Bank Tabungan Negara's net profit up 21% to US$44m in 1Q17

Thanks to a rapid 18.7% loan expansion.

Despite seasonality in NIM and NPL for 1Q17, Maybank Kim Eng said Bank Tabungan Negara (BBTN) managed to post 21% YoY profit growth.

"Driven by robust mortgage demand and significant improvement in loan quality, we believe the bank will maintain this strong EPS growth until YE17F."

Here's more from Maybank Kim Eng:

BBTN’s 1Q17 net profit of IDR594b (US$44m) (+21% YoY) was in line with our estimate. Its rapid 18.7% YoY loan expansion helped slow down NIM compression to 4.3% in 1Q17; this was a decrease from the normalised level of 4.8% in FY16, which was driven by lower lending rates and the seasonal QoQ decline of CASA portion in 1Q.

We have also anticipated the seasonal QoQ increase in NPL to 3.3% in 1Q17 due to an expected acceleration in loan repayment observed every 4Q.

Despite the 50bps QoQ NPL hiccup in 1Q17, there was no change in BBTN YE17 guidance of 2.5%. Based on our estimate, it is achievable as the portion of BBTN’s old subsidised mortgage is depleting.

The bank has also swiftly shifted towards SOE lending in both construction and commercial segment, which should lower the risk profile of its loan portfolio.

Moreover, BBTN is improving its collection system through IT development and employee regeneration. The bank is also in the process of tying up an agreement with a third party business to help accelerate NPL settlement. These should allow a smoother NPL cycle in the future.