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Danareksa Equity Snapshot - BMRI, 24 Januari 2020
January 24, 2020 11:39

Bank Mandiri(BMRI IJ)

Still a keeper

We maintain our BUY call on BMRI with an unchanged GGM-derived TP of IDR9,000 (implying 1.9x 2020F P/BV) following the release of inline FY19 results with IDR27.5tn of net profits. Aside from the corporate segment, BMRI will continue to push its retail segment driven by salary-based loans due to lower credit costs and higher yields. The blended CoF should remain manageable in our view supported by the bank’s active funding strategy to reduce special rates on TD instruments. We therefore expect the blended CoF to touch 3.1% in FY20F. Meanwhile, PSAK 71 implementation should trim CAR by a max of 250bps (IDR21-25tn) from 21.4% as of December 2019. 

FY19 highlights. The IDR27.5tn of net profits were supported by a drop in credit costs to 143bps (FY18: 200bps, 3Q19: 184bps). Loans grew by 10.8% yoy driven by 19.4% yoy growth in the micro segment. NIM, however, only dipped by c.6bps to 5.46% indicating that BMRI’s management was able to manage its assets and liabilities portfolio fairly well amid aggressive policy rate cut last year. Assets quality, meanwhile, stabilised as the gross NPLs ratio reached 2.4% with a 143.4% LLC ratio as of December 2019.

Reliable risk management approach. BMRI emphasised the improved approach toward the issue of assets quality. The bank’s Risk Management team highlighted the tools available which can detect potential troubled borrowers using many parameters. In our view, these tools can help BMRI to have a much more manageable loans portfolio going forward which is more resilient to dynamic changes in the global and domestic macroeconomic environment. BMRI also stated that the potential formation of NPLs this year might reach IDR8tn, mostly coming from the wholesale segment (corporate and commercial). Such an amount is fairly manageable in our view.

Manageable blended CoF. We believe that the blended CoF will remain manageable at 3.1% this year thanks to the bank’s strong retail-based customer deposits. Meanwhile, BMRI’s strategy to selectively offer special rates to institutional customers should provide a limited buffer from a higher blended CoF risk this year. Thus, the contribution of CASA deposits is expected to decline slightly to 58.8% of total customer deposits by December 2020F.

Maintain BUY, TP of IDR9,000. We maintain our BUY call on BMRI with an unchanged GGM-derived TP of IDR9,000 (implying 1.9x 2020F P/BV) assuming 9.0% CoE, 14.6% sustainable ROAE and 3% long-term growth.

… read more 20200124 BMRI