Bank Tabungan Negara(BBTN IJ)

Transcription

1 Equity Research Company Update Monday,23 October 2017 BUY Maintain Last price (IDR) 3,060 Target Price (IDR) 3,600 Upside/Downside +17.6% Previous Target Price (IDR) 2,940 Stock Statistics Sector Bloomberg Ticker Banks BBTN IJ No of Shrs (mn) 10,590 Mkt. Cap (IDRbn/USDmn) 32,405/2,393 Avg. daily T/O (IDRbn/USDmn) 43.0/3.2 Major shareholders Government of Indonesia 60.0% Estimated free float (%) 40.0 EPSConsensus(IDR) 2017F 2018F 2019F Danareksa Consensus Danareksa/Cons BBTN relative to JCI Index Source : Bloomberg Eka Savitri (62-21) ext 3506 eka.savitri@danareksa.co.id Bank Tabungan Negara(BBTN IJ) Leveraging its niche position We remain upbeat on BBTN, noting that the bank will retain its focus on extending mortgage loans, especially to the middle to low income segments. In particular, the government s goal of reducing the housing backlog in Indonesia remains a strong catalyst for future growth, in our view. With a focus on mortgages, the bank s credit cost should remain manageable at 47bps in FY18F. This will result in a LLC ratio of 39.7% assuming 2.4% gross NPL ratio by end of In terms of profitability, we expect the NIM to stabilise at 4.4% backed by a lower blended CoF due to a better interest bearing liabilities mix. BUY maintained with a new GGM-derived TP of IDR3,600. Maintaining its focus on low income mortgage segment. Benefiting from the government s one million houses program, BBTN will focus on maintaining its leading position in the mortgages segment. For subsidised mortgages, we see that the preferable scheme to support BBTN s lending next year is in the form of interest rate subsidies (Subsidi Selisih Bunga/SSB) using 12-month SBI of 5.25% as the benchmark rate. This is because such scheme does not need a substantial amount of funds from the State Budget. All in all, subsidised mortgages will be the main growth engine with estimated growth of 19.5% YoY next year. Manageable credit costs. We expect BBTN s credit costs to remain manageable given the significant exposure to mortgages in its loans book. Mortgages have low credit costs compared to other loans since they are secured by the properties themselves. In 3Q17, credit cost remain managable at 50.6bps. Our estimate of 74.8% mortgage exposure in its loans book by the end of 2018 should allow the bank to book manageable credit costs and a decent loan loss coverage (LLC) ratio. In this regard, we project a 47bps credit cost for next year while assuming a 2.4% gross NPLs ratio. This would translate into a 39.7% LLC ratio by the end of Stable NIM projected. The NIM should be stable at 4.4% up to FY19F despite compression in asset yields coming from a higher proportion of subsidised mortgages in its loans book. In addition, the central bank s rate cuts will also put downward pressure on BBTN s asset yields going forward. We therefore expect the loans yield to decline by around 32bps to 10.4% in FY18F given a higher contribution from subsidised mortgages of 36.4% of the loans book at the end of On the funding side, BBTN will seek more CASA deposits by tapping institutional funds. As such, the blended CoF is expected to improve to 4.9% in FY18F from 5.2% in FY16. Maintain BUY, new TP of IDR3,600. We maintain our BUY call on BBTN with a new GGM derived TP of IDR3,600 (implying 1.5x 2018F P/BV) assuming 11.4% CoE, 16% ROAE and 3% long-term growth. Our TP stands at +0.5SD of the 7- year mean. Key Financials The Year to risks 31 Dec to our call include 2015A but are 2016A not limited 2017F to: 1) uncertainties 2018F 2019F in government policies concerning subsidised mortgages, 2) tight liquidity within PPOP, (IDRbn) 3,427 4,060 4,770 5,652 6,474 the system that would lead to a higher blended CoF, and 3) rising costs that Net profit (IDRbn) 1,851 2,619 3,135 3,658 4,241 could limit housing supply. EPS (IDR) EPS growth (%) BVPS, (IDR) 1, , , , ,648.7 PER (x) PBV (x) Dividend yield (%) ROAE (%) Source : BBTN, Danareksa Estimates See important disclosure at the back of this report 1

2 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Exhibit 1. LOANS AND GROWTH Exhibit 2. NET INTEREST INCOME AND GROWTH Exhibit 3. NIM AND LDR Exhibit 4. NPLs Exhibit 5. PE BAND CHART x Exhibit 6. PBV BAND CHART 3.0 x % Fwd P/E Mean +1SD -1SD Fwd P/BV Mean +1SD -1SD ROAE (RHS) See important disclosure at the back of this report 2

3 Exhibit 7. BBTN s 9M17 results FYE Dec (IDRbn) 9M16 9M17 YoY (%) Comments YoY Net interest income 5,527 6, Reported Net interest margin (%) Non-interest income 891 1, Non-II/Total income (%) Operating income 6,418 7, Overhead expenses (3,742) (4,571) 22.2 Cost-Income Ratio (%) Pre-Provisions profit 2,677 3, Provisions allowance (480) (598) 24.6 Credit cost - annualised (bps) Pretax profit 2,189 2, Tax (568) (574) 1.0 Effective tax rate (%) (26.0) (22.3) Profit after tax 1,621 2, Manageable credit cost, due to substantial mortgage exposure on its loan book Other Key Data and Ratios Gross loans 153, , Strong 30.8% growth in subsidised mortgages Customer deposits 147, , Supported by 27.8% growth in savings account Gross NPLs 5,537 5, NPL in subsidised mortgages improved, due to a higher proportion from new subsidised mortgages scheme Total assets 197, , Shareholders' funds 18,151 20, ROAA (%) ROAE (%) LDR (%) Gross NPL ratio (%) LLC ratio (%) CAR (%) See important disclosure at the back of this report 3

4 Exhibit 8. BBTN s 3Q17 results FYE Dec (IDRbn) 3Q16 2Q17 3Q17 QoQ (%) YoY (%) Net interest income 1,887 2,173 2, Reported Net interest margin (%) Non-interest income Non-II/Total income (%) Operating income 2,194 2,578 2, Overhead expenses (1,206) (1,483) (1,636) Cost-Income Ratio (%) Pre-Provisions profit 988 1,094 1, Provisions allowance (173) (235) (229) (2.5) 32.4 Credit cost - annualised (bps) Pretax profit Tax (228) (176) (208) 18.4 (8.8) Effective tax rate (%) (32.6) (22.3) (22.1) Profit after tax Other Key Data and Ratios Gross loans 153, , , Customer deposits 147, , , Gross NPLs 5,537 5,730 5,664 (1.1) 2.3 Total assets 197, , , Shareholders' funds 18,151 19,851 20, ROAA (%) ROAE (%) LDR (%) Gross NPL ratio (%) LLC ratio (%) CAR (%) See important disclosure at the back of this report 4

5 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Maintaining its focus on low income mortgage segment BBTN will retain its focus on the mortgage segment, looking to benefit from the opportunities arising from Indonesia s large housing backlog of c.11mn units. As such, BBTN should be able to maintain its leading position in terms of mortgage market share which stood at 33.5% as of June In second place was Bank Central Asia (BBCA IJ, Under Review, TP IDR19,450) with 19.7% mortgage market share. It should be noted, however, that these two banks have a different niche in the mortgages market. While BBCA focuses on high-income earners with minimum mortgages of around IDR1bn, BBTN, by comparison, targets middle-low income earners who seek mortgages of around IDR300mn on average. Thus, competition landscape is still favorable for BBTN. With the government seeking to reduce the housing backlog through its one million houses program, BBTN s bread and butter business will still revolve around the housing-related segment - not only mortgages but also construction loans related to housing development. Given this backdrop, BBTN is keen to provide a one-stop solution for the housing-related segment, encompassing not only developers but also potential mortgage borrowers. For subsidised mortgages, we see that the preferable scheme to support BBTN s lending next year is in the form of interest rate subsidies (Subsidi Selisih Bunga/SSB). This is because the SSB scheme does not need a substantial amount of funds from the State Budget. Recall that under the SSB scheme, the government provides a subsidy of 5.25% (the benchmark using the 12-month SBI) while all the funding comes from BBTN. By comparison, 90% of the funding for the FLPP (Fasilitas Likuiditas Pembiayaan Perumahan) scheme comes from the government budget with the remaining 10% coming from BBTN. Exhibit 9. BBTN still dominates the mortgage market IDR trn % Mortgage industry (LHS) BBCA (RHS) BMRI (RHS) BBTN (RHS) BBNI (RHS) Source : Bank Indonesia, respective companies See important disclosure at the back of this report 5

6 Sep F 2018F Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Sep 17 Dec 17F Dec 18F Exhibit 10. BBTN s loans portfolio IDR tn % Subsidized mortgage (LHS) Other housing loans (LHS) Loans growth YoY (RHS) Non-subsidized mortgage (LHS) Non-housing loans (LHS) Manageable credit costs We expect BBTN s credit costs to remain manageable given the significant exposure to mortgages in its loans book. Mortgages have low credit costs compared to other loans since they are secured by the properties themselves. In 3Q17, credit cost remain managable at 50.6bps while gross NPL ratio slightly improved to 3.07% by September Our estimate of 74.8% mortgage exposure (subsidised and non-subsidised) in its loans book by the end of 2018 should allow the bank to book manageable credit costs and a decent loan loss coverage (LLC) ratio. In this regard, we project a 47bps credit cost for next year while assuming a 2.4% gross NPLs ratio. This would translate into a 39.7% LLC ratio by the end of Exhibit 11. Manageable credit costs and decent LLC ratio % bp 74.1 s LLC ratio (LHS) Credit cost (RHS) See important disclosure at the back of this report 6

7 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17F Dec 18F Stable NIM projected On the funding side, BBTN will seek more CASA deposits by tapping institutional funds to support its current accounts. For saving accounts, BBTN will offer more innovative products and services in order to encourage customers to utilise more of their BBTN accounts. As such, we expect the bank s CASA deposits to reach 52.9% of total customer deposits by the end of next year. In addition, the issuance of securities will remain a viable funding source for BBTN given the longer tenures. Recall that BBTN will have IDR900bn of bonds maturing in July 2018 with a 9.625% coupon rate. These bonds are part of the bank s shelf-registered bonds II phase I (total of IDR3trn). That said, we expect BBTN to issue at least IDR3trn of bonds in 2018 as part of its IDR6.4trn remaining shelf-registered bonds III until July As such, this funding instrument should account for 8% of the interest bearing liabilities by the end of Exhibit 12. BBTN s interest bearing liabilities mix IDR trn CASA TD Securities issued Borrowings Others We expect the NIM to reach 4.4% until FY19F despite compression in the assets yield by c.40bps this year to 9.3% and another c.10bps in both FY18F and FY19F. The lower asset yields are a consequence of the higher proportion of subsidised mortgages in its loans book. In addition, the central bank s rate cuts will also put downward pressure on BBTN s asset yields going forward. In our estimate, the loan yield will fall by c.32bps to 10.4% in FY18F due to a higher contribution from subsidised mortgages of 36.4% of the loans book at the end of See important disclosure at the back of this report 7

8 FY12 FY13 FY14 FY15 FY16 FY17F FY18F Exhibit 13. Stabilised NIMs 12.0 % NIM CoF Asset yield BUY maintained, new TP of IDR3,600 We maintain our BUY call on BBTN with a new GGM derived TP of IDR3,600 (implying 1.5x 2018F P/BV) assuming 11.4% CoE, 16% ROAE and 3% long-term growth. Our TP stands at +0.5SD of the 7- year mean. This is reasonable, in our view, given the bank s unique business model that focuses on the housing-related segment and which is not easy for competitors to replicate, particularly the middle-low income earners segment. This focus on the housing-related segment should also translate into manageable credit costs and, therefore, predictable earnings growth. The risks to our call are: 1) uncertainties in government policies concerning subsidised mortgages, 2) tight liquidity within the system that would lead to a higher blended CoF, and 3) rising costs that could limit housing supply. Exhibit 14. Changes in our forecast (% unless stated) Old New 2016A 2017F 2018F 2019F 2017F 2018F 2019F Loans growth Deposits growth CASA deposits Asset yields Cost of funds Gross NPL LLC ratio Credit costs (bps) Net profit growth See important disclosure at the back of this report 8

9 Exhibit 15. Income Statement Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F Interest Income 14,966 17,139 19,835 22,952 26,135 Interest Expense (8,155) (8,975) (10,379) (11,910) (13,506) Net Interest Income 6,811 8,164 9,456 11,042 12,629 Non-Interest Income (NII) 939 1,000 1,481 1,729 2,010 Oper. Income 7,751 9,164 10,937 12,771 14,640 Oper. Expenses (4,490) (5,387) (6,167) (7,120) (8,166) Pre-provisions profit 3,427 4,060 4,770 5,652 6,474 Provisions & Allowances (894) (708) (782) (998) (1,106) Operating Profits 2,534 3,352 3,988 4,654 5,368 Non-Operating Income 8 (22) Exceptionals Pre-tax Profit 2,542 3,330 3,988 4,654 5,368 Income Tax (691) (711) (854) (996) (1,127) Minorities Net Profit 1,851 2,619 3,135 3,658 4,241 Exhibit 16. Balance Sheet Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F Gross Loans 127, , , , ,206 Provisions (1,726) (1,725) (1,907) (2,161) (2,445) Net Loans 126, , , , ,761 Govt. Bonds 8,231 9,244 6,988 5,069 4,910 Securities 1,808 4,172 7,150 7,500 7,650 Other Earnings Assets 10,899 13,833 13,520 15,335 17,452 Total Earnings Assets 156, , , , ,474 Fixed Assets 3,237 6,557 6,841 7,209 7,446 Non-Earnings Assets 3,102 4,157 5,570 7,463 10,001 Total Assets 171, , , , ,893 Customer Deposits 127, , , , ,197 Banks Deposits 1,721 3,653 2,797 3,356 3,323 Int. Bearing Liab. - Others 153, , , , ,181 Total Liabilities 157, , , , ,850 Share capital & Reserves 7,207 10,201 10,201 10,201 10,201 Retained Earnings 6,653 8,930 11,438 14,364 17,842 Shareholders' Funds 13,860 19,131 21,638 24,565 28,043 Minority interests Total Equity & Liabilities 13,860 19,131 21,638 24,565 28,043 See important disclosure at the back of this report 9

10 Exhibit 17. Ratios Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F Yield on Earning Assets Cost of funds Interest Spread Net Interest Margin Cost/Income Ratio Oper. Exp./Oper. Gross Inc Gross NPL Ratio LLP/Gross NPL Cost of Credit Loan to Deposit Ratio Loan to Funding Ratio CASA Mix ROAE ROAA CAR Exhibit 18. Dupont and growth Year to 31 Dec 2015A 2016A 2017F 2018F 2019F Dupont Pre-Tax ROAA Tax Retention rate Post-Tax ROAA Goodwil, Assoc& Min Leverage ROAE Growth (%) Interest income Net Interest Income Other Oper. Expenses Fee Based Income Pre-Provision Oper. Profit Net Profit Shareholders Equity Loan Earnings Asset Deposit Int. Bearing Liab CASA Total Asset Source : BBTN, Danareksa Estimates