Indonesian Banking Sector

Transcription

1 Indonesian Banking Sector Update on Indonesian Banking Sector 2008 All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, thirdparty research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access IR at or by calling DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1 Raymond Kosasih raymond.kosasih@db.com

2 Relatively sound macro Indonesia real economy is still largely unaffected and banking system remains sound Indonesia is more sheltered against global recession Domestically centric economy Other cushions include lower personal and corporate tax (+81 takehome) Easing food inflation and possibly fuel price cut ahead of election So far, policy makers have been able to contain macro risk It wont immune from global slow down Slowdown in exports Near term risks : Rupiah weakness Risks on confidence and fundamentals Nearterm US$ debt and asset held by foreigners ~US$67bn vs. reserves US$57bn Current account US$1.5bn deficit in 2Q and BOP very dependent on portfolio flow Impact: wide ranging implication, higher imported inflation, cost push and margin squezze, forex losses, higher rates, etc. but don t foresee capital flight Raymond.kosasih@db.com page 2

3 Maintaining confidence is key for Rupiah Foreign position in govt bonds and SBI US$mn Flow in SBI affects the Rp/US$ significantly Figure 5: CDS Sovereign bonds spiked Jan07 Feb07 Mar07 Apr07 May07 Jun07 Jul Nov07 Dec07 Jan08 Feb % 3 25% 2 15% 1 5% 10,000 9,800 9,600 9,400 9,200 9,000 8,800 Mar08 Apr08 May08 Jun08 Jul Jan07 Feb07 Mar07 Apr07 May07 Jun07 Jul Nov07 Dec07 Jan08 Feb08 Mar08 Apr08 May08 Jun08 Jul (5) (10) (15) (20) SUN + SBI US$bn (LHS) % in SBI SBI m thly changes Rp trn (RHS) IDR/USD CDS sovereign bonds in the region ,100 1, Indonesia CDS bps 1,067 Indonesia Korea China Philippines Thailand Jul Jul Jul Base period 7/25/2008 Source: Deutsche Bank and Bloomberg Raymond.kosasih@db.com page 3

4 Exports slowdown Exports ~ 1/3 of GDP and Exports to US and EU ~ ¼ of exports Impact: Negative impact is inevitable but shouldn t be too severe Export growth has been important economic driver. Government has lowered FY09 growth of 5.5% (from 6.3%), but could undershoot. DB estimates at 5% growth. Traders holding back purchases and lack of working capital. Outer islands will see slower growth, but won t be too damaging as it has evolved into larger and broder economies in the past years Exports by country Exports Contri. US$114.1bn +31% yoy% Japan 21% 19% USA 1 17% Singapore 9% 34% China 8% 37% South Korea 7% 56% Malaysia 4% 61% India 4% 56% Australia 3% 19% Thailand 3% 35% Netherlands 2% 66% Others 28% 26% Source: Deutsche Bank and BPS Exports Top 10 by product % Contri yoy% CPO 11% 98% Coal 7% 44% Rubber 6% 33% Electronic 5% 7% Machinery 3% 8% Iron Ore 3% 25% Pulp and Paper 3% 21% Clothings 2% 2% Logs and Timber 2% 6% Textile 2% 12% Top10 45% 26% Others non Oil&Gas 32% 17% Oil & Gas 23% 63% Total Exports 10 3 raymond.kosasih@db.com date page 4 Source: Deutsche Bank and BPS

5 Macro risk assessment Lower oil price eases oil subsidy pressure on budget Budget deficit reduced to 1. of GDP in FY09 from 1.7% in FY08. Bond issuance halved to Rp54.7tr given difficult environment BI s tight interest rate policy To maintain Rupiah stability, less so in keeping inflation Rates may rise to 1 or more Comparatively higher real interest rates Inflation at 12.1% is peaking out. Easing food prices from 2 yoy helps as lowend income spends >6 on food. BI expects inflation of % Current account deficit near term weak currency Reflects economic resilience given strong imports, incl. capital goods But, this is mostly funded by portfolio inflow, so BOP is at the whimp of sentiment Weaker oil price also lower forex reserves accumulation Rupiah weak currency Raymond.kosasih@db.com page 5

6 Macro risk assessment Food price rising at fastest pace since 98 crisis BI rate real and nominal % 2 18% 16% 14% 12% 1 8% 6% 4% % Jan07 Mar07 May07 Jul07 07 Nov07 Jan08 Mar08 May08 Jul08 08 Jan05 Jul05 Jan06 Jul06 Jan07 Jul07 Jan08 Jul08 CPI yoy% Food yoy% SBI 1mth (real) RHS SBI 1mth Current account deficit structural (1) (4) (7) FY93 FY95 FY97 FY99 FY01 FY03 FY05 FY07 2Q08 6% 4% 2% 2% 4% Current account a function of investment 31% 29% 27% 25% 23% 21% 19% 17% FY93 FY95 FY97 FY99 FY01 FY03 FY05 FY07 2Q Current Account US$ bn (LHS) Current Account % GDP Current A/C (RHS) Investment to GDP % Raymond.kosasih@db.com page 6

7 Banking system remains healthy The blessing in disguise from the Asian financial crisis BI a lot more effective and conservative on banking regulations No exposure to CDOs and the likes Arresting liquidity issues Prudent lending : Psychological mark steered bankers from careless lending New owners promoting corporate governance Building credit culture Mortgage is still plain vanilla and accounts for 23% of GDP. Confidence took time to recover, avoided the buildup of overly unjustified confidence Sound system: Debt to GDP at less than 3, NPL trending down to abt 3% with high coverage ratio Low FX loans exposures (abt 18% now vs over 5 in 1997/8) Manageable risks of default in consumer loans CAR stands at a healthy 17% But prolonged credit crunch could affect subdebt issuance Implementation of Basel II could cut CAR by bps Longer term, normalising profitability Raymond.kosasih@db.com page 7

8 LDR drivers Banks remain well capitalized CAR LDR (RHS) Deposit % Loan % F 2008F Still lowly leveraged economy and NPL remains in check 27% 12% 26% 1 25% 24% 8% 23% 6% 22% 21% 4% 2 2% 19% 18% 17% NPL (LHS) Loan to GDP % Money market increase by predominantly deposit funding 92% 12% % 8% 86% 84% 6% 82% 4% 8 2% 78% 76% Debt Money Market 3rd party (RHS) Raymond.kosasih@db.com page 8

9 Arresting liquidity issues LDR and Adjusted LDR Input cost increases fueling working capital loans 4 35% W PI WC loan 3 25% Jan02 May02 02 Jan03 May03 03 Jan04 May04 04 Jan05 May05 05 Jan06 May06 Adj LDR Reported LDR 06 Jan07 May07 07 Jan08 May08 15% 1 5% Jan05 May05 05 Jan06 May06 06 Jan07 May07 07 Jan08 May08 Source: Deutsche Bank and company data Low real WC growth BI regulations help easing constraints % % % 1 Jan05 May05 05 Jan06 May06 06 Jan07 May07 07 Jan08 May BBCA BMRI BBNI BBRI BDMN BNII BNGA PNBN Rp reserve ratio % Release of cash reserve (Rptr) As % of loans Source: Deutsche Bank Source: Deutsche Bank and company data Raymond.kosasih@db.com page 9

10 Liquidity imbalances DB s estimate of liquidity as % of loans Cheap funding is key to weather liquidity risks BCA BRI BBNI FY07 Average BDMN 1H08 BMRI BNII BNGA 160, , , ,000 80,000 60,000 40,000 20, Mandiri BCA BRI BNI Cheap fundings (Rpbn) Lippo Danamon BII Niaga Panin NISP Buana Share of cheap fundings (%) RHS Source: Deutsche Bank and company data Deposit franchise is key (ratios of CASA to total deposits) F 09F Source: Deutsche Bank and company data Funding costs comparison BCA BMRI BBRI LPBN BBNI BNII PNBN NISP BNGA BDMN BBCA BMRI BBNI BBRI LPBN BBIA BNGA BNII BDMN PNBN Source: Deutsche Bank and company data Raymond.kosasih@db.com page 10 Source: Deutsche Bank and company data

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