Bank Negara Indonesia may post 18% earnings growth for 2020: analyst

It will be driven by a projected NIM recovery and a decline in provision expenses.

Bank Negara Indonesia (BBNI) is expected to record an 18% YoY net profits growth in 2020, underpinned by a 10bp net interest margin (NIM) expansion and lower provisions, reports UOB Kay Hian.

Analyst Raphon Prima expects BBNI to post a turnaround in 2020 on the back of a 10bp NIM recovery which translates to 11% YoY net interest income growth; and a 1.5% YoY decline in
provision expenses after the IFRS9 implementation.

The bank said that additional provisions will be booked under retained earnings in view of the IFRS9 regulation which will be implemented by the end of the month. Coverage ratio should rise from 133.5% in 2019 to 180-200% in 2020, which in turn will give room for lower credit costs that hit a historical peak of 1.6% last year, the report noted.

BBNI reported a 2019 net profit growth of only 2.5% YoY as a result of aggressive provisioning. Provisions totalled $257.28m (Rp3.4t) in Q4 2019, 133% QoQ higher compared to the previous quarter and 66% YoY higher than a year earlier.

The company also claimed that it had downgraded classifications of several corporate loans which were already on its watch list to the non-performing category and consequently allocated provisions. This resulted in a rise in non-performing loans (NPL) ratio from 1.9% in Q3 2019 to 2.3% in Q4. 

Meanwhile, its loans growth slowed to 8.6% YoY in 2019 whilst deposit growth is at 6.1% YoY. Despite this, the private corporate segment still posted a growth of 19.6% YoY. To mitigate pressure on cost funding, BBNI focused on selective loan distribution amid slowing deposit growth, noted Prima.