Research & Stock Picks

Emiten Report

26 July 2023

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BBNI – BUY (Maintain) – TP IDR 12,700

Focusing on quality-focused growth

In line with expectations and cons. BBNI reported a net profit of IDR 5.1tn in 2Q23 (-2.7% QoQ and +5.0% YoY), which brought its 6M23 net profit to IDR 10.3tn (+17% YoY), in line with our expectations (47.1% of our full-year forecast) and consensus (47.9%). The low provision expense in 2Q23 (IDR 2.4tn; +8.9% QoQ, -15.0% YoY) and 1H23 annualized CoC of 1.4% (1H22: 2.2%) were some of the primary contributors to BBNI's impressive performance. The bank's NII decreased slightly to IDR 10.2tn in 2Q23 (-2.0% QoQ and -1.7% YoY), as the bank continued to focus on asset quality improvement and disburse loans only to low-risk segments, resulting in soft loan growth of 4.9% in Jun-23, which was driven by the private corporate segment (+16.6% YoY) and payroll loan (+20.0% YoY). Regarding asset quality, BBNI’s LAR ratio dropped to 16.1% in Jun-23, from 19.6% in Jun-22, while its LAR coverage ratio improved to 47.1% vs. 42.3% in the same period last year.

 

Guidance for 2023F. During its analyst meeting, BBNI stated that it would keep its loan growth projection for 2023F at 7.0%-9.0%, slightly lower than 2022 (10.9%), with the tier 1 private corporate segment as the main driver. Regarding its NIM, BBNI revised its 2023F projection to > 4.6%, down from the initial target of >4.7%, while its CoC is projected to drop further (<1.5%, vs. 1.9% in 2022), thanks to the improvement in asset quality. The company indicated that it will be able to maintain a dividend payout ratio of 40-50% in the coming years.

 

Sufficient coverage for construction debtors. BBNI has increased its provision buffers for construction SOE debtors in 2Q23, with total provision coverage of 53.5% as of Jun-23 (60% for WSKT and 30% for WIKA) compared to 46.6% in Dec-22, which we believe is adequate. BBNI anticipates that LAR will continue to decrease to less than 13% by the end of the year, with LAR coverage ratios exceeding 50%.

 

Reiterate BUY with TP of IDR 12,700/share. At this juncture, we believe BBNI’s management will continue improving its risk management system, particularly for wholesale and SMEs. In contrast to its nearest competitor (BMRI), BBNI will continue to focus on asset quality improvement in 2023F. We maintain our BUY rating for BBNI with a TP of IDR 12,700/share, implying a 2023F PBV of 1.3x. Key downside risks to our call including a higher-than-expected CoC and higher CoF, which will push down its NIM even further.

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