Equity Research

Company Update

Thursday,28 January 2021

BUY Bank Mandiri (BMRI IJ)

Maintain To a better year
Last price (IDR) 7,050 The IDR17.1tn FY20 net profits are in-line at the lower bound of our forecast,
Target Price (IDR) 8,000 mainly due to the higher effective tax rate of 24.3% in 2020. Additionally,
loans contracted by 1.6% yoy with a 4.6% NIM. Looking into 2021, we believe
Upside/Downside +13.5%
our forecasts are reasonable with 4.8% yoy loans growth, a 20bps elevated
Previous Target Price (IDR) 8,000 NIM to 4.8% and 227bps credit costs. BMRI’s management also provided
guidance for a 60% dividends payout given its ample level of capital. Maintain
Stock Statistics
BUY with an unchanged TP of IDR8,000 (implies 1.9x 2021F PBV).
Sector Banking
Bloomberg Ticker BMRI IJ FY20 highlights. The FY20 net profits of IDR17.1tn (-37.7% yoy) are inline at the
No of Shrs (mn) 46,667 lower bound of our forecast due to a higher effective tax rate of 24.3% (FY19:
21.9%). Loans contracted by 1.6% yoy as of December 2020 due to soft loans
Mkt. Cap (IDRbn/USDmn) 329,000/23,370
demand and BMRI’s policy to disburse loans to a few sectors. Yet, NIM could be
Avg. daily T/O (IDRbn/USDmn) 356.1/25.3 managed at 4.6% in FY20 as BMRI aggressively cut its TD rate in the low policy
rate environment also supported by its ample liquidity. With 12.2% yoy
Major shareholders (%)
customer deposits growth, the LDR went down to 85.2% as of December 2020.
Government of Indonesia 60.0
Abundant liquid assets. As BMRI’s management remains cautious in the
Estimated free float 37.9 current environment, ample liquidity is a key focus in 2021. BMRI will continue
to actively monitor macro conditions on a monthly basis. As such, BMRI will
EPS Consensus (IDR) only disburse loans to selective sectors, such as FMCG, telecommunications,
2020F 2021F 2022F and health related sectors. Aside from that, marketable securities and
interbank placements will continue to be the preferable temporary liquid
Danareksa 379.8 533.3 628.7
earnings assets instruments going forward. At the same time, we believe there
Consensus 366.3 526.0 667.1 is limited room for a lower blended CoF assuming only a 25bps policy rate cut
Danareksa/Cons 3.7 1.4 (5.7) in 2021. All in all, we assume a 2.9% blended CoF in FY21F.

BMRI relative to JCI Index Maintaining its conservative assets quality policy. The lower-than-expected
FY20 credit costs owed to better assets quality in the commercial segment.
BMRI also provided guidance that 11% of its restructured loans have a high risk
profile, while 25% are in the medium risk category. With such an assessment,
BMRI continued to build up sufficient provisions for COVID-19 restructuring
borrowers with credit costs of 61bps aside from the BAU (Business As Usual)
credit costs of 174bps in FY20. Thus, we assume 227bps credit costs for FY21F
with a 2.8% gross NPLs ratio as of December 2021F.

Maintain BUY, TP of IDR8,000. We maintain our BUY call on BMRI with an

unchanged GGM-derived TP of IDR8,000 (implying 1.9x 2021F PBV, at 10-year
mean) assuming a 9.1% CoE, 14.5% sustainable ROAE and 3% long-term growth.

Source : Bloomberg Key Financials

Year to 31 Dec 2018A 2019A 2020F 2021F 2022F
PPOP (IDRbn) 48,091 48,524 47,392 52,780 55,935
Net profit (IDRbn) 25,015 27,482 17,722 24,887 29,342
EPS (IDR) 536.0 588.9 379.8 533.3 628.7
EPS growth (%) 21.2 9.9 (35.5) 40.4 17.9
BVPS (IDR) 3,882.9 4,384.3 4,021.9 4,235.2 4,518.2
Eka Savitri
PER (x) 13.2 12.0 18.6 13.2 11.2
(62-21) 5091 4100 ext.3506
PBV (x) 1.8 1.6 1.8 1.7 1.6
[email protected]
Dividend yield (%) 3.8 5.0 3.2 4.5 4.9
ROAE (%) 14.4 14.2 9.0 12.9 14.4
Source : BMRI, BRI Danareksa Estimates

www.danareksa.com See important disclosure at the back of this report 1

Exhibit 1. Loans and Growth Exhibit 2. Net Interest Income and Growth

Source: Company, BRI Danareksa Sekuritas estimates Source: Company, BRI Danareksa Sekuritas estimates

Exhibit 3. NIM and LDR Exhibit 4. NPLs

Source: Company, BRI Danareksa Sekuritas estimates Source: Company, BRI Danareksa Sekuritas estimates

Exhibit 5. PBV ROAE Band Chart Exhibit 6. PE Band Chart

3,0 x % 25,0 20,0 x
18,0
2,5
20,0 16,0
2,0 14,0
15,0
1,5 12,0
10,0 10,0
1,0
8,0
0,5 5,0 6,0
Jan-17
Jan-11
Jul-11
Jan-12

Jan-13

Jan-14
Jul-14
Jan-15

Jan-16

Jul-17
Jan-18

Jan-19

Jan-20

Jan-21
Jul-12

Jul-13

Jul-15

Jul-16

Jul-18

Jul-19

Jul-20

4,0
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18
Jul-18
Jan-19

Jan-20

Jan-21
Jul-13

Jul-14

Jul-15

Jul-16

Jul-17

Jul-19

Jul-20

Fwd P/BV Mean +1SD -1SD ROAE (RHS)

Fwd P/E Mean +1SD -1SD

Source: Company, BRI Danareksa Sekuritas estimates Source: Company, BRI Danareksa Sekuritas estimates

www.danareksa.com See important disclosure at the back of this report 2

 Exhibit 7. BMRI’s result
QoQ YoY
FYE Dec (IDRbn) YoY (%)
4Q19 3Q20 4Q20 (%) (%) FY19 FY20

Net interest income 15,500 13,224 15,862 19.9 2.3 61,248 58,022 (5.3)
Net interest margin (%) 5.3 4.0 4.3 5.6 4.6
Non-interest income 8,135 6,381 7,880 23.5 (3.1) 27,352 28,697 4.9
Non-II/Total income (%) 34.4 32.5 33.2 30.9 33.1
Operating income 23,635 19,605 23,742 21.1 0.5 88,600 86,719 (2.1)
Overhead expenses (11,873) (9,136) (12,326) 34.9 3.8 (40,076) (40,647) 1.4
Cost-Income Ratio (%) 50.2 46.6 51.9 45.2 46.9
Pre-provisions profit 11,761 10,469 11,416 9.0 (2.9) 48,524 46,072 (5.1)
Provisions allowance (2,170) (5,226) (7,197) 37.7 231.6 (12,072) (22,896) 89.7
Credit cost - annualised 102 245 326 161 254
(bps)
Pretax profit 9,640 5,216 4,397 (15.7) (54.4) 36,441 23,298 (36.1)
Tax (2,494) (1,152) (1,184) 2.8 (52.5) (7,986) (5,652) (29.2)
Effective tax rate (%) (25.9) (22.1) (26.9) 22.0 4.1 (21.9) (24.3)
Net Profit 6,901 3,932 3,091 (21.4) (55.2) 27,482 17,119 (37.7)

Other Key Data and

Ratios

Gross loans 907,456 873,729 892,805 2.2 (1,6) 907,456 892,805 (1,6)

Customer deposits 933,571 1,024,636 1,047,318 2.2 12.2 933,571 1,047,318 12.2

Gross NPLs 21,316 29,073 27,588 (5.1) 29.4 21,316 27,588 29.4

Total assets 1,318,247 1,406,655 1,429,334 1.6 8.4 1,318,247 1,429,334 8.4

Shareholders' funds 204,601 185,085 189,143 2.2 (7.6) 204,601 189,143 (7.6)

ROAA (%) 2.1 1.1 0.9 2.7 1.2

ROAE (%) 13.8 8.6 6.6 18.8 8.7

LDR (%) 97.2 85.3 85.2 97.2 85.2

Gross NPL ratio (%) 2.3 3.3 3.1 2.3 3.1

LLC ratio (%) 144.1 207.5 229.1 144.1 229.1

CAR (%) 20.9 19.5 19.5 20.9 19.5

Source : Company, BRI Danareksa Sekuritas estimates

www.danareksa.com See important disclosure at the back of this report 3

 Exhibit 8. Income Statement
Year to 31 Dec (IDRbn) 2018A 2019A 2020F 2021F 2022F
Interest Income 80,993 91,525 90,329 97,648 103,995
Interest Expense (26,370) (32,085) (32,210) (33,993) (34,805)
Net Interest Income 54,623 59,440 58,119 63,655 69,190
Non-Interest Income (NII) 26,722 24,426 25,037 27,729 28,274
Oper. Income 81,345 83,866 83,156 91,384 97,464
Oper. Expenses (37,566) (40,076) (40,597) (43,586) (46,592)
Pre-provisions profit 48,091 48,524 47,392 52,780 55,935
Provisions & Allowances (14,185) (12,072) (24,564) (21,009) (19,006)
Operating Profits 33,906 36,452 22,828 31,770 36,929
Non-Operating Income 38 (10) 10 10 10
Exceptionals 0 0 0 0 0
Pre-tax Profit 33,943 36,441 22,838 31,781 36,939
Income Tax (8,091) (7,986) (4,354) (6,059) (6,691)
Minorities (837) (973) (761) (834) (907)
Net Profit 25,015 27,482 17,722 24,887 29,342

Exhibit 9. Balance Sheet

Year to 31 Dec (IDRbn) 2018A 2019A 2020F 2021F 2022F
Gross Loans 799,557 885,835 904,748 948,360 1,018,781
Provisions (31,796) (29,988) (56,172) (56,734) (57,301)
Net Loans 767,761 855,847 848,576 891,626 961,480
Govt. Bonds 114,285 129,000 124,214 119,429 114,643
Securities 63,836 71,263 124,711 122,516 134,768
Other Earnings Assets 20,146 21,258 20,380 21,508 15,385
Total Earnings Assets 1,077,468 1,200,219 1,305,262 1,350,270 1,418,924
Fixed Assets 50,076 57,658 66,276 76,183 87,569
Non-Earnings Assets 25,517 24,260 23,743 24,268 24,090
Total Assets 1,202,252 1,318,246 1,403,475 1,452,265 1,539,493

Customer Deposits 841,348 933,571 1,023,669 1,060,676 1,140,132

Banks Deposits 16,494 13,398 15,289 14,462 10,053
Int. Bearing Liab. - Others 0 0 0 0 0
Total Liabilities 1,017,292 1,109,212 1,210,590 1,248,591 1,321,709
Share capital & Reserves 54,118 61,291 61,291 61,291 61,291
Retained Earnings 127,085 143,310 126,399 136,354 149,558
Shareholders' Funds 181,203 204,601 187,690 197,645 210,848
Minority interests 3,758 4,434 5,195 6,029 6,936
Total Equity & Liabilities 1,202,252 1,318,246 1,403,475 1,452,265 1,539,493

www.danareksa.com See important disclosure at the back of this report 4

Exhibit 10. Ratios
Year to 31 Dec (IDRbn) 2018A 2019A 2020F 2021F 2022F
Yield on Earning Assets 7.7 8.0 7.2 7.4 7.5
Cost of funds 2.8 3.2 2.9 2.9 2.8
Interest Spread 4.9 4.9 4.3 4.5 4.7
Net Interest Margin 5.2 5.2 4.6 4.8 5.0
Cost/Income Ratio 43.9 45.2 46.1 45.2 45.4
Oper. Exp./Oper. Gross Inc. 69.7 69.8 81.0 75.6 73.1
Gross NPL Ratio 2.8 2.3 3.2 2.8 2.6
LLP/Gross NPL 142.5 144.1 195.6 215.9 216.8
Cost of Credit 1.9 1.4 2.7 2.3 1.9
Loan to Deposit Ratio 95.0 94.9 88.4 89.4 89.4
Loan to Funding Ratio 92.9 91.7 86.5 87.7 87.8
CASA Mix 59.1 60.4 59.3 57.7 58.6
ROAE 14.4 14.2 9.0 12.9 14.4
ROAA 2.2 2.2 1.3 1.7 2.0
CAR 21.1 21.8 17.4 17.3 17.2

Exhibit 11. Dupont and growth

Year to 31 Dec 2018A 2019A 2020F 2021F 2022F
Dupont
Pre-Tax ROAA 2.9 2.9 1.7 2.2 2.5
Tax Retention rate 76.2 78.1 80.9 80.9 81.9
Post-Tax ROAA 2.2 2.3 1.4 1.8 2.0
Goodwil, Assoc& Min 0.1 0.1 0.1 0.1 0.1
Leverage 6.7 6.5 6.9 7.4 7.3
ROAE 14.4 14.2 9.0 12.9 14.4
Growth (%)
Interest income 1.9 13.0 (1.3) 8.1 6.5
Net Interest Income 4.4 8.8 (2.2) 9.5 8.7
Other Oper. Expenses 7.3 6.7 1.3 7.4 6.9
Fee Based Income 5.2 1.9 (1.6) 10.2 9.4
Pre-Provision Oper. Profit 11.5 0.9 (2.3) 11.4 6.0
Net Profit 21.2 9.9 (35.5) 40.4 17.9
Shareholders’ Equity 8.7 12.9 (8.3) 5.3 6.7
Loan 12.3 10.8 2.1 4.8 7.4
Earnings Asset 5.8 11.4 8.8 3.4 5.1
Deposit 4.0 10.4 9.7 3.5 7.0
Int. Bearing Liab. 7.6 9.1 9.5 3.3 6.0
CASA (0.9) 12.8 7.8 0.6 8.7
Total Asset 6.9 9.6 6.5 3.5 6.0

Source : BMRI, BRI Danareksa Estimates