Bank Danamon (BDMN IJ)
25 October 2018 (BDMN IJ)
Bank Danamon Results Note (Unchanged)
HOLD Stock Data Still stagnant but drag is diminishing Target price (Rp) Rp6,000 Weak top-line growth but micro business unwinding is nearly over.
Prior TP (Rp) Rp6,000 NIMs are maintained (for now) despite rising rates this year.
Share price (Rp) Rp7,050 Credit cost improved as loan mix shifts towards lower-risk assets.
Upside/downside (%) (14.9) Shares outstanding (m) 9,585 Reiterate Hold given upside from MUFG acquisition/merger plans. Market cap. (US$ m) 4,112 s
Free float (%)
32.6 Still no earnings growth. BDMN reported net profit of Rp3.0tn in 9M18 (flat),
k n in-line with our FY18F forecast albeit slightly below consensus estimate. As such,
Avg. 6m daily T/O (US$ m)
2.0 a the bank continued with no earnings growth in the past five years on the back of
Price Performance its unwinding of micro lending business to focus on SME, home mortgages,
B
3M
6M
12M commercial and automotive lending through subsidiary Adira Finance. However,
| the growth drag from micro lending business appears to be over soon as its micro
Absolute (%) 4.4 -1.9
25.5 ia loans, which declined 58% yoy, has fallen to just Rp3.2tn or contributing only
Vs. JCI (%)
9.1
2.9
30.9 s 2.4% of loans, from 6.1% a year ago, and its peak contribution of 16% in 2013. e
52w high/low (Rp) 6,525 - 4,850 n
150 Stable NIMs. BDMN’s loan portfolio (including trade finance) grew 6% in 9M18 or o
140 d 10% if excluding its declining micro loans. The bank’s key loan growth drivers are
130 n
Adira Finance’s automotive loans (+12% yoy), followed by SME loans (+11%) and 120
I consumer (+16%), mainly driven by its strong mortgage loans (+35%), while 110 corporate loans grew 7%. Meanwhile, although the bank’s high NIMs narrowed by
| 100 y
30bps yoy to 9.0% in 9M18, NIMs were maintained stable at this level in the past
90
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 3 quarters despite BI’s 1205ps rate hikes and the bank’s loan mix shifting away
- 1 -1 t- r- r- l- l- t- v c c n b b y y n p p c u u g c a p o e e a e e a a u u e e J J O A O
u J F F M J S S N D D M M A from high-margin loans, due to lack of funding growth and its CASA improvement
BDMN-Rebase JCI Index-Rebase q strategies. However, we expect lower NIMs in coming years as the bank starts to
E grow loans more rapidly.
Major Shareholders Asset quality. BDMN’s asset quality has been stable with credit cost improving
Asia Financial (Indonesia) 67.4% marginally to 2.6% in 9M18 (vs. 2.7% in 9M17) with lower credit cost of 2.5% in
3Q vs. 2.8% in 2Q. NPL ratio has also declined to 3.0% in 3Q, from 3.3% in 2Q and a year earlier, while provision/NPL coverage also improved to 126%, from
Estimate Change; Vs. Consensus 116% a year ago. However, we expect scope for BDMN’s further credit cost
improvement to be more limited in the coming years and thus its earnings growth2018F 2019F will have to come from top-line growth.
Latest EPS (Rp) 429 488 Vs. Prior EPS (%)
0.0
0.0 Valuation. We maintain our earnings forecasts, TP of Rp6,000 and HOLD rating Vs. Consensus (%) -3.0 -2.3 despite the bank’s weak fundamentals in light of potential upside from ongoing M&A. Although we believe BDMN’s valuation is unattractive, given the bank’s slow
Source: Bloomberg earnings growth prospect with headwinds from rising rates, we believe its share price will continue to be well supported by MUFG acquisition and merger plans (at premium valuation), which has received regulatory approval and is proceeding to the next stage in the process.
Year To 31 Dec 2016A 2017A 2018F 2019F 2020F Operating income (RpBn) 18,472 18,519 19,017 20,539 22,503 PPOP (RpBn) 9,375 9,098 9,314 10,247 11,491 Net profit (RpBn) 2,669 3,682 4,116 4,677 5,400 Net profit growth (%)
11.5
37.9
11.8
13.6
15.5 FD EPS (Rp) 279 384 429 488 563 P/E (x)
25.3
18.4
16.4
14.4
12.5 P/B (x)
1.7
1.6
1.5
1.4
1.3 Stephan Hasjim Dividend yield (%)
1.5
2.1
2.3
2.6
3.0 PT Indo Premier Securities ROAA (%)
1.5
2.1
2.2
2.2
2.3 [email protected] ROAE (%)
7.6
9.9
10.3
10.9
11.6 Source: BDMN, IndoPremier Share Price Closing as of : 24-October-2018
- 62 21 5793 1168
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
5
1
8
2 Q
1
8
3 Q
1
8 Pre-Provision Profit Pre-Provision Profit ROAA
Rp bn 100 200 300 400 500 300
600 900 1,200 1,500
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
1,000 1,500 2,000 2,500 3,000
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 Credit Cost bps of Loans
bps Rp bn 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 300
600 900 1,200 1,500
3 Q
1
5
4 Q
1
5
1 Q
1
Rp bn 0% 1% 2% 3% 4% 5% 6% 500
1
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
600 900 1,200 1,500
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% 300
3 Q
4 Q
1
5
4 Q
1
5
1 Q
1
6
2 Q
1
6
3 Q
1
1
7
4 Q
1
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
5% 6% 7% 8% 9% 10%
1,000 2,000 3,000 4,000 5,000
3 Q
1
5
4 Q
1
5
1 Q
1
6
2 Q
6
1
3 Q
1
6
4 Q
1
6
1 Q
1
7
2 Q
1
7
3 Q
6
1
3 Q
2 Q
2 Q
1
6
3 Q
1
6
4 Q
1
6
1 Q
1
7
1
1
7
3 Q
1
7
4 Q
1
7
1 Q
1
8
2 Q
1
8
6
1 Q
6
1
1 Q
1
7
2 Q
1
7
3 Q
1
7
4 Q
1
7
1 Q
8
5
2 Q
1
8
3 Q
1
8 Other Income Other Income % of Total
Rp bn 0% 20% 40% 60% 80% 100%
500 1,000 1,500 2,000 2,500 3,000
3 Q
1
5
4 Q
1
Rp bn
Year To 31 Dec (RpBn) 2016A 2017A 2018F 2019F 2020F Income Statement Interest income 20,655 20,052 20,505 22,407 24,771 Interest expense (6,876) (5,903) (6,308) (7,216) (8,030) Net interest income 13,779 14,149 14,197 15,191 16,741 Fees and commissions 3,644 3,428 3,770 4,147 4,562 Trading income 425 325 350 400 400 Other operating income 623 617 700 800 800 Total operating income 18,472 18,519 19,017 20,539 22,503 Personnel expenses (4,879) (5,023) (5,173) (5,535) (5,923) G&A expenses (4,217) (4,398) (4,530) (4,757) (5,090) Other operating expenses Pre-provision operating profit 9,375 9,098 9,314 10,247 11,491 Provisions (4,441) (3,513) (3,298) (3,408) (3,633) Loan recovery income Operating profit 4,934 5,586 6,015 6,838 7,858 Non-operating profit (541) (218) (130) (68) (55) Exceptional items Pre-tax profit 4,393 5,367 5,885 6,770 7,803 Income tax (1,600) (1,539) (1,589) (1,896) (2,185) Minority interests (123) (147) (180) (198) (218) Reported net profit 2,669 3,682 4,116 4,677 5,400 Balance Sheet Cash 2,265 2,546 2,795 3,034 3,296 Current account with BI 7,352 7,556 8,713 9,436 10,231 Placements at BI & other banks 7,705 7,231 8,188 9,275 10,512 Short-term investments 17,408 16,060 17,666 19,432 21,375 Government bonds 9,563 10,974 10,974 10,974 10,974 Gross loans 122,385 124,766 138,733 154,863 173,311 Loan provisions (4,568) (4,271) (4,283) (4,515) (4,704) Other assets 11,975 13,395 14,722 16,182 17,788 Total Assets 174,087 178,257 197,507 218,682 242,783 Customer deposits 103,740 101,897 110,240 119,382 129,408 Deposits from other banks 2,873 4,635 5,098 5,608 6,169 Securities and borrowings 19,813 19,965 22,710 25,842 29,416 Other liabilities 11,284 12,588 17,581 22,736 28,913 Total Liabilities 137,709 139,085 155,629 173,567 193,905 Share capital 13,151 13,158 13,158 13,158 13,158 Reserves and others
76 121 Retained earnings 22,716 25,382 28,209 31,445 35,209 Shareholders' equity 35,943 38,660 41,367 44,603 48,366 Minority interest 435 512 512 512 Total Liabilities & Equity 174,087 178,257 197,507 218,682 242,271 Source: BDMN, IndoPremier
Year To 31 Dec 2016A 2017A 2018F 2019F 2020F Growth Ratios (% yoy) Gross loans (5.4)
1.9
11.2
11.6
11.9 Total assets (7.4)
2.4
10.8
10.7
11.0 Customer deposits (9.9) (1.8)
8.2
8.3
8.4 Net interest income
1.0
2.7
0.3
7.0
10.2 Non-interest income 1.8 (6.9)
10.3
10.9
7.8 Total operating income
25.1
13.2
7.7
13.7
14.9 Operating expense (1.5)
3.6
3.0
6.1
7.0 PPOP 3.9 (3.0)
2.4
10.0
12.1 Net profit
11.5
37.9
11.8
13.6
15.5 Profitability Ratios ROAA (%)
1.50
2.11
2.19
2.25
2.34 ROAE (%)
7.6
9.9
10.3
10.9
11.6 NIM (%)
8.60
8.91
8.36
8.09
8.03 Credit cost (bps) 356.5 287.6 250.4 232.2 221.4 Cost/income (%)
49.2
50.9
51.0
50.1
48.9 LDR (%) 118.0 122.4 125.8 129.7 133.9 CAR (%)
23.7
25.0
24.3
23.6
23.0 NPL ratio (%)
2.7
2.3
2.1
2.1
2.1 Provisions/NPL (%) 138.3 150.3 147.5 140.4 130.9 Source: BDMN, 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
report.