Apr 18, 2017 13:13:51

Yesterday afternoon BTN ($BBTN) held its 1Q17 result. Our GGM-derived TP are 1.27xP/BV multiple for 2017F.

Key highlights:

1Q17 performance:

  • Net interest income represents 21.3% of our forecast as BTN still use cashbasis (instead of accrual-basis method for interest income) thus has not received the payment from Government on interest rate subsidy for subsidised mortgage of IDR80bn.
  • Reported net interest margin (NIM) compressed to 4.3% due to lower asset yield of 9.3% (1Q16: 10.4%) despite 80bps reduction in blended CoF from 1Q16’s figure of 6%.
  • Cost to income ratio (CIR) uptick to 61.9% from 59.3% due to lower YoY operating income growth.
  • Gross non-performing loans (NPL) ratio stood at 3.3% (Mar-16: 3.6%).
  • Credit cost remain manageable at 33bps with 11.7% special Mention loan (Mar-16: 13.8%).
  • Net profit of IDR594bn accounted for 18.9% of our forecast, inline with lastyear’s cyclicality of 1Q contribution at 18.8% of full year’s net profit.

What to expect:

  • BTN’s management emphasised that interest income payment from government would all be received by end of year given that such amount already allocated in government’s state budget.
  • Subsidised mortgage scheme would remain unchanged with 90-10 funding split between government and bank. This year government allocate total c.IDR15trn for subsidised mortgage consists of funding scheme (90-10), interest rate subsidy (12month SBI), and subsidy on down payment for eligible potential borrowers.
  • We expect moderate loan growth figure at 17.1%. We still expect strong growth coming from subsidised mortgage segment as BTN continue its commitment to support government’s one million houses program.
  • Asset quality would improve in our view to 2.5% by end of year with 48bps credit cost (2016: 2.8% gross NPL and 47bps credit cost).
  • Asset yield would fall to 9.5% in FY17 (FY16: 9.7%) due to higher portion of subsidised mortgage in loan portfolio. We assume 21% YoY growth in subsidised mortgage resulting to 35.7% contribution to total loan book (end- 16: 34.6% of loan book).
  • NIM would be flat at 4.6% for FY17 (FY16: 4.6%) in our forecast as we expect lower both on asset yield and blended CoF of 5% (FY16: 5.2%).
  • Funding should remain manageable aside from customer deposits. For wholesale funding, BTN would continue to issue bonds and NCD as a strategy to diversify the maturity profile of its funding structure given that most of its loans book dominated by long-term tenure (more than five years maturity profile). (Eka Savitri)