Analisa Saham BMRI | 30 Januari 2019

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Bank Mandiri (BMRI IJ) - 4Q18 review: A strong end to 2018 (weak core earnings) by Lee Young Jun (
Jan 29, 2019

- For 4Q18, Bank Mandiri (BMRI) reported net profit of IDR6,923.2bn (+17.1% QoQ; +24.3% YoY). This brought full-year net profit to IDR25,015.0bn, achieving 103.4% of our estimate (IDR24,188.2bn). We expect bottom-line growth to normalize downward in 2019, as we anticipate normalization of provisions and non-interest income.

- Loan growth: The bank’s consolidated loans grew 12.4% YoY to IDR820.1tr in 2018. Even though liquidity appears to have tightened, BMRI demonstrated healthy loan and deposit growth through average balance rather than ending balance. Hence, we are now more optimistic that the bank will be able to gear up its balance sheet going forward (Loan growth 2019: Mirae 12.1% YoY vs. BMRI 11.0%).

- Net interest margins: In 4Q18, BMRI’s net interest margin (NIM) came in at 5.74% (-2bps QoQ; -9bps YoY). Given rising market yields and BMRI’s adjustments to funding costs in 2018, we see upside to NIM in 2019.

- Asset quality: BMRI’s consolidated non-performing loan (NPL) ratio surprised us by falling to 2.75% (-25bps QoQ; -71bps YoY). Management guided further NPL and credit cost improvement in 2019 (NPL 2.6%, CoC 1.7%), but our own view is that NPL and credit cost will be flat given the lending rate upcycle and the likelihood of banks being aggressive in 2H19.

- We retain our target price of IDR8,700. However, we upgrade our recommendation on BMRI from Trading Buy to Buy due to the recent share price decline.
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