Feb 22, 2017 11:11:40

Bank Tabungan Negara - A Good Year Indeed

Yesterday evening BTN had analyst meeting presentation on its FY16 performance. BTN currently trades at 0.97x 2017 P/BV multiple (-0.7SD of its historical mean). Maintain BTN ($BBTN) as one of our top pick in the sector.

Key highlights:

FY16 performance:

  • Net interest income represents 103%/105% of our/consensus forecasts.
  • Net interest margin (NIM) slightly expanded to 5% due to lower blended CoF by 6bps to 5.7% in FY16 (FY15: 5.8%).
  • Cost to income ratio (CIR) slightly elevated to 57.4% from 56.7% due to 22% YoY opex growth.
  • Credit cost improved significantly to 46.7bps indicating lower pressure in asset quality.
  • Restructured loan of IDR4.9trn accounted for 2.9% of total loans, still relatively manageable compared to other banks.
  • Lower corporate tax rate due to BTN already reach 40% free float (previously only c.39%).
  • Net profit of IDR2.6trn accounted for 109%/113% of our/consensus forecast.

4Q16 performance:

  • NIM expanded to 5.3% compared to previous quarter due to high growth in current account as BTN received substantial amount (c.IDR7.7trn in 4Q16) from government institutions’ fund as well as IDR546bn payment of 2015 FLPP’s claim from government.
  • Credit cost remain managable at 57.3bps as BTN’s loan mostly secured by the property themselves.
  • With stable credit cost and lower corporate tax rate, net profit grew by 71.2% QoQ.

What we miss:

  • Lower credit cost at 46.7bps as we expect higher gross NPLs ratio at 3.1% (vs 2.8%) and 63bps credit cost.

What to expect:

  • Loan growth would reach 19% this year as we expect that BTN would continue to channel subsidised mortgage through interest rate subsidy first while FLPP scheme is still under discussion with Government. Yet we expect the FLPP scheme would not changed significantly given that Government would still need to reduce the housing backlog in Indonesia.
  • We conservatively expect lower loan yield of 9.9% in FY17 (FY16:11%) on the back of higher subsidised mortgage portion into BTN’s loan book. (Eka Savitri)