Analisa Saham BBTN : Big Miss on Higher Provision

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BBTN IJ – FY18 Results: Big Miss on Higher Provision
Alvin Baramuli & Henry Wibowo – RHB Sekuritas 

Maintain NEUTRAL, TP IDR2,700, 8% upside. 4Q18 earnings down 44% YoY (-29.6% QoQ), bringing FY18 to IDR2.8trn (-7.2% YoY) –  85%/88% of RHB/consensus FY18F on higher-than-expected provision in 4Q18 (+88.6% QoQ, +196.2% YoY) FY18 to IDR1.7trn (+93.9% YoY) with CoC to 0.8% (9M18: 0.6%, FY17: 0.5%).

IFRS 9 anticipation raised provision expenses (+94% YoY) in FY18. Higher-than-expected provision expense was a result of preparation for the IFRS9 implementation in Jan 2020. Management guided for provision coverage in FY19F-20F to be around 79% and 100%. For FY19F, its provision is expected to be around c.IDR1.7-8trn (flattish YoY) charged on P&L, while any remaining provision charges could go to retained earnings in FY20F. Bank Tabungan Negara is also exploring the option of a rights issue next year, should its CAR (FY18: 18.2%) go lower than estimated.

FY18 loan grew 19.5% but guiding lower target of 13-15% in FY19F. Management has guided for lower loan growth target due to asset quality focus and lower mortgage subsidy disbursement.

Higher NPL ratio of 2.8% in FY18, from shariah business. Nominal NPL grew +26.6% YoY mainly from IDR1trn downgrade in its shariah business in the construction segment. Management guided that this is a result of the use of the 3-pillars criteria in 2018, after the relaxation in 2017, which required a downgrade despite the accounts meeting interest payments. Management targets c.2.4% NPL ratio in FY19F.

Funding competition to suppress NIM. FY18 deposits grew +19.3% YoY mainly due to significant TD growth of +33.9% YoY (+24.3% QoQ) vs CASA growth of +4.5% YoY (+10.8% QoQ). LDR improved from 9M18: 112.8% to FY18: 103.3%, but it was at the expense of NIM compression (FY18: 4.3% vs 9M18: 4.4%) since funding mostly came from expensive TD. Management expects NIM to be flat at c.4.3% in FY19F, and assumes 1x increase in 7-DRRR by 25bps this year.

Link to report: RHB