Corporate Result Flash Bank Jabar Banten - Bahana

1Q11 performance
§ Helped by loan growth and extraordinary income, BJBR reported 1Q11 net profit of IDR260b (+23.7% y-y; +162.7% q-q), in line with expectations, accounting for 24-25% of our and consensus’ full-year estimates.
§ 1Q11 loans grew 4.2% q-q, coming mainly from consumer loans, which accounted for approximately 73% of 1Q11 loan portfolio. NIM declined to 6.5% in 1Q11 from 7.3% in 4Q10 owing to the underutilized excess funding with LDR of 72.9% in 1Q11 vis-à-vis 74.1% in 4Q10.
§ The surge in 1Q11 non-operating income to IDR30b from IDR11b in 4Q10 stemmed from the return of money seized in the corruption case by BJBR’s former members of directors. Out of the total IDR50b, IDR26b had been deposited back to the bank, while the remaining IDR24b is still under collection by the Indonesian Corruption Eradication Commission (KPK).

Outlook
Although BJBR’s gross NPL had trended up to 2.4% in 1Q11 from 1.9% in 4Q10, we expect some softening due to the restructuring of commercial loans worth IDR46b in 2Q11. The management is still optimistic of achieving 30% loan growth (Bahana: 25.5%) on strong support from both consumer (civil servant loans and loan acquisitions through Regional Development Banks) and micro loans through Direct Selling Agents (DSA).

Recommendation and valuation
Although we expect improvements in core earnings in the following quarters, pressure on margins appears inevitable. This has encouraged us to downgrade 2011 earnings by 9.5%. This combined with higher-than-expected dividend payout ratio of 65% has resulted to 2.5% downgrade in BVPS to IDR547. Hence, we reduced our TP by 5% to IDR1,475. Thus, with less than 15% upside potential, BJBR remains a HOLD.