FOCUS Bank Permata Company Update 24 February 2017

Transcription

1 FOCUS Bank Permata Mandiri Sekuritas Analyst Priscilla Thany Tjandra Lienandjaja Sector : Banking NEUTRAL (from BUY) Current Price Rp710 Price Target Rp650 (-8.5%) 52-wk range Rp1,180 - Rp520 Stock Data Bloomberg Code BNLI IJ Mkt.Cap (Rp bn/us$ mn) 15,861 / 1,188 Issued Shares (mn) 22,340 Avg. Daily T/O (Rp bn/us$ mn) 11.2/0.8 Major shareholder Astra International 44.6% Standard Chartered Bank 44.6% Public 10.9% EPS consensus Mansek Cons Diff 2017F F (10.3) Share price performance 3m 6m 12m Absolute Relative to JCI Taking a Massive Hit BNLI reported a net loss of Rp6.5tn due to significant provision expenses recorded in Dec- 16. The bank booked loan growth of -18%yoy and NPL of 8.8% in Dec-16, a significant deterioration compared to Sept-16 at 4.9%. We downgrade our recommendation to Neutral and revise our TP to Rp650. BNLI reported FY16 net loss of Rp6.5tn, -2,724%yoy, due to significant increase in provision expenses totaling to Rp12.1tn, +243%yoy. PPOP declined by -7%yoy mainly due to decline in net interest income of -5%yoy. In 4Q16 alone, provision expenses totaled to Rp7.6tn, +403%qoq/ +283%yoy, bringing the quarter s net loss to Rp5.3tn. We highlight that in Dec-16 alone, the bank booked provision expenses of Rp6.2tn, +529%mom/+706%yoy, translating to a net loss of Rp4.6tn. Loan growth -18%yoy/-6%qoq, marking the 14th consecutive month the bank booked negative loan growth. The bank indicates that significant decline in loans was seen across all loan segments, in particular the wholesale segment (corporate and commercial), which booked negative loan growth of -23%yoy. Meanwhile, the retail segment (consumer and SME) booked negative loan growth of -13%yoy, with the majority of the decline coming from the SME segment. Deposit growth -10%yoy/ flat qoq. Decline in deposits was mainly driven by decline in time deposits at -19%yoy. Meanwhile, savings deposits grew by +10%yoy while demand deposits grew by +4%yoy, bringing CASA to 40% in Dec-16 from 34% in Dec-15. LDR stood at 81% in Dec-16 vs. 88% in Dec-15. Bank only NPL significantly increased to 8.8% in Dec-16 from 4.9% in Sept-16. The bank s management indicates that they have thoroughly reviewed its loan portfolio and downgraded another Rp3.8tn of loans in 4Q16 alone. Most of these loans came from the commercial and SME segment. In terms of economic sector, most of the bank s NPL came from the manufacturing, mining, and wholesale and retail trading sectors. Meanwhile, SML declined to 11% in Dec-16 from 15.8% in Sept-16 while restructured loans increased to 14.1% in Dec-16 from 13.1% in Sept-16. We note that the nominal amount of restructured loans has been relatively stable at ~Rp14tn since Jun-16. We estimate the bank wrote off approximately Rp4.4tn of bad debts in 2016 and Rp1.5tn in 4Q16 alone. Coverage ratio increased to 122% in Dec-16 from 98% in Sept-16. NIM slightly declined to 3.9% in 12M16 from 4.0% in 12M15, mainly due to significant increase in bad debts. In 4Q16 alone, NIM declined to 3.9% from 4.1% in. Cost to income ratio deteriorated to 59% in 12M16 from 57% in 12M15, mainly due to decline in operating income of - 2%yoy. We highlight the bank was able to well manage operating expenses throughout 2016, which only grew by +1%yoy in In 4Q16 alone, cost to income ratio deteriorated to 68% from 56% in. Downgrade to Neutral from Buy as we are cautious on the bank s elevated NPL and loan at risk ratios. As per Dec-16, BNLI s loan at risk totals 23% of the bank s loan book portfolio, equivalent to Rp23.7tn. We highlight that this value surpasses BNLI s equity at Rp19.3tn as per Dec-16. We revise target price to Rp650 from Rp690. The stock is trading at 0.8x 2017 P/BV. Please see important disclosure at the back of this report Page 1 of 9

2 BNLI - At a Glance FIGURE 1. LOAN, DEPOSIT GROWTH, AND LDR FIGURE 2. NET INTEREST MARGIN 120 (% YoY) (10) (20) (30) 0.0 LDR Total Loan Growth (YoY) [RHS] Total Deposit Growth (YoY) [RHS] NIM Interest Yield Cost of Funds FIGURE 3. QUARTERLY ROE AND ROA 40.0% 20.0% 0.0% -20.0% -40.0% -60.0% -80.0% % % ROA ROE FIGURE 4. DEPOSIT BREAKDOWN 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Current Accounts Savings Time Deposits FIGURE 5. NPL & COVERAGE RATIO FIGURE 6. CAR & EQUITY Rp Bn 35,000 30,000 25,000 20,000 15,000 10,000 5, Loan Loss Coverage NPL [RHS] Capital Base Total CAR [RHS] Please see important disclosure at the back of this report Page 2 of 9

3 FIGURE 7. 12M16 AND 4Q16 RESULTS Income Statement 12M15 12M16 YoY 4Q15 4Q16 YoY QoQ FY16 % Cons % (Rp bn) Net interest income 6,495 6,164 (5) 1,585 1,617 1,470 (7) (9) 6, Non interest income 2,120 2, (26) (19) 2, Fees and Commisions 1,317 1,293 (2) (4) (7) 1, Others (51) (37) 1, Operating income 8,615 8,405 (2) 2,214 2,188 1,933 (13) (12) 8, , Provision expense (3,516) (12,076) 243 (1,995) (1,519) (7,637) (5,925) 204 Operating expense (4,896) (4,964) 1 (1,171) (1,227) (1,305) 11 6 (4,823) 103 Personnel Expenses (2,145) (2,200) 3 (407) (570) (496) 22 (13) (2,175) 101 Other Expenses (2,751) (2,764) 0 (764) (657) (809) 6 23 (2,648) 104 Operating profit 203 (8,636) (4,356) (952) (558) (7,009) 636 1,156 (2,160) 400 (2,160) 400 PPOP 3,719 3,440 (7) 1, (40) (35) 3, Pre-tax profit 294 (8,634) (3,039) (926) (539) (6,991) n.m, n.m (2,252) nm (2,252) nm Net profit 247 (6,483) (2,724) (691) (398) (5,250) n.m. n.m (1,686) nm (1,686) nm Balance Sheet (Rp bn) Dec-15 Sep-16 Dec-16 YoY QoQ Gross loan 127, , ,960 (18) (6) Demand deposit 28,716 26,492 29, Saving deposit 20,372 21,772 22, Time deposit 96,003 81,776 77,968 (19) (5) Total deposit 145, , ,032 (10) (0) CASA to deposits Ratio 12M15 12M16 4Q15 4Q16 CAR Tier 1 CAR LDR NIM ROE 1.4 (31.4) (15.1) (6.8) (99.2) NPL, cat Loan loss coverage Cost to Income Restructured Loans Source: Company, Mandiri Sekuritas So where s the problem? The economic sectors that experienced significant downgrades to NPL in nominal terms were manufacturing (Rp2.2tn were downgraded to NPL in 4Q16 alone), agriculture (Rp714bn), wholesale and retail trading (Rp575bn), and mining (Rp320bn). Meanwhile, in terms of percentage, NPL in the agriculture sector jumped to 21.2% (from 4.5% in Sept-16), mining to 29.8% (from 20.5%), manufacturing to 12.6% (from 4.5%), and trading to 8.7% (from 5.5% in Sept-16). The spike in NPL was due to the recent economic slowdown, over expansion problems, and mismanagement of cash flow experienced by companies. We highlight that BNLI s management decided to downgrade mining loans in 4Q16 as it views that the recent coal price rally will not be sustainable over the long term. Going forward, we believe that the bank needs to focus on tightening underwriting standards to prevent similar problems from occurring in the future. Please see important disclosure at the back of this report Page 3 of 9

4 FIGURE 8. LOANS BASED ON ECONOMIC SECTOR Loan based on economic sector: Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Agriculture Mining Manufacturing Utilities Construction Trading, rest. & hotel Trans, warehouse & comm Business services Social/public services Other Consumer Total Source: Company, Mandiri Sekuritas FIGURE 9. NPL BASED ON ECONOMIC SECTOR NPL level based on economic sector: Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Agriculture Mining Manufacturing Utilities Construction Trading, rest. & hotel Trans, warehouse & comm Business services Social/public services Other Consumer Total Source: Company, Mandiri Sekuritas What to expect in 2017? BNLI s management seems to be quite optimistic that the worst is behind and expects to see positive loan growth in Furthermore, management highlights that the bank booked net profit of Rp136bn in Jan-17. In an attempt to reduce NPL, BNLI s management plans to gradually sell and/or write off approximately Rp9tn of loans at risk in 2017, this is equivalent to 8.6% of its loan portfolio and 38% of total loans at risk. However, details regarding this plan to sell loans at risk were not disclosed. BNLI also announced plans to conduct a rights issue at the end of 1H17, totaling Rp3tn. This corporate action highlights Standard Chartered Bank's and Astra s strong commitment to BNLI. The bank s management indicates that neither Astra nor SCB have plans to sell their shares to Mayapada Group. Change in forecast assumptions. We upgrade expected 2017 net income by 64% as we expect BNLI to book a one-off gain from sales of its problematic assets. Our numbers assume that the bank can successfully sell Rp3tn of its problematic loans at 20 cents to a dollar, which adds approximately Rp450bn to the bank s expected net income after tax. Without this one off gain, we expect net income to total Rp888bn. Furthermore, we downgrade expected loan growth to 5.2% in 2017 (previously 10.5%) as we expect the bank to continue resolving asset quality issues before focusing on growth. Please see important disclosure at the back of this report Page 4 of 9

5 FIGURE 10. CHANGE IN ESTIMATES Year-end Dec 31 Old New Change (IDRb) 2017E 2018E 2017E 2018E 2019E 2017E 2018E Net interest income 6,661 7,018 6,783 7,019 7, Net interest margin Total income 9,259 9,863 9,942 9,649 10, (2.2) Pre provision operating profit 4,073 4,366 4,735 4,130 4, (5.4) Operating profit 1,038 1,862 1,733 1,659 2, (10.9) Reported net profit 816 1,434 1,338 1,282 1, (10.6) Loan growth Deposit growth LDR NIM NPL Coverage ratio Cost to income ROE CAR Source: Mandiri Sekuritas estimates Bank Only: 1M17 Results-Above Consensus Expectations BNLI reported 1M17 unconsolidated net income of Rp136bn, -7%yoy, accounting for 17% of consensus expectation and 10% of ours. Decline in net income was driven by decline in operating income of -14%yoy. Meanwhile, provision expenses declined by -61%yoy to Rp50bn while operating expenses only grew by +1%yoy in Jan-17. Loan growth of -19%yoy (-3% mom), deposit growth of -6%yoy (+3%mom). We believe decline in loan growth was due to ongoing consolidation across all loan segments, in particular commercial and SME loans. On the other hand, decline in deposits was mainly driven by decline in time deposits of -14%yoy. Meanwhile, demand deposits and savings deposits grew by +11%yoy and +10%yoy bringing CASA to 39% in Jan-17 from 33% in Jan-16. LDR stood at 75% in Jan-17 vs. 87% Jan-16. NIM declined to 3.3% in 1M17 from 3.7% in 1M16 mainly due to elevated NPL ratios. Provisioning expense declined by -61%yoy to Rp50bn in 1M17. We estimate total write-offs of Rp29bn in 1M17. Provisioning to total loans increased to 11.2% in Jan-17 from 10.8% in Dec-16 while cost of credit (gross) declined to 1.0% in Jan-17 from 11.2% in Dec-16. Cost to income ratio increased to 66% in 1M17 from 56% in 1M16 due to decline in operating income. Please see important disclosure at the back of this report Page 5 of 9

6 FIGURE 11. 1M17 RESULTS Income Statement (Rp bn) Jan-16 Dec-16 Jan-17 % MoM % YoY 1M16 1M17 % YoY FY17F % F FY17 Cons % Net interest income (1) (11) (11) 6,783 7 Non interest income (19) (19) 3,159 5 Operating income (14) (14) 9, ,300 7 Provision expenses (126) (6,159) (50) (99) (61) (126) (50) (61) (3,003) 2 Operating expenses (399) (508) (405) (20) 1 (399) (405) 1 (5,207) 8 Operating profit 186 (6,057) 161 (103) (14) (14) 1, , PPOP (33) (33) 4,735 4 Pre-tax profit 192 (6,055) 177 (103) (8) (8) 1, , Net profit 146 (4,556) 136 (103) (7) (7) 1, Balance Sheet (Rp bn) Jan-16 Dec-16 Jan-17 % MoM % YoY Gross loan 124, , ,009 (3) (19) Demand deposits 27,632 29,745 30, Saving deposits 19,640 22,324 21,584 (3) 10 Time deposits 95,644 77,968 82,056 5 (14) Total deposits 142, , ,305 3 (6) CASA to deposits Ratio Jan-16 Dec-16 Jan-17 1M16 1M17 LDR NIM ROE 9.4 (266.3) Cost to income Source: Mandiri Sekuritas estimates We downgrade our recommendation to Neutral from Buy as we are cautious on the bank s elevated NPL and loan at risk ratios. As per Dec-16, BNLI s loan at risk totals to 23% of the bank s loan book portfolio, equivalent to Rp23.7tn. We highlight that this value surpasses BNLI s equity at Rp19.3tn as per Dec-16. In addition, we also highlight that even with BNLI s planned rights issue of Rp3tn in Jun-17 and subordinated debt issuance of Rp1.5tn, the bank s current loan at risk will still be higher than the expected increase in equity to Rp23.6tn. We note that Astra International and Standard Chartered Bank provided advancement in capital amounting to Rp1.5tn (Rp750bn each) in Dec-16. This advancement will be used for the bank s right issue in Jun-17and we expect another Rp1.5tn to be received by BNLI in Jun-17. Revise target price to Rp650 from Rp690. We adjusted our target price to exclude the cash advancement received by BNLI in Dec-16. The new target price is based on 0.7x 2017 P/BV with COE of 10.0%, sustainable ROE of 9.4%, and long term growth of 6.3%. Please see important disclosure at the back of this report Page 6 of 9

7 FIGURE 12. PE BAND (x) SD +1SD Mean -1SD -2SD - Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Source: Mandiri Sekuritas Estimates FIGURE 13. FINANCIAL SUMMARY YE Dec (Rp Bn) 2015A 2016A 2017F 2018F 2019F Pre-Provision Profit 3,719 3,440 4,735 4,130 4,300 Net Profit 247 (6,483) 1,338 1,282 1,612 EPS 19 (321) EPS Growth (84.6) (1,822.2) (4.2) 25.7 P/E Ratio (x) BVPS 1, ,041 P/BV Ratio (x) Dividend Yield ROAE 1.4 (34.0) CAR Source: Company, Mandiri Sekuritas Estimates Please see important disclosure at the back of this report Page 7 of 9

8 BNLI Profit & Loss YE Dec (Rp Bn) 2015A 2016A 2017F 2018F 2019F Interest Income 16,131 14,399 15,295 15,833 16,669 Interest Expense (9,636) (8,234) (8,513) (8,814) (9,351) Net Interest Inc. 6,495 6,164 6,783 7,019 7,317 Other Oper. Inc. 2,120 2,240 3,159 2,630 2,821 Operating Exp. (4,896) (4,964) (5,207) (5,519) (5,838) Personnel Exp.. (2,145) (2,200) (2,332) (2,472) (2,608) G & A (2,751) (2,764) (2,875) (3,047) (3,230) Others Pre-Prov. Profit 3,719 3,440 4,735 4,130 4,300 Provision Exp. (3,516) (12,076) (3,003) (2,471) (2,202) Operating Inc. 203 (8,636) 1,733 1,659 2,098 Pre-tax Income 294 (8,634) 1,783 1,709 2,148 Tax Expenses (47) 2,151 (445) (427) (536) Minority Int Net Profit 247 (6,483) 1,338 1,282 1,612 Balance Sheet YE Dec (Rp Bn) 2015A 2016A 2017F 2018F 2019F Assets Cash 2,013 2,071 2,174 2,336 2,549 Due to BI 12,834 10,541 11,500 12,500 12,500 Interbank Placement 1,290 3,798 5,880 6,728 7,623 Securities-Net 29,805 42,176 39,106 36,926 37,604 Gross Loan 127, , , , ,005 Loan Loss Prov. (3,390) (11,264) (7,567) (6,538) (5,440) Fixed Assets 2,703 2,532 3,064 3,707 4,485 Other Assets 9,662 10,714 9,178 8,905 8,489 Total Assets 182, , , , ,816 Liabilities & Equity Liabilities Demand Deposits 28,716 29,743 32,046 35,654 40,388 Saving Deposits 20,372 22,321 25,055 28,905 33,039 Time Deposits 96,003 77,968 77,131 78,781 82,670 Total Third Party Funds 145, , , , ,097 Deposits From Oth. Banks Securities Issued Borrowings 2,280 2,626 3,176 4,197 5,548 Subordinated Loan 7,905 6,527 7,538 8,707 9,599 Other Liabilities 7,930 7,053 7,480 7,933 8,413 Total Liabilities 163, , , , ,557 Minority Interest Shareholder's Equity 18,813 19,290 20,627 21,776 23,259 Total Liab. and Equity 182, , , , ,816 Key Ratios YE Dec (Rp Bn) 2015A 2016A 2017F 2018F 2019F Growth (% YoY) Assets (1.4) (9.4) Loans (3.1) (17.9) Earnings Assets (1.4) (5.0) Non-Performing Loans (34.4) (10.3) (13.2) Deposits (1.7) (10.4) Shareholders' Equity Net interest income 14.0 (5.1) Non-interest income (16.7) 7.2 Operating expenses Pre-provision profit 28.4 (7.5) 37.6 (12.8) 4.1 Net profit (84.4) (2,723.5) (4.2) 25.7 Common Ratios NIM LDR NPL Coverage ratio ROAE 1.4 (34.0) ROAA 0.1 (3.7) Total CAR Tier 1 CAR Other Ratios Yield on earning assets Avg. cost of funds Net Interest Spread CASA deposits Cost to income Equity to assets Dividend payout Effective tax rate Per Share Data YE Dec 2015A 2016A 2017F 2018F 2019F EPS 19 (321) BVPS 1, ,041 DPS Valuations P/BV (x) P/E (x) P/PPOP (x) Dividend yield Please see important disclosure at the back of this report Page 8 of 9

9 Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk Plaza Mandiri 28 th Floor, Jl. Jend. Gatot Subroto Kav , Jakarta 12190, Indonesia General: , Fax : (Equity Sales) RESEARCH Tjandra Lienandjaja Deputy Head of Equity Research, Banking tjandra.lienandjaja@mandirisek.co.id Liliana S Bambang Property, Building Material liliana.bambang@mandirisek.co.id Adrian Joezer Consumer, Strategy adrian.joezer@mandirisek.co.id Ariyanto Kurniawan Telecom, Coal, Metal, Automotive ariyanto.kurniawan@mandirisek.co.id Bob Setiadi Construction, Toll Road bob.setiadi@mandirisek.co.id Francis Lim Quant, Health Care, Hospital francis.lim@mandirisek.co.id Yudha Gautama Mining, Plantation yudha.gautama@mandirisek.co.id Laura Taslim Retail laura.taslim@mandirisek.co.id Priscilla Thany Banking priscilla.thany@mandirisek.co.id Ferdy Wan Building Material, Industrial Est., Media ferdy.wan@mandirisek.co.id Lakshmi Rowter Research Assistant lakshmi.rowter@mandirisek.co.id Gerry Harlan Research Assistant gerry.harlan@mandirisek.co.id Audrey C. Hanzdima Research Assistant audrey.hanzdima@mandirisek.co.id Leo Putera Rinaldy Chief Economist leo.rinaldy@mandirisek.co.id Wisnu Trihatmojo Economist wisnu.trihatmojo@mandirisek.co.id Aziza Nabila Amani Research Assistant aziza.amani@mandirisek.co.id INSTITUTIONAL SALES Lokman Lie Co-Head Institutional Equities lokman.lie@mandirisek.co.id Silva Halim Co-Head Institutional Equities silva.halim@mandirisek.co.id Aditya Sastrawinata Institutional Sales aditya.sastrawinata@mandirisek.co.id Andrew Handaya Institutional Sales andrew.handaya@mandirisek.co.id Cindy Amelia P. Kalangie Institutional Sales cindy.amelia@mandirisek.co.id Feliciana Ramonda Institutional Sales feliciana.ramonda@mandirisek.co.id Kevin Halim Institutional Sales kevin.halim@mandirisek.co.id Mirna Santikara Salim Institutional Sales santikara.salim@mandirisek.co.id Oos Rosadi Institutional Sales oos.rosadi@mandirisek.co.id Zahra Aldila Niode Institutional Sales zahra.niode@mandirisek.co.id Kusnadi Widjaja Equity Dealing kusnadi.widjaja@mandirisek.co.id Edwin Pradana Setiadi Equity Dealing edwin.setiadi@mandirisek.co.id Jane Theodoven Sukardi Equity Dealing jane.sukardi@mandirisek.co.id Michael Taarea Equity Dealing michael.taarea@mandirisek.co.id RETAIL SALES Andreas M. Gunawidjaja Head Retail Equities andreas@mandirisek.co.id Boy Triyono Plaza Mandiri boy.triyono@mandirisek.co.id A. A. Damargumilang Pondok Indah Office Tower damar.gumilang@mandirisek.co.id Herianto Pondok Indah Prioritas herianto@mandirisek.co.id Hendra Riady Mangga Dua hendra.riady@mandirisek.co.id Indra Mas'ari Bandung indra.mas ari@mandirisek.co.id Yogiswara P. Yogyakarta yogiswara.perdana@mandirisek.co.id Widodo Solo widodo@mandirisek.co.id Linawati Surabaya Linawati@mandirisek.co.id Bambang Suwanto Malang bambang.suwanto@mandirisek.co.id Ruwie Medan ruwie@mandirisek.co.id Aidil Idham Palembang aidil.idham@mandirisek.co.id Yuri Ariadi Pontianak yuri.ariadi@mandirisek.co.id INVESTMENT RATINGS: Indicators of expected total return (price appreciation plus dividend yield) within the 12-month period from the date of the last published report, are: Buy (15% or higher), Neutral (-15% to10%) and Sell (-15% or lower). DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX) and Mandiri Sekuritas is registered and supervised by the Financial Services Authority (OJK). Although the contents of this document may represent the opinion of PT. Mandiri Sekuritas, deriving its judgement from materials and sources believed to be reliable, PT. Mandiri Sekuritas or any other company in the Mandiri Group cannot guarantee its accuracy and completeness. PT. Mandiri Sekuritas or any other company in the Mandiri Group may be involved in transactions contrary to any opinion herein to make markets, or have positions in the securities recommended herein. PT. Mandiri Sekuritas or any other company in the Mandiri Group may seek or will seek investment banking or other business relationships with the companies in this report. For further information please contact our number ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her compensation.