Apr 26, 2016 16:04:04
Bank Tabungan Negara: Starting the Year Well (BBTN; Rp1,730; Buy; TP:Rp2,100)

Bank Tabungan Negara reported 1Q16 net income of Rp491bn, +22% yoy, accounting for 22% of FY16 consensus and 21% of our full year expectations.

Loan growth +19% yoy, deposit growth +20% yoy. Loan growth was mainly driven by subsidized mortgages at +28% yoy (32% of total loans), non-subsidized mortgages at +16% yoy (38% of total loans), and construction loans at +25% yoy (14% of total loans). Over all, housing related loans grew by +21% yoy ( 90% of total loans) while consumer and commercial loans grew by +5% yoy ( 10% of total loans). Meanwhile, deposit growth was driven by current account deposits +33% yoy, savings deposit +17% yoy, and time deposit +16% yoy bringing 1Q16 CASA to 46% vs. 1Q15 CASA of 44% and 4Q15 CASA of 48%. Of the CA Rp18tr (56% of total current accounts) come from the FLPP, in which the government puts the funds and get 0.3% pa interest.  

NIM deteriorated to 4.35% in 1Q16 from 4.66% in 1Q15. Decline in NIM was due to decline in asset yield of -63bps yoy as BTN lowered lending rates in the month of February. Meanwhile, cost of funds declined by a smaller proportion, -15bps yoy, as time deposits have yet to mature. BTN indicates that cost of funds will decline, in line with lower lending rates, in 2Q16 as BTN plans to lower time deposit rates once deposits have matured.
NPL slightly deteriorated to 3.59% in Mar16 from 3.42% in Dec15 while restructured loans totaled to 3.6% in Mar16 vs 3.0% in Dec15. Deteriorating asset quality mainly came from other housing loans (NPL increased to 3.77% in 1Q16 from 3.44% in 4Q15), construction loans (NPL at 4.18% in 1Q16 from 3.81% in 4Q15), and non-subsidized mortgage (NPL increased to 2.85% in 1Q16 from 2.57% in 4Q15). BTN targets NPL to be <3% by the end of 2016. Total provisioning expense declined by -28% yoy while write-offs totaled to Rp69.6bn in 1Q16. Coverage ratio improved to 41% in 1Q16 vs. 30% in 1Q15, however deteriorated compared to 4Q15 at 43%.  

BTN targets single digit lending rate by end of the year. As of April, BTN has lowered lending rates by ~75 bps. BTN targets to lower non-subsidized mortgage rates and construction lending rates to a single digit by Oct16 and Dec16. In order to maintain net income, BTN will focus on increasing mortgage volumes from the middle income segment and will also focus on increasing fee based income through digital banking services.

Higher CAR from asset revaluation. Total CAR was 16.5% in Mar 16 while the bank has yet to record additional ~Rp1.6tn capital from asset revaluation which is likely to be recorded in 2Q16, which will increase their CAR to ~18%.  

The counter is trading at 1.2x P/BV 2016 and we keep our Buy call with TP of Rp2,100.