Corporate Result Flash Bank Negara Indonesia - Bahana

1Q11 performance


§ BBNI reported growth of 22.0% y-y and 9.1% q-q in 1Q11 net profit to IDR1.25t, in line with expectations, accounting for 23% of our 2011 and market estimates.

§ 1Q11 performance was buoyed by net interest income (NII) and lower provisioning with gross NPL of 4.1% versus 4.3% in 4Q10. NII grew 8.7% q-q on 4Q10 strong loan growth of +8.2% q-q while 1Q11 loans grew 1.7% q-q, coming from corporate (+3.9% q-q) and consumer (+3.1% q-q) segments. This supported 1Q11 NIM at 5.7% vis-à-vis 5.8% in 4Q10.

§ On the funding front, 1Q11 third party funding contracted 2.9% q-q caused by lower time deposits (-7.7% q-q) while core funding edged up 0.3%. As a result, CASA ratio improved to 61% at end 1Q11 from 59% at end 2010 and LDR increased to 73.5% from 70.2% over the same period.

Outlook
We believe BBNI is set to report improved earnings in the subsequent quarters on the back of stronger loan growth and lower provisioning as a result of further improvement in its assets quality. With CAR of 18.4% and LDR of 73.5%, BBNI has greater flexibility to expand its loan portfolio. In 2011, we have conservatively assumed 2011 loan growth of 17%, before rising to 19% in 2012. For corporate loans, the bank targets 8 main industries, which include prioritizing infrastructure projects. On the consumer side, growth will stem from the mortgage and credit card segments.

Recommendation and valuation
We continue to like BBNI’s strong deposit franchise, which has paved the way for continued re-rating and ytd market outperformance (exhibit 4). As we use lower cost of equity on lower 10-year government risk free rate (-50bps to 7%), we raise our TP on BBNI to IDR5,000 (+4.2%), reflecting P/BV of 2.5x, still a substantial 29% discount to the industry’s average 3.5x P/BV. BUY.