BTPN: Innovative bank - Mandiri

We have positive impression from BTPN’s analyst meeting yesterday which again highlighted the success of the bank’s innovation amid tighter competition in the banking sector. While its micro loans grew strongly at 41% yoy, its exposure to pensioners also performed very well, rising 33% yoy in Jun11, supporting a 63% yoy net profit growth. BTPN’s valuation is currently very excessive at 2012F P/BV 2.9x and PER of 13.1x. Yet, the future outlook is really worth considering, in our view.

1H11 net profit represented 48% of FY11 consensus … BTPN reported strong net profit of Rp585bn in 1H11, representing 48% of FY11 consensus forecast. Please note that net profit in 1H10 only represented 43% of FY10, hence better- than- expected FY11 results are very likely as the 2H performance is usually stronger than the 1H.

.. thanks to strong loan growth. The bank recorded strong loan growth of 36% yoy in Jun11, supported by 33% yoy growth in loans to pensioners and 41% yoy to micro businesses. It is interesting to note that the bank still managed to post strong loan growth to pensioners which reflects the bank’s attractive value proposition to its customers. BTPN currently has 470 branches dedicated to cater to pensioners, some also equipped with healthcare facilities.

NIM tended to decline, yet still at a decent level. The bank’s NIM declined from 14.0% in in FY10 to 12.8% in 1H11 as a result of changes in loan composition. The bank is moving toward higher percentage of secured micro loans which yielded 20-22% p.a vs unsecured of 40-42% p.a. The company targets to maintain unsecured loans at maximum 20% of total loans in order to maintain NPL from micro loans at around 4-4.5%.

Introducing new value proposition. During the analyst meeting yesterday, the bank introduced new CSR platform which is well integrated with the bank’s business models. The bank offers training to micro borrowers to improve their knowledge and skills in running their business. We view this as a very innovative approach in doing business and believed that it will contribute to the bank’s sustainable growth in the future. In addition, the bank is also developing new loan scheme to support productive poor people. This new plan is expected to be marketed next year. While valuation looks excessive at present, we believe in the bank’s sound long term growth hence any price correction will be a good buying opportunity.