Bank Permata: 11M16 Results- Below Expectations ($BNLI)
Bank Permata reported 11M16 unconsolidated net loss of Rp1.9tn, -468%yoy, exceeding consensus and Mansek’s expected loss of Rp1.7tn for FY16. Significant net loss was due to increase in provision expense of +115%yoy and reduction in assets size. PPOP was flat as operating income and operating expenses declined by -1%yoy.The bank booked a net loss of Rp556bn in Nov alone vs. Rp141 net loss in Oct16.
Loan growth -17%yoy (-1% mom), deposit growth -6%yoy (+2%mom). YTD this translates to loan growth of -16% and deposit growth of -7%. Decline in deposits was mainly driven by decline in time deposits of -14%yoy. Meanwhile, demand deposits and savings deposits grew by +9%yoy and +17%yoy bringing CASA to 37% in Nov16 from 31% in Nov15. LDR stood at 79% in Nov16 vs 90% Nov15.
NIM remained stable at 3.8% in 11M16, as decline in asset yield was offset by decline in cost of funds. On a monthly basis, NIM declined to 3.7% in Nov16 from 4.0% in Oct16.
Provisioning expense increased by +115%yoy to Rp5.9tn, while in the month of Oct alone provisioning expenses increased by +95%mom/+51%yoy to Rp979bn. Mansek estimates total write-offs of Rp2.4tn in 11M16 and Rp17bn in Nov alone. Provisioning to total loans increased to 6.2% in Nov from 5.2% in Oct while cost of credit (gross) increased to 6.2% in Nov from 5.7% in Oct. With such a high level of provisioning, we expect substantial write offs in December.
Cost to income ratio remains stable at 57% in Nov16. On a monthly basis, cost to income ratio increased to 65% in Nov from 55% in Oct.
Maintain BUY with TP of Rp700. The stock is trading at 0.5x 2017 P/BV. Concentration on asset quality improvement resulted in net loss and negative loan growth to date. However, in line with management expectations, we expect loan growth and asset quality to see a turnaround in 2017.