BNI, Expanding capacity, CLSA

Thanks to an improvement in asset quality and strong recovery from its
written-off assets, BBNI managed to record strong net profit growth of
42% YoY in FY11. Coupled with the better asset quality trend, we expect
the bank to record higher pre-impairment profit (PPOP) this year on the
back of lower cost of funds and stronger fee based income. The bank
continues to expand aggressively in the consumer segment where it is
taking market share and building up capacity. Maintain outperform.


FY11 results were higher than expected
BBNI reported net profit of Rp5.8tn (+42% YoY) in FY11, which was 6%
above consensus estimates. However, the strong net profit growth was mainly
driven by lower impairment expenses (-33.3% YoY) to Rp2.4tn in FY11. In
terms of pre-provision operating profit (PPOP), it only grew by 5.8% YoY to
Rp9.7tn in 2011, the lowest growth in the past four years.

Strong consumer growth
Loan growth was reported at 20% YoY in 2011 after booking very low loan
growth in 2009-10. Consumer loans grew the fastest at 31.2% YoY, bringing
its contribution to total loans to 19%, the second highest after the corporate
segment’s 35%. Mortgage loans, which contributed 58% of total consumer
loans grew very strong at 50% YoY. The bank’s market share in mortgage
reached 9.9% at end 2011 compared with 6.5% in 2008.

Higher operating expenses to expand capacity
Even though the growth in operating expenses was lower than that in 2010, it
was still high at 15.5% YoY in 2011. This was mostly driven by the growth in
personnel expenses (+22.2% YoY). Management stated that the bank had
hired 4,000 new people last year, particularly in the credit and risk
management division. The bank also opened 1 branch, 34 sub branches and
180 cash offices during the year.

TP of Rp4,250 (14% upside) - outperform call maintained
We expect business to perform well this year as the bank has a lot of room to
grow its fee based income and its retail businesses. However, regulatory risk
and a possible further contraction in margin caused us to lower our TP to
Rp4,250/share, which was derived based on 21% LT ROAE and 14% cost of
equity. We maintain our outperform call.

Download file : Indonesia BBNI Final