Refer to Important disclosures in the last page of this report
18 October 2018 (BMRI IJ)
Bank Mandiri Results Note
(Unchanged) BUY Stock Data Solid growth from lower credit cost
Target price (Rp) Rp8,200 9M18 earnings rose 20% (in-line) while core profit grew modestly.
Prior TP (Rp) Rp8,300 Strong loan growth mitigated NIM pressure from rising rates.
Share price (Rp) Rp6,575 Credit cost improved despite still elevated middle corporate NPLs.
Upside/downside (%) +24.7
Shares outstanding (m) 46,667 Reiterate BUY albeit with lower TP of Rp8,200 (from Rp8,300). Market cap. (US$ m) 20,253
s
Free float (%)
40.0 Results in-line. BMRI reported net profit of Rp18.1n in 9M18 (+20% yoy), in line
k n with FY18F consensus estimate of Rp24.3tn albeit slightly below our forecast due
Avg. 6m daily T/O (US$ m)
18.3
a to tax-case loss of c.Rp300bn in 3Q18 arising from disputed timing of tax-benefit
Price Performance associated with achieving 40% stock free float post a rights issue in 2011. BMRI’s
B
3M
6M
12M tax-case loss in 3Q, as ruled by the Supreme Court, came after its tax-dispute win
| of Rp1.08tn in 2Q18. Excluding these non-operating items, its earnings grew 19%
Absolute (%) 3.5 -17.8 -3.7
ia qoq in 3Q due to its lower loan provisions (-24% qoq). The bank’s strong earnings
Vs. JCI (%) 3.6 -10.4 -2.3
s growth in 9M18 was driven by its modest top line growth, strong cost control and e
52w high/low (Rp) 6,575 - 6,200 also partly due to a low base effect from its very weak 1Q17 earnings.
n 140 o
130 d Modest PPOP growth. Excluding provisions, BMRI’s core profit grew 7% in 9M18
120 n driven by its strong asset growth (loans: +14%; deposits: +9%), which mitigated
110
I NIM pressures arising from 125bps interest rate hikes so far in 2018, and modest 100 operating cost growth of only 6%. Although NIMs declined 17bps yoy in 9M18,
|
90 y
NIMs were stable in the past 3 quarters and came at the top end of 5.5%-5.7%
80
7
8
8
7
7
7
8
8
8
8
8
8
8
8
8
8
8
8
1
1
1
1
1
1 it
- 1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 guidance although we still expect lower NIM in 4Q when its loan growth slows to
- 1 t- r- r- r- l- t- v v c n n b y n n p c u g g c a p p o o e a a e a u u u u e J O A A O
u J J F M J J S N N D M A A narrow the gap with deposit growth. The bank’s IDR cost of funds rose by 20bps
BMRI-Rebase JCI Index-Rebase q to 3.1% in 3Q due to 50bps rise in time deposit costs in the last quarter.
E Asset quality. BMRI’s credit cost improved to 183bps in 3Q18 (1H18: 209bps)
Major Shareholders while its new NPL formation also dropped to Rp3.06tn (1.8% of loans), from an
Republic of Indonesia 60.0%
average of Rp4.1tn or 2.6% of loans in 1H18 (FY17: 2.6%), of which half of these new NPLs came from its middle corporate loans (4.3% of loans), albeit still better vs. 6.1% in 1H18. Management is guiding for new NPLs of Rp3.6tn in 4Q18 (9M: Estimate Change; Vs. Consensus Rp13.5tn) and maintain credit cost guidance of 2.0-2.2% for FY18F (9M: 1.97%). BMRI’s NPL ratio improved to 3.0% in 3Q, from 3.74% a year earlier, with stable
2018F 2019F provision/NPL coverage of 136%.
Latest EPS (Rp) 521 613 Vs. Prior EPS (%) -2.6 -3.1
Valuation. We lower our earnings forecasts for FY18F/FY19F by 2.6%/3.1% and
Vs. Consensus (%) 0.0 +1.1
our TP to Rp8,200 (from Rp8,300), due to our slightly lower book value forecast arising from bond revaluation losses in 2018. Our TP is based on our GGM-derived Source: Bloomberg target FY18F P/B of 2x, assuming LT ROAE of 16.6%, growth of 8.5%, and cost of equity of 12.5%. We estimate BMRI’s LT ROAE based on our DuPont analysis, assuming LT ROAA of 2.08% and asset/equity leverage of 8x. We maintain our BUY rating.
Year To 31 Dec 2016A 2017A 2018F 2019F 2020F
Operating income (RpBn) 70,824 73,718 78,504 85,827 93,882 PPOP (RpBn) 39,556 38,704 41,670 46,113 51,060 Net profit (RpBn) 13,807 20,640 24,314 28,608 33,438 Net profit growth (%) (32.1)
49.5
17.8
17.7
16.9 FD EPS (Rp) 296 442 521 613 717 P/E (x)
22.2
14.9
12.6
10.7
9.2 P/B (x)
2.0
1.8
1.6
1.4
1.2 Stephan Hasjim Dividend yield (%)
2.0
3.0
3.6
4.2
4.9 PT Indo Premier Sekuritas ROAA (%)
1.4
1.9
2.1
2.2
2.4 stephan.hasjim@ipc.co.id ROAE (%)
10.5
13.4
13.7
14.1
14.2
- 62 21 5793 1168
Source: BMRI, IndoPremier Share Price Closing as of : 17-October-2018
Rp bn
5
1
8
2 Q
1
8
3 Q
1
8 Pre-Provision Profit Pre-Provision Profit ROAA
Rp bn
2,000 4,000 6,000 8,000
3 Q
1
4 Q
7
1
5
1 Q
1
6
2 Q
1
6
3 Q
1
6
4 Q
1
1 Q
1
1 Q
3 Q
8,000 12,000 16,000
3 Q
1
5
4 Q
1
5
1 Q
1
6
2 Q
1
6
1
4 Q
6
4 Q
1
6
1 Q
1
7
2 Q
1
7
3 Q
1
7
6
1
8 Operating Expenses Cost-Income Ratio
3 Q
3 Q
1
6
4 Q
1
6
1 Q
1
7
2 Q
1
7
1
1
7
4 Q
1
7
1 Q
1
8
2 Q
1
8
3 Q
1
8 Net Profit Net Profit ROAA
6
2 Q
7
1
2 Q
1
7
3 Q
1
7
4 Q
1
7
1 Q
1
8
2 Q
8
6
3 Q
1
8 Net Provisions bps of Loans
bps Rp bn 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 2,000
4,000 6,000 8,000
3 Q
1
5
4 Q
1
5
1 Q
1
Rp bn 0% 1% 2% 3% 4% 5% 6% 4,000
1
Fig. 1: Net Interest Income (Rp bn) and NIMs (%) Fig. 2: Non-Interest Income (Rp bn; % of Gross Income) Source: Company, IndoPremier Source: Company, IndoPremier
4,000 6,000 8,000
1
7
1 Q
1
8
2 Q
1
8
3 Q
1
8 Net Interest Income Net Interest Margin
Rp bn 0% 5% 10% 15% 20% 25% 30% 35% 40% 2,000
3 Q
7
1
5
4 Q
1
5
1 Q
1
6
2 Q
1
6
3 Q
1
4 Q
1
4 Q
2 Q
Fig. 3: Operating Expense (Rp bn) and Cost/Income Ratio (%) Fig. 4: Pre-Provision Profit (Rp bn; % of Average Assets) Source: Company, IndoPremier Source: Company, IndoPremier
Fig. 5: Net Loan Provisioning (Rp bn; bps of Average Loans) Fig. 6: Net Profit (Rp bn) and ROAA (%) Source: Company, IndoPremier Source: Company, IndoPremier
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 4,000
8,000 12,000 16,000
3 Q
1
5
4 Q
1
5
1 Q
1
6
1
3 Q
6
3 Q
1
6
4 Q
1
6
1 Q
1
7
2 Q
1
7
6
1
3 Q
2 Q
6
2 Q
1
6
3 Q
1
6
4 Q
1
6
1 Q
1
7
1
1 Q
7
3 Q
1
7
4 Q
1
7
1 Q
1
8
2 Q
1
8
1
5
6
1
1 Q
1
7
2 Q
1
7
3 Q
1
7
4 Q
1
7
1 Q
8
1
2 Q
1
8
3 Q
1
8 Other Income Other Income % of Total
Rp bn 0% 10%
20% 30% 40% 50% 60% 70%
3,000 6,000 9,000 12,000
3 Q
1
5
4 Q
- 100 100 200 300 400 500
Third Quarter 2018 Results (Rp Bn)
9M18
9M17 % Y-Y
3Q18
2Q18 % Q-Q Net Interest Income 40,472 38,839 4.2 13,907 13,341
4.2 Fees & Commissions 9,417 9,120
3.3 3,289 3,095
6.3 Insurance & Other Incomes 5,203 3,589 45.0 1,213 2,597 -53.3 Trading Income 3,123 3,033 3.0 1,067 835
27.9 Operating Income 58,215 54,582
6.7 19,477 19,867 -2.0
Operating Expenses -26,907 -25,310 6.3 -9,559 -8,938
7.0 Pre-Provision Profit 31,308 29,271
7.0 9,918 10,930 -9.3
Provision for Impairment -10,961 -12,218 -10.3 -3,070 -4,057 -24.3 Recovery of Written-Off Loans 3,248 2,879 12.8 1,016 1,146 -11.4
Operating Profit 23,594 19,931 18.4 7,864 8,019 -1.9
Other Non Operating Items 23 -92 n.m 55 -5 n.m
Pre-Tax Profit 23,617 19,839 19.0 7,919 8,014 -1.2
Tax -4,917 -4,211 16.8 -1,798 -1,511
19.0 Minorities -609 -559 8.9 -208 -185
12.1 Net Profit 18,091 15,069
20.1 5,913 6,318 -6.4 Gross Loans 781,077 686,157 13.8 781,077 762,539
2.4 Customer Deposits 831,203 761,490
9.2 831,203 803,027
3.5 Non-Performing Loans (NPL) 23,745 25,442 -6.7 23,745 23,560
0.8 Special Mention Loans 35,300 32,502 8.6 35,300 34,835
1.3 Loan Loss Reserves (LLR) 32,293 34,695 -6.9 32,293 32,041
0.8 Total Assets 1,173,645 1,078,703 8.8 1,173,645 1,155,548
1.6 Risk-Weighted Assets 836,221 756,066 10.6 836,221 830,913
0.6 Shareholders’ Funds 172,871 160,972
7.4 172,871 166,834
3.6 BV Per Share 3,704 3,449 7.4 3,704 3,575
3.6 Source: Company, IndoPremier Key Ratios (%)
9M18
9M17 % Y-Y
3Q18
2Q18 % Q-Q ROAA (annualized)
2.13
1.90
11.7
2.03 2.24 -9.4 ROAE (annualized)
14.5
13.2
10.3
14.1 15.2 -6.8
Net Interest Margin (bps) 556 573 -3.0 554 556 -0.4 Gross Credit Cost (bps) 186 236 -21.1 159 201 -20.9 Fee Inc/Operating Income
16.2 16.7 -3.2
16.9
15.6
8.4 Non Int Inc/Operating Income
30.5
28.8
5.7
28.6 32.9 -12.9 Op. Cost/ Operating Income
46.2 46.4 -0.3
49.1
45.0
9.1 Loan-to-Deposit Ratio (LDR)
94.0
90.1
4.3
94.0 95.0 -1.0 NPL/Loan Ratio
3.0 3.7 -18.0
3.0 3.1 -1.6 LLR/NPL Ratio 136.0 136.4 -0.3 136.0 136.0
0.0 Tier-1 Capital Ratio
19.6 20.2 -3.0
19.6
18.9
3.3 Total Capital Ratio
20.7 21.2 -2.3
20.7
20.0
3.6 Source: Company, IndoPremier
Year To 31 Dec (RpBn) 2016A 2017A 2018F 2019F 2020F Income Statement
Interest income 76,710 79,502 81,342 91,870 103,646 Interest expense (24,885) (27,174) (26,621) (31,635) (37,341) Net interest income 51,825 52,327 54,721 60,235 66,305 Fees and commissions 11,440 12,483 12,836 14,119 15,531 Trading income 3,027 3,950 4,250 4,778 5,016 Other operating income 4,532 4,958 6,698 6,695 7,029 Total operating income 70,824 73,718 78,504 85,827 93,882 Personnel expenses (13,619) (14,859) (16,047) (17,331) (18,718) G&A expenses (13,958) (15,406) (16,176) (17,470) (18,868) Other operating expenses (3,691) (4,750) (4,612) (4,913) (5,237) Pre-provision operating profit 39,556 38,704 41,670 46,113 51,060 Provisions (24,645) (15,952) (15,243) (14,266) (13,122) Loan recovery income 3,702 4,417 5,000 5,000 5,000 Operating profit 18,613 27,170 31,427 36,846 42,938 Non-operating profit (40) (13) Exceptional items Pre-tax profit 18,573 27,157 31,427 36,846 42,938 Income tax (3,923) (5,714) (6,285) (7,369) (8,588) Minority interests (844) (803) (827) (869) (912) Reported net profit 13,807 20,640 24,314 28,608 33,438
Balance Sheet
Cash 22,907 24,269 28,177 30,821 33,723 Current account with BI 52,485 50,188 60,991 66,434 72,403 Placements at BI & other banks 83,977 86,931 91,277 95,841 100,633 Short-term investments 61,606 62,161 57,354 53,027 49,133 Government bonds 98,933 103,411 103,411 103,411 103,411 Gross loans 662,013 729,548 814,896 917,207 1,032,455 Loan provisions (32,945) (34,116) (35,348) (39,615) (42,736) Other assets 89,730 102,309 111,087 120,852 131,738 Total Assets 1,038,706 1,124,701 1,231,845 1,347,979 1,480,760 Customer deposits 762,501 815,807 890,353 972,087 1,061,736 Deposits from other banks 9,675 8,795 9,074 9,382 9,720 Securities and borrowings 48,477 56,332 59,068 62,078 65,389 Other liabilities 64,683 73,762 81,819 81,931 87,579 Total Liabilities 885,337 954,695 1,040,314 1,125,478 1,224,424 Share capital 28,983 28,983 28,983 28,983 28,983 Reserves and others 24,540 26,378 23,261 25,261 25,261 Retained earnings 96,931 111,358 135,671 164,280 197,718 Shareholders' equity 150,454 166,719 187,915 218,523 251,961 Minority interest 2,916 3,287 3,616 3,978 4,375 Total Liabilities & Equity 1,038,706 1,124,701 1,231,845 1,347,979 1,480,760
Source: BMRI, IndoPremier
Year To 31 Dec 2016A 2017A 2018F 2019F 2020F Growth Ratios (% yoy)
Gross loans
11.2
10.2
11.7
12.6
12.6 Total assets
14.1
8.3
9.5
9.4
9.9 Customer deposits
12.7
7.0
9.1
9.2
9.2 Net interest income
14.2
1.0
4.6
10.1
10.1 Non-interest income
3.6
12.6
11.2
7.6
7.8 Total operating income (29.3)
46.0
15.7
17.2
16.5 Operating expense
8.7
12.0
5.2
7.8
7.8 PPOP 13.2 (2.2)
7.7
10.7
10.7 Net profit (32.1)
49.5
17.8
17.7
16.9 Profitability Ratios ROAA (%)
1.44
1.94
2.06
2.22
2.36 ROAE (%)
10.5
13.4
13.7
14.1
14.2 NIM (%)
6.28
5.71
5.34
5.39
5.40 Net credit cost (bps) 349.4 172.3 132.6 107.0
83.3 Cost/income (%)
44.1
47.5
46.9
46.3
45.6 LDR (%)
86.8
89.4
91.5
94.4
97.2 CAR (%)
20.8
19.1
18.9
18.7
18.6 NPL ratio (%)
4.0
3.5
3.0
2.9
2.6 Provisions/NPL (%) 124.6 134.8 145.9 150.6 156.7
Source: BMRI, IndoPremier
Head Office PT INDO PREMIER SEKURITAS Wisma GKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta 10210 - Indonesia p +62.21.5793.1168 f +62.21.5793.1167
INVESTMENT RATINGS
BUY : Expected total return of 10% or more within a 12-month period HOLD : Expected total return between -10% and 10% within a 12-month period SELL : Expected total return of -10% or worse within a 12-month period ANALYSTS CERTIFICATION.
The views expressed in this research report accurately reflect the analyst;s personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
DISCLAIMERS
This reserch is based on information obtained from sources believed to be reliable, but we do not make any representation or warraty nor accept any responsibility or liability as to its accruracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, finacial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this