Sign up to SahamTalk to save a watchlist for easy access to your favorite stocks
Apr 02,2016 11:47:03
Indonesia Banks: 4Q15 Results Round-Up

Earnings growth: our 10 banks +8.1% y-y; industry: -1.5% y-y
All 10 banks under our coverage have reported 4Q15 net earnings, booking 8.1% y-y growth, vis-à-vis the industry average of a 1.5% y-y decline. On a quarterly basis, the 10 banks reported 3.3% q-q growth while the industry average contracted by 3.3% q-q, mainly due to the limited advantages of a lower blended cost of funding. The industry NIM reached 5.4% (+10bps q-q) in 4Q15 compared to 30bps higher q-q for our 10 listed banks. Only 4 of the 10 banks displayed lower NIMs: $BBRI (-20bps q-q), $BBNI (-20bps), $BJTM (-60bps) and $BBKP (-30bps). The better-than-expected 4Q15 earnings were supported by lower provisioning (-9.4% q-q) on improved loan quality, as most banks restructured their debt, benefiting from the OJK relaxation policy in pursuing NPLs based on debtor abilities to serve their loans while ignoring financial stability and the industry outlook.

Loan growth: 10.4% y-y vs 11.4% y-y on lower GDP
Sector 4Q15 loan growth was 2.5% q-q, bringing full-year 2015 loan growth to 10.4%, vis-à-vis 11.4% y-y growth in 2014, in line with the deceleration in GDP growth to 4.8% in 2015 from 5.0% in 2014. Our 10 listed banks’ loan growth of 12.6% was above the industry average, except for $BDMN and $BJTM. $BBTN posted the highest growth, at nearly 20% y-y, benefiting from continued strong demand from the low-end market segment, including government subsidized mortgages. Corporate loans were the main contributor, while consumer loans (9.1% y-y) moved at a slower pace due to slow mortgage demand. This brought the proportion of consumer loans to total loans to 27.1% (-30bps y-y). However, deposits contracted 1.1% q-q, bringing full-year 2015 growth to only 7.3% y-y. As a result, LDR increased to 92.5% from 89.9% a year earlier.

Seeking normalization under new low-lending rate regime
In 2016, we assume loan growth of 12.7% y-y on increased investment in infra-related projects, with the government having recently encouraged banks to set lending rates at single-digit levels. This, however, may create challenges given Indonesia’s geography, high inflation, limited fee-based income and low employee productivity. On monetary policy, lower lending rates may only be achieved once the benchmark rate reaches 6.25% (currently: 6.75%, or -125bps y-y), setting the ceiling on SOE deposit rates and eliminating current deposit rate spreads from 200bps and 225bps for bank categories IV and III, respectively, to 75bps and 100bps. On macroprudential policy, OJK should lower both the minimum primary (currently: 6.50% from 8.00% previously) and secondary (currently: 4.00%) reserve requirements, increasing LFR and lowering RWA. We believe this move may lower bank NIMs by 40-50bps (vs our previous estimate of 30-40bps) for the 10 banks we cover, but the overall industry may be worst off (exhibit 31). Based on this, combined with continued high provisioning, we forecast overall 2016 net earnings growth of around 6.3% y-y, helped by improved operating efficiencies and increased fee-based income.
Quotes delayed, except where indicated otherwise.
555.00 0.00 (0.00%)
Bank Bukopin Tbk.
Last Update 02:54:10