Given the closer gap between BBNI and big banks, we believe that BBNI deserves a re-rating in its valuation. Furthermore, post 22.5% 3-year CAGR growth, loans already grew at a softer rate of 14.1% YoY in September 2014 with slower economic growth in 3Q14 at 5.01%. Thus, we project loans will grow at more sustainable figure of 15.1-15.2% in 2015-16F. Apart from that, going forward margin should slightly normalize. In 9M14, NIM stood at 6.1% despite higher blended CoF of 3.3%. Nonetheless, NIM will fall to 5.7% in FY15-16F due to stable blended CoF at 2.9%. We upgrade our target price to IDR6,750 derived from DBV model with lower discount at 25% from previously 30% as BBNI deserves a re-rating. This target price implies PBV 2.0-1.7x for 2015-16F. BUY maintained.
Normalized loans growth
Following 22.5% 3-year CAGR loans growth, BBNI has opted to slow its loans growth in the current macroeconomic landscape marked by tighter liquidity conditions. As a result, in September 2014, loans only grew 14.1% YoY. In addition, BI’s LTV regulation led to much slower consumer loans growth of only 3.3% YoY, with mortgages still dominating (they accounted for 62.8% of the total consumer loans as of September 2014). All in all, we forecast loans growth of a more sustainable 15.1-15.2% in 2015-16F with manageable gross NPLs at 2.3% as of December 2015, then slightly down to 2.2% as of December 2016F.
Meanwhile, Net Interest Margin (NIM) also stable at 6.1% in 9M14 despite a higher blended CoF (up 90 bps to 3.3% in 9M14). This achievement was backed by the management’s policy to cherry pick special TD rates for selected customers and re-price policy on its loan interest rate by around 50-75 bps in general. Nonetheless, we forecast NIM will slightly fall to 5.7% in FY15F and flat at that figure in FY16F as we believe that blended CoF will stay at 2.9% for FY15-16F due to flat BI rate outlook as well as fed rate increase in 2015.
BUY, TP of IDR6,750
With the normalized loans growth and stable margins as well as the appreciation on BBNI’s stock (YtD up by 50.0%) we believe BBNI deserves a re-rating hence lower gap with big banks. Using the Deposit Base Valuation (DBV) model with a 13.7% cost of equity, 6.0% terminal growth rate and lower discount rate of 25% from previously 30%, we arrive at a new Target Price of IDR6,750. Our Target Price translates into PBV 2015-16F of 2.0-1.7x. Maintain BUY.