We met with Yap Tjay Soen, the CFO of BNI, yesterday and found out some
interesting highlights:,
NPL will remain a challenge until the next two years (max). Therefore, the bank will continue building up its provisioning coverage to cover the possibility of higher NPL in the future (coverage ratio = 120% at end Dec09). Such NPL will mainly come from medium segment as around 15% of the medium-sized loans are basically restructured loans (=Rp6.7tn, of which Rp2.7tn belong to NPL).
However, as loans is expected to grow higher this year (+15% yoy vs 8.0% yoy in 2009), the NPL will likely maintain below 5% by end of this year (vs. 4.7% at end Dec09).
BNI’s Cost to Income Ratio will likely maintain at around 50-52% as the bank plans to refurbish its branches in order to keep the loyalty of its customers.
At current price, the stock is trading at 2010F P/BV of 1.5x and PER of 9.0x. Despite concerns over rising NPL, we see the management’s serious efforts to improve the current loan underwriting process (please note that majority of additional NPL are coming from the legacy loans). We therefore maintain our buy recommendation on the counter.
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