INVESTOR DIGEST Equity Research | 27 June 2019 Economic Data HIGHLIGHT Latest 2019F Bank BNI: 5M19 Results - Below Expectations (BBNI; Rp8,850; Neutral; Tp: Rp9,000) 7-DRRR (%), eop 6.00 5.75 Bank Jabar: 5M19 Results - Below Expectations (BJBR; Rp1,685; Neutral; TP: Rp1,770) Inflation (YoY %) 3.32 3.80 Market Recap June 26th 2019; JCI 6,310.49 Points -9.96 pts (-0.16%); VAalued US$ 1 = Rp, period avg 14,170 14,450 $505mn; Mkt Cap $497bn; USD/IDR 14,170 Stock Market Data CORPORATE (26 June 2019) Bank BNI: 5M19 Results - Below Expectations (BBNI; Rp8,850; Neutral; Tp: JCI Index 6,310.5 -0.16% Rp9,000) Trading T/O ( Rp bn ) 7,160.7 Market Cap ( Rp tn ) 7,186.0 BBNI reported bank only net income of Rp5.4tn in 5M19, +1% yoy, accounting for 32% of FY19 consensus and 33% of Mansek’s expectations. Consolidated net income is estimated at Rp5.6tn, accounting for 33% of FY19 Market Data Summary* consensus and 34% of Mansek’s expectations – below expectations. The operating income which grew +5% yoy was offset by provision expenses growth 2019F 2020F of +7% yoy and operating expenses growth of +4% yoy, leading to a +1% yoy growth in the bottom line while PPOP increased +6% yoy. May19 net income is P/E (x) 17.4 16.1 Rp1.19tr. +29% yoy/+249% mom on normalized provisioning charges. P/BV (x) 2.5 2.4 EV/EBITDA (x) 13.8 13.2 Loan growth remained strong at +19% yoy/+2% mom and deposit growth Div. Yield (%) 2.5 2.7 +10% yoy/+3% mom. Deposit growth was supported by time deposits at +19% Net Gearing (%) 18.1 16.6 yoy, followed by savings deposits at +10% yoy, and demand deposit at +1% yoy, ROE (%) 15.2 15.1 resulted in CASA ratio of 61% in May-19 vs. 64% in May-18. LDR was at 94% in EPS Growth (%) 8.2 7.7 May-19 from 87% in May-18. EBITDA Growth (%) 4.7 4.7 NIM declined to 4.9% in 5M19 from 5.5% in 5M18, due to rising cost of funds Earnings Yield (%) 5.7 6.2 and declining asset yield. On a monthly basis, however, NIM improved to 5.2% in May-19 from 4.6% in Apr-19 mostly over increase in asset yield. * Aggregate of 74 companies in MS research universe, representing 63.9%of JCI’s market capitalization Cost to income ratio was stable at 45% in 5M19 and 5M18. Provision expenses increased +7% yoy to Rp3.5tn in 5M19. Mansek estimates the bank to have written off ca. Rp2.0tn of bad debts in 5M19 vs. Rp3.6tn in 5M18. Cost of credit declined to 1.7% in 5M19 from 1.9% in 5M18 while provisioning to total loans declined to 3.1% in May-19 from 3.2% in May-18. We understand BBNI will book more provisioning for KRAS, amounting to around Rp500bn in Jun19 to reach the 20% provisioning level for the Rp5tr exposure. Maintain Neutral with TP of Rp9,000. BBNI is trading at 1.4x 2019F P/BV. Please see important disclosure at the back of this report Page 1 of 9 Equity Research | 27 June 2019 %of Income Statement %of FY19 May-18 Apr-19 May-19 %MoM %YoY 5M18 5M19 %YoY FY19F FY19F (Rp bn) FY19F Cons Cons Net interest income 2,920 2,521 2,811 11 (4) 13,258 13,439 1 39,520 34 Non-interest income 892 984 1,226 25 37 4,535 5,247 16 14,967 35 Operating income 3,812 3,505 4,037 15 6 17,793 18,685 5 54,486 34 54,036 35 Provision expenses (1,154) (1,453) (554) (62) (52) (3,301) (3,544) 7 (9,550) 37 Operating expenses (1,571) (1,597) (1,973) 24 26 (8,011) (8,342) 4 (24,139) 35 Operating profit 1,087 456 1,511 232 39 6,481 6,799 5 20,797 33 21,934 31 PPOP 2,241 1,909 2,065 8 (8) 9,782 10,343 6 30,348 34 Pre-tax profit 1,138 420 1,501 258 32 6,717 6,779 1 20,985 32 21,718 31 Net profit 919 340 1,186 249 29 5,374 5,416 1 16,642 33 17,042 32 Balance Sheet (Rp bn) May-18 Apr-19 May-19 %MoM %YoY Gross loans 421,390 493,878 503,027 219 Demand deposits 150,778 151,582 151,580 (0) 1 Saving deposits 161,509 167,352 177,218 610 Time deposits 174,761 205,194 208,599 219 Total deposits 487,049 524,129 537,397 310 CASA to deposits (%) 64.1 60.9 61.2 Ratio (%) May-18 Apr-19 May-19 5M18 5M19 LDR 86.5 94.2 93.6 86.5 93.6 NIM 5.9 4.6 5.2 5.5 4.9 ROE 11.9 3.8 13.2 13.7 12.4 Cost to income 41.2 45.5 48.9 45.0 44.6 Cost of credit - net 3.3 3.5 1.3 1.9 1.7 Provisioning level 3.2 3.0 3.1 3.2 3.1 Tjandra Lienandjaja (+6221 5296 9617) [email protected] Priscilla Thany (+62 21 5296 9546) [email protected] Silvony Gathrie (+6221 5296 9544) [email protected] Bank Jabar: 5M19 Results - Below Expectations (BJBR; Rp1,685; Neutral; TP: Rp1,770) BJBR reported bank only net income of Rp589bn in 5M19, -19%yoy, translating into 30% of FY19 consensus and 41% of Mansek’s expectations. If we add up Rp7.2bn of BJB Sharia net income in 5M19, consolidated net income totaled to Rp596bn, translating into 31% of consensus’ and 41% of our expectations – below expectations. Weak operating income was the main reason behind the decline in net income growth. PPOP declined -17%yoy. Loan growth +7%yoy/+1% mom, deposit growth +2%yoy/-6% mom. We believe Bank Jabar’s loan growth continues to be supported by consumer loans growth. Deposits growth is driven by savings deposit at +23%yoy and time deposit at +4%yoy, while demand deposit declined -20yoy. CASA ratio now accounts for 43% of total deposits in May-19 vs. 44% in May-18, while LDR tightened to 90.4% in 5M19 vs. 86% in 5M18. NIM declined to 5.8% in 5M19 from 6.2% in 5M18 over rising cost of funds. May-19’s NIM also declined to 5.7% from 6.1% in Apr-19 over the same reason. Cost to income ratio increased to 69% in 5M19 vs. 64% in 5M18. Provision expenses declined by -11%yoy in 5M19 to Rp116bn. Cost of credit remained stable at 0.4% in 5M19 and 5M18 while provision to total loans increased to 1.7% in May-19 from 0.8% in May-18 as the bank increased its coverage ratio to 100% through retained earnings adjustment in May-19. Please see important disclosure at the back of this report Page 2 of 9 Equity Research | 27 June 2019 Maintain Neutral with TP Rp1,770. The stock is trading at 1.4x 2019F P/BV. %of Income Statement %of FY19 May-18 Apr-19 May-19 %MoM %YoY 5M18 5M19 %YoY FY19F FY19F (Rp bn) FY19F Cons Cons Net interest income 533 523 476 (9) (11) 2,537 2,391 (6) 6,759 35 Non interest income 79 96 80 (17) 0 412 416 1 1,103 38 Operating income 613 619 555 (10) (9) 2,949 2,807 (5) 7,862 36 9,846 29 Provision expenses (10) (35) (24) (33) 125 (131) (116) (11) (706) 16 Operating expenses (377) (509) (394) (23) 4 (1,888) (1,924) 2 (5,260) 37 Operating profit 225 74 138 86 (39) 930 767 (18) 1,896 40 2,076 37 PPOP 236 110 162 47 (31) 1,061 884 (17) 2,602 34 Pre-tax profit 223 91 133 46 (40) 930 751 (19) 1,926 39 2,077 36 Net profit 174 72 105 46 (40) 726 589 (19) 1,444 41 1,934 30 Balance Sheet (Rp bn) May-18 Apr-19 May-19 %MoM %YoY Gross loans 71,702 75,746 76,755 17 Demand deposits 20,775 22,948 16,587 (28) (20) Saving deposits 16,184 16,740 19,901 19 23 Time deposits 46,428 51,126 48,450 (5) 4 Total deposits 83,387 90,813 84,937 (6) 2 CASA to deposits (%) 44.3 43.7 43.0 Ratio (%) May-18 Apr-19 May-19 5M18 5M19 LDR 86.0 83.4 90.4 86.0 90.4 NIM 6.6 6.1 5.7 6.2 5.8 ROE 18.2 6.7 9.9 16.0 11.0 Cost to income 61.5 82.3 70.9 64.0 68.5 Cost of credit - net 0.2 0.6 0.4 0.4 0.4 Provisioning level 0.8 0.9 1.7 0.8 1.7 Silvony Gathrie (+6221 5296 9544) [email protected] Tjandra Lienandjaja (+6221 5296 9617) [email protected] Priscilla Thany (+62 21 5296 9546) [email protected] MARKET Market Recap June 26th 2019; JCI 6,310.49 Points -9.96 pts (-0.16%); VAalued $505mn; Mkt Cap $497bn; USD/IDR 14,170 TOP TURNOVER: BBRI PGAS BBCA BMRI PTBA TLKM ADRO ERAA INDY ASII BBNI MNCN BTPS GGRM (40%) ADVANCING SECTOR: telco+5.6%; construction+0.4% DECLINING SECTOR: plantation-1.2%; cement-1%; auto-0.7%; mining-0.5%; consumer & property-0.2%; financial flat Indo stocks traded in narrow range, with the Fed officials tempered expectations in the markets for aggressive monetary easing, pushing back against US President Donald Trump’s demand for a significant rate cut.