Enjoy Acceleration in Performance

  Buy Dec 2018 TP (IDR) 9,675 Consensus Price (IDR) 9,029 TP to Consensus Price +7.2% vs. Last Price +22.5% Shares data

  The highest growth since 4Q16 in interest income and net interest income respectively buoyant of 16.3% and 17.1% were potent drivers for the acceleration in net profit.

  NIM Recovery Thanks to the 2Q18’s net interest margin (NIM) of 5.6% so that BBNI enjoyed rosier net internet income. The 2Q18’s NIM was more buoyant than the 4Q17 and the 1Q18’s NIM of 5.4% and 5.5%, respectively. BBNI succeeded to whittle away the cost of deposit from 3.0% to 2.8% despite the slight decline of loan yield from 10.3% to 10.2%.

  Improvement in Credit Quality The 2Q18’s non-performing loan (NPL) ratio settling at 2.16% marked the further decline in NPL figures snapping at its highest level of 3.12% in 3Q16.

  The current NPL figures were the lowest since the 2Q15 of 2.15%. On the other hand, the trend of lagging credit growth ceased as it enjoyed the growth of 11.1% in the 2Q18’s credit (vs. the 1Q18’s credit of 10.8%). The low NPL and the recovery in credit are the logical takeaway for the profit growth in 2018-2019.

BBNI IJ

  Target Price of IDR9,675 We use the assumption of forward P/B of 1.4x (1 SD higher than the last 4- year average of 1.2x) as the basis of valuation method. The target price implies a 2018E P/B of 1.6x (vs. the current P/E of 1.3x) Bank Negara Indonesia Tbk | Summary (IDR bn)

  Reuters BBNI.JK Raphon Prima

  Finance Bank Bloomberg

  25.94 Avg. Trd Val - 3M (bn) 197.39 Foreign Ownership 19.7%

  39.7 Outstanding sh.(mn) 18,649 Market Cap (IDR bn) 147,324 Market Cap (USD mn) 10,594 Avg. Trd Vol - 3M (mn)

  Last Price (IDR) 7,900 Price date as of Aug 03, 2018 52 wk range (Hi/Lo) 10,175 / 6,750 Free float (%)

• 62 21 797 6202, ext:214

  88.2% 83.5% 83.7% 83.1%

  12M

  raphon@nhsec.co.id

  2016/12A 2017/12A 2018/12E 2019/12E

  Interest Income 43,768 48,178 55,837 64,525

  growth 18.6% 10.1% 15.9% 15.6%

  Operating Revenue 41,299 45,212 50,071 58,554 Net profit 11,339 13,616 15,866 19,744 EPS (IDR) 608 730 851 1,059

  EPS growth 25.1% 20.1% 16.5% 24.4%

  BVPS (IDR) 4,786 5,411 5,954 6,715 Net Interest Margin 6.0% 5.4% 5.4% 5.5% Loan/Deposits

  Rel. Ret. -14.7% 7.0% -0.3% 4.6%

  Abs. Ret. -20.2% 13.7% 2.3% 8.6%

  3M

  NPL

  1M

  Share Price Performance YTD

  Dividend yield 3.9% 2.6% 3.8% 4.7% Source: Company Data, Bloomberg, NHKS Research

  ROIC 14.8% 14.0% 13.5% 14.1% P/E 9.1x 13.6x 9.3x 7.5x P/BV 1.2x 1.8x 1.3x 1.2x DPS (IDR) 213 256 298 371

  2.0% 2.1% 2.1% 2.3%

  Please consider the rating criteria & important disclaimer NH Korindo Sekuritas Indonesia Company Report | Aug 06, 2018 Bank Negara Indonesia Tbk (BBNI) Enjoy Acceleration in Performance Acceleration in 2Q18’s Net Profit BBNI enjoyed the surge of 19.0% y-y to IDR3.8 trillion in the 2Q18’s net profit. The 2Q18’s growth in net profit beat the 1Q18’s net profit of 13.0%.

  13.5% 14.3% 15.0% 16.7%

  ROE

  3.0% 2.3% 1.9% 2.2%

  ROA

  BDO Unibank 11,171 53,371 6.4% 4.1% 9.5% 21.5x 2.0x 0.9% Metropolitan Bank 5,836 41,612 6.5% 3.8% 8.3% 13.1x 1.1x 1.2% Philippine Island Bank 8,396 38,084

  Singapore

  Philippine

  Bank of Ayudhya 8,896 64,128 7.5% 3.7% 10.7% 12.3x 1.3x 2.1%

  Bangkok Bank 11,816 94,446 6.7% 2.4% 8.9% 11.3x 1.0x 3.2% Siam Commercial 14,539 92,841

  Thailand

  CIMB 13,316 124,711 17.0% 2.4% 9.8% 11.5x 1.2x 4.3% Malayan Banking 26,392 188,433 9.5% 1.8% 10.7% 13.5x 1.5x 5.6% Hong Leong 5,019 50,939 4.3% 1.6% 10.0% 12.0x 1.2x 2.2%

  Malaysia

  DBS 49,554 387,334 11.1% 1.9% 10.3% 14.0x 1.4x 5.4% UOB 33,174 268,287 19.2% 1.8% 11.3% 12.0x 1.3x 3.7% OCBC 35,669 340,370 20.0% 1.7% 11.2% 11.2x 1.2x 3.2%

  BBNI 10,594 52,203 9.4% 5.6% 15.5% 10.5x 1.3x 3.1% BBRI 28,796 82,886 11.0% 7.9% 19.6% 13.6x 2.6x 3.2% BMRI 23,611 82,772 44.3% 5.5% 14.5% 14.6x 2.0x 2.7% BBCA 40,232 55,219 12.2% 6.5% 18.8% 24.1x 4.3x 1.1%

  Company Market Cap (USD mn) Total Asset (USD mn) Net Profit Growth (LTM) Net Interest Margin (LTM) ROE (LTM) P/E (LTM) P/BV (LTM) Dividend Yield

• 3.9% 3.5% 12.4% 17.8x 2.1x 1.8%

  Source: Bloomberg, NHKS research

  A number of banks in Malaysia and Singapore such as OCBC, CIMB, and Malayan Banking can outpace the growth of 10%-20% in net profit posted by Indonesia’s banks. However, those three banks have bigger assets than does Indonesia’s bank have.

  Although facing the challenge of decline in reference rate, Indonesia’s banks are still capable of maintaining NIM topping 5% higher than the NIM achieved by its peers in ASEAN. The higher NIM is capable of being translated into a higher ROE.

  ASEAN Banks A Glance at BBNI BBNI is the fourth-biggest bank in Indonesia after BBRI, BMRI, and BBCA and dominates 9.2% the credit market share in Indonesia. Its credit distribution focuses on the corporate segment contributing 50% to its overall credit. As the state-owned bank, it has a significant exposure to the credit distribution. Of note, 20% of its overall credit is given to the debtors coming from the stated-owned enterprises inextricably linked to the public sector. Indonesian’s Bank Competitiveness in ASEAN The banking industry in Indonesia is the investment priority in ASEAN as it offers higher credit rate than do its peers in ASEAN. It is the takeaway factor to the excellent characteristic the banking industry in Indonesia has.

  Aug 06, 2018

  Company Report

• 13.0% 3.2% 11.7% 11.6x 1.3x 3.9%

  Company Report

  Aug 06, 2018

  Performance Highlights Interest Income (IDR bn) | 2Q15 - 2Q18 Net Profit (IDR bn) | 2Q15 - 2Q18

  Source: Company, NHKS research Source: Company, NHKS research

  Gross Loan (IDR bn) | 2Q15 - 2Q18 Deposit (IDR bn) | 2Q15 - 2Q18

  Source: Company, NHKS research Source: Company, NHKS research

  Loan Composition Loan Yield, Cost of Deposit, NIM | 1Q15 - 1Q18

  Source: Company, NHKS research Source: Company, NHKS research

  Company Report

  Aug 06, 2018

  Multiple Valuation Forward P/B band | Last 4 years Dynamic Forward P/B band | Last 4 years

  Source: NHKS research Source: NHKS research

  Rating and target price update Target Price Revision Date Rating Target Price Last Price Consensus vs Last Price vs Consensus

  11/17/2017 Buy 9,550 (Dec 2018) 7,675 8,169 +24.4% +16.9% 02/14/2018 Hold 10,825 (Dec 2018) 9,525 9,765 +13.6% +10.9% 05/04/2018 Hold 8,125 (Dec 2018) 7,475 9,941 +8.7% 18.3%

• 08/06/2018 Buy 9,675 (Dec 2018) 7,900 9,029 +7.2% +22.5%

  Source: NHKS research, Bloomberg

  Analyst Coverage Rating Closing and Target Price

  Source: Bloomberg Source: NHKS research

  NH Korindo Sekuritas Indonesia (NHKS) stock ratings

  1. Period: End of year target price

  2. Rating system based on a stock’s absolute return from the date of publication : Greater than +15%

   Buy : -15% to +15%  Hold : Less than -15%  Sell

  Company Report

  Aug 06, 2018

  Summary of Financials

DISCLAIMER

INCOME STATEMENT BALANCE SHEET

  

This report and any electronic access hereto are restricted and intended only for the clients and related entity of PT NH Korindo Sekuritas Indonesia. This

report is only for information and recipient use. It is not reproduced, copied, or made available for others. Under no circumstances is it considered as a selling

offer or solicitation of securities buying. Any recommendation contained herein may not suitable for all investors. Although the information here is obtained

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and agents disclaim any responsibility and liability for claims, proceedings, action, losses, expenses, damages, or costs filed against or suffered by any person

as a result of acting pursuant to the contents hereof. Neither is PT NH Korindo Sekuritas Indonesia, its affiliated companies, employees, nor agents liable for

errors, omissions, misstatements, negligence, inaccuracy arising herefrom. All rights reserved by PT NH Korindo Securities Indonesia ^{BBNI Summary Last Price (IDR) 7,900}

^{Target Price (IDR) 9,675 2016/12A 2017/12A 2018/12E 2019/12E}

^{Rating: Buy ROE 13.5% 14.3% 15.0% 16.7% ROA 2.0% 2.1% 2.1% 2.3% ROIC 14.8% 14.0% 13.5% 14.1% Opera ti ng ROA 7.4% 6.9% 6.6% 6.8%}

^{in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E Pre-Provi s i on ROA 4.0% 3.7% 3.6% 3.7%}

^{Interest Income 43,768 48,178 55,837 64,525 Non-Interes t Income/Op. Rev 27.4% 29.4% 26.5% 26.9%}

^{Growth (% y/y) 18.6% 10.1% 15.9% 15.6% Cos t/Income 46.5% 46.1% 46.0% 46.0%}

^{Interes t Expens es (13,773) (16,240) (19,046) (21,716) Ca s h Di vi dend (IDR bn) 3,969 4,766 5,553 6,910}

^{Net Interest Income 29,995 31,938 36,791 42,809 Di vi dend Yi el d (%) 3.9% 2.6% 3.8% 4.7%}

^{Net Interest Margin 6.0% 5.4% 5.4% 5.5% Pa yout Ra ti o (%) 35.0% 35.0% 35.0% 35.0%}

^{Net Fee Income 6,473 7,314 7,920 9,215 Equi ty/As s ets 14.8% 14.2% 13.8% 13.8%}

^{Tra di ng Income 1,288 1,590 1,330 1,839 Loa n/Depos i ts 88.2% 83.5% 83.7% 83.1%}

^{Other Opera ti ng Income 3,544 4,370 4,030 4,690 Loa n/As s ets 65.2% 62.2% 61.6% 62.0%}

^{Operating Revenue 41,299 45,212 50,071 58,554 NPL 3.0% 2.3% 1.9% 2.2%}

^{Opera ti ng Expens es (19,217) (20,863) (23,044) (26,948) Loa n Los s Res erves /Loa ns 4.2% 3.3% 2.8% 2.9%}

^{Pre-provisioning OP (PPOP) 22,082 24,349 27,027 31,606 Depos i ts /Li a bi l i ti es 86.8% 86.8% 85.4% 86.6%}

^{Provi s i on for Impa i rment (7,853) (7,126) (7,054) (6,758) CASA/Depos i ts 64.6% 63.1% 64.8% 65.3%}

^{EBT 14,303 17,165 19,880 24,739 Ti me Depos i ts /Depos i ts 35.4% 36.9% 35.2% 34.7%}

^{Income Ta x (2,893) (3,395) (3,976) (4,947) Pa r Va l ue (IDR) 375 375 375 375}

^{Non-control l i ng Interes t (71) (154) (39) (48) Tota l Sha res (mn) 18,649 18,649 18,649 18,649}

^{Net Profit 11,339 13,616 15,866 19,744 Sha re Pri ce (IDR) 5,525 9,900 7,900 7,900}

^{Growth (% y/y) 25.1% 20.1% 16.5% 24.4% Ma rket Ca p (IDR tn) 103.0 184.6 147.3 147.3}

^{in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Ca s h 11,168 11,578 14,793 14,958 Pri ce /Ea rni ngs 9.1x 13.6x 9.3x 7.5x}

^{Pl a cement i n Ba nks 70,107 82,629 94,899 108,703 Pri ce /Book Va l ue 1.2x 1.8x 1.3x 1.2x}

^{Net Loa ns 376,595 426,790 482,512 547,434 Pri ce/Op. Revenue 2.5x 4.1x 2.9x 2.5x}

^{Inves tment 88,493 117,292 132,390 150,120 PE/EPS Growth 0.4x 0.7x 0.6x 0.3x}

^{Fi xed As s et 21,972 22,805 22,451 23,683 EV/Opera ti ng Revenue 3.2x 4.9x 3.9x 3.3x}

^{Other As s ets 34,698 48,237 58,296 63,920 EV/PPOP 6.1x 9.2x 7.2x 6.2x Total Assets 603,032 709,330 805,340 908,819 EV (IDR bn) 134,155 223,559 195,645 196,154}

^{Depos i ts 445,769 528,275 593,030 678,311 Op. Revenue CAGR (3-Yr) 14.6% 12.5% 12.4% 12.3%}

^{Borrowi ng 40,193 48,204 60,912 61,694 EPS CAGR (3-Yr) 7.8% 8.1% 20.5% 20.3%}

^{Other l i a bi l i ti es 27,816 31,948 40,356 43,590 Ba s i c EPS (IDR) 608 730 851 1,059}

^{Total Liabilities 513,778 608,427 694,297 783,595 Di l uted EPS (IDR) 608 730 851 1,059}

^{Ca pi ta l Stock 9,055 9,055 9,055 9,055 BVPS (IDR) 4,786 5,411 5,954 6,715}

^{Reta i ned Ea rni ngs 50,798 60,314 71,668 85,859 Op. Revenue PS (IDR) 2,215 2,424 2,685 3,140}

^{Shareholders' Equity 89,254 100,903 111,043 125,223 DPS (IDR) 213 256 298 371}

^{in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Net Income 11,339 13,616 15,866 19,744 DCF (IDR bn)}

^{Deprec & Provi s i on 7,415 6,454 381 3,822 NOPAT 17,616 19,534 21,622 25,285}

^{Chg. In Worki ng Ca pi ta l (1,325) (4,103) (13,913) (16,264) +Depr./Amor. 7,415 6,454 381 3,822}

^{CFO 17,429 15,967 2,333 7,301 -Chg. i n Loa n (63,523) (64,270) (55,028) (67,559)}

^{Net Cha nges i n Loa n (63,523) (64,270) (55,028) (67,559) -Incr. (Decr.) i n Worki ng Ca p. (1,325) (4,103) (13,913) (16,264)}

^{CFI (92,923) (87,544) (70,854) (87,636) (Unl evered) FCFF (39,816) (42,386) (46,938) (54,717)}

^{Di vi dends Pa i d (2,267) (3,969) (4,766) (5,553) WACC}

^{Net Cha nges i n Depos i t 61,516 80,558 64,755 85,282 Cos t of Debt (Ta x Adj.) 9.5% 7.3% 8.4% 8.9%}

^{CFF 70,153 85,174 71,482 80,500 Cos t of Equi ty (COE) 10.4% 11.6% 11.2% 11.6%}

^{Net Changes in Cash (5,341) 13,597 2,961 165 WACC (%) 10.2% 10.7% 10.4% 10.8%}

^{RIM Sprea d (FROE-COE) (%) 4.0% 3.7% 4.5% 6.2% Res i dua l Income (IDR bn) 3,162 3,272 4,518 6,845}

^{By Geography % Shareholders % Equi ty Cha rge 8,177 10,345 11,348 12,899}

^{Indones i a 80.3 Republ i c of Indones i a 60.0 EVA Uni ted Sta tes 8.0 Va ngua rd Group 2.0 Inves ted Ca pi ta l (IDR bn) 108,328 129,447 149,108 171,955 Luxembourg 3.6 Bl a ckrock 1.3 ROIC-WACC (%) 6.1% 4.4% 4.1% 3.9% Irel a nd 1.8 Prudenti a l Pl c 1.3 EVA (IDR bn) 6,617 5,682 6,088 6,706}

  CASH FLOW STATEMENT DCF, RIM & EVA OWNERSHIP PROFITABILITY & STABILITY _{August 3, 2018 Dec 2018}

  ^{Analyst: Raphon Prima}