Fi xed As s ets 41,897 56,727 52,738 57,002 EV/EBITDA 7.8x 7.8x 8.0x 6.9x
Total Assets 508,595 603,032 686,906 787,410 EV/EBIT 7.7x 7.8x 7.8x 6.8x
Tota l Depos i ts 370,421 435,545 503,656 587,157 EV (IDR bn) 88,513 111,700 140,596 144,956
Dema nd Depos i ts 91,194 122,652 137,078 162,882 Sa l es Growth 10.6% 18.6% 11.2% 14.9%
Sa vi ng Depos i ts 135,065 158,662 181,398 214,050 EPS Growth -15.9% 25.1% 25.8% 18.5%
Ti me Depos i ts 144,161 154,230 185,179 210,226 Ba s i c EPS (IDR) 486 608 765 907
ST & LT Borrowi ngs 37,255 54,182 57,926 65,133 Di l uted EPS (IDR) 486 608 765 907
Total Liabilities 430,157 513,778 585,982 677,109 BVPS (IDR) 4,206 4,786 5,412 5,915
Reta i ned Ea rni ngs 50,534 61,277 72,875 82,089 Sa l es PS (IDR) 1,978 2,347 2,610 2,998
Total Equity 78,438 89,254 100,924 110,301 DPS (IDR) 145 122 213 222

CASH FLOW STATEMENT DCF, RIM & EVA

in IDR bn 2015/12A 2016/12A 2017/12E 2018/12E 2015/12A 2016/12A 2017/12E 2018/12E
Net Income 9,067 11,339 14,264 16,907 DCF (USD mn)
Depreci a ti on 8,120 7,694 3,946 1,037 NOPAT 9,097 11,462 14,177 16,864
Oth Non-Ca s h Adj 1,913 (1,337) (5,574) (8,476) +Depr./Amor. 8,120 7,694 3,946 1,037
CFO 19,099 17,696 12,636 9,468 -CAPEX (4,422) (2,213) (1,583) (2,413)
Ca pex (4,422) (2,213) (1,583) (2,413) -Incr. (Decr.) i n Worki ng Ca p. 1,913 (1,337) (5,574) (8,476)
Inves tment (49,355) (90,710) (63,067) (74,647) (Unl evered) FCFF 14,708 15,606 10,967 7,012
CFI (53,777) (92,923) (64,649) (77,060) WACC
Di vi dends Pa i d (2,696) (2,267) (3,969) (4,137) Cos t of Debt (Ta x Adj.) 10.3% 9.5% 8.1% 11.1%
Others 67,469 72,171 71,919 90,709 Cos t of Equi ty (COE) 11.3% 10.4% 12.1% 11.3%
CFF 64,774 69,904 67,950 86,572 WACC (%) 11.0% 10.1% 10.9% 11.2%
Net Changes in Cash 30,096 (5,323) 15,936 18,980 RIM
Sprea d (FROE-COE) (%) -11.3% -10.4% -12.1% -11.3%
Res i dua l Income (USD mn) 2,152 3,162 3,437 5,537
OWNERSHIP Equi ty Cha rge 6,914 8,177 10,827 11,370
By Geography % Shareholders % EVA
Indones i a 77.8 Republ i c Of Indones i a 58.8 Inves ted Ca pi ta l (USD bn) 84,061 115,693 143,436 158,850
Uni ted Sta tes 8.1 Bl a ckrock 3.2 ROIC-WACC (%) -0.2% -0.2% -1.0% -0.6%
Luxembourg 3.9 Va ngua rd 2.0 EVA (USD mn) (174) (246) (1,471) (941)

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