Interest income, fee income, and loan recovery buoyed quarterly learnings.
Bank Negara Indonesia opened the year on stable financial footing as profits rose 13.3% YoY to $258.48m (Rt3.6t) in Q1, according to UOB Kay Hian.
A growth in interest income (9.6%) and fee income (18.5%) alongside higher loan recovery boosted the bank’s quarterly earnings and sets the stage for another good year ahead, said analyst Alexander Margaronis.
The 11% increase in loan growth came largely from corporate loans and not the usual state-owned enterprises (SOE) due to slow undrawn credit from SOE companies which management had highlighted in the last quarter that SOE loan growth could be more challenging to maintain this year.
Here’s more from UOB Kay Hian:
Net interest income (NII) grew 9.5% yoy, driven by interest income (+9.6% yoy) vs interest expense growth of 10% yoy. Strong liquidity and cheap deposit collection supported lower cost of funds at 2.8%, down 20bp yoy. This also led to a smaller NIM compression of 5.4% (1Q17: 5.6%) as loan yield fell 40bp to 9.6% (due to 1Q18 loan rate adjustment for the year). Thus, we expect NIM to sustain at around this level for 2018.
Steady NPL ratio in 1Q18 although some pressures on asset quality remained. Loans at risk improved to 10% in 1Q18 (1Q17: 12%) with lower credit costs although we note the huge write-offs of Rp8.7t in 2017. Write-offs remained high at Rp1.8t in 1Q18 although management said that these will be below Rp7t in 2018. Both special mention loans (SML) and non-performing loans (NPLS) increased in 1Q18. There is off course some seasonality of higher NPL in the first two quarters of the year. Moreover, management expects some issues with large debtors to be resolved which could take some pressure off asset quality.
New additional capital requirements have little impact on BBNI. Among peers, BBNI has the lowest CAR at 18.5% currently. BNI estimates that even after the new capital requirements, its CAR will still be at 16% in 2020 so there is no issue of equity raising.
BBNI could continue to record double-digit earnings growth in 2018-19. Among peers, BBNI has a better operating performance with good PPOP growth and high loan growth. BBNI and BBRI maintain sufficiently low NPL ratio with manageable NPL pressures. ROE also continues its upward trend while NIM pressures are sustainable. The deposit franchise is improving with better and cheaper collection while fee income was very strong at 18.5% yoy in 1Q18.
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