BBNI - FY22 likely beats expectation

FY22 net profit should surpassing KBVS’ and consensus’ ‘22F expectations while soften ’23F earnings and loan growth are acceptable in our view, as post covid recovery momentum has made high-base net profit in 2022. Transmission of rising policy rate to loan yield and CoF will play important role in ‘23F, aside from continuing provisions improvement which become the growth cushion. We might see a slight NIM contraction, yet asset quality should remain manageable. Maintain BUY, with target price of IDR10,600 (1.4x 2022F P/B). Strong earnings continue in 11M22 BBNI continue to record strong monthly result throughout 2022. In 11M22 BBNI booked IDR37.2 tn net interest income or up 7.5% yoy. Provision expenses continue to improve and make substantial impact to the bank only net profit growth which surged 78.8% yoy to IDR17.03 tn. With such achievement and the upcoming Dec ‘22 steady earnings growth, we believe FY22 net profit figures will surpassing KBVS’ and consensus’ expectations. In Nov ‘22 stand alone, net interest income grew strongly at 12.87% yoy and improving provisions by 36.2% yoy has lifted net profit to IDR1.54 tn or 42.5% higher yoy. Meanwhile, the 3.8% mom slips in net profit as a result of 34.6% mom higher provisions sounds acceptable as the bank taking the advantage on strong growth momentum to front-loading provision. Soften yet reasonable growth in 2023F Slower net profit growth in 2023F seems reasonable as headwinds from macro uncertainty and higher interest rate could impacting loan demand appetite, especially from the consumer loan segment. However, a double-digit growth achievement in 2023F net profit still deserves two thumbs up in our view on top of high-based net profit post covid recovery momentum. (FY21 +232% yoy and ‘22F at 58.0% yoy). Our conservative 2023F net profit for BBNI at 16.0% yoy (consensus at 26.1% yoy) will be driven by 10% and 16% yoy growth in PPOP and operating profit, respectively. Manageable asset quality and recent front-loading provisions, which resulting to provision improvement, will also underpin overall earnings growth in 2023F. Solid loan and liquidity outlook In Nov ‘22, loan growth arrived at 10.1% yoy or within ‘22F management guidance range of 7.0%- 10.0%. The growth remains underpin from low-risk segment. Corporate segments saw 24.9% yoy growth, while enterprise, KUR and payroll segment at 20.5% yoy, 20.9% yoy and 16.6% yoy, respectively. We expect ‘23F loan to grow at 9.0% yoy or at upper range of management’s guidance of 7.0%-9.0% yoy. On liquidity side, solid growth across deposits segments remain persists with demand deposits booked the highest growth at 16.2% yoy and saving deposits grew by 6.0% yoy. This has made CASA continue solid which arrived at 70.1% or grew by 11.5% yoy. Persistency solid asset quality metrics On key performance indicators, NIM stood at 4.8% amid higher loan yield and at the upper-range of management’s forecast (4.6%-4.8%) and around 30bp above our ‘22F figures. Cost of Fund (CoF) which has bottoming in 3Q22, has started to increase and reached 1.53%. Improving asset quality metrics continue in place, with NPL ratio at 3.0%, LAR including Covid at 18.4% (3Q22 at 19.3%), robust LAR and NPL coverage at 45% and 2.8x. Our ‘23F NIM for BBNI is at 4.7%, largely aligned with BBNI’s ‘23F upper-range target. Maintain BUY with target price of IDR10,600 Our target price is based on Gordon Growth Model-derived fair P/B of 1.4x. BBNI is currently trading at 1.2x ‘23F P/B, or at its 10-year historical mean. Risks to our call are: a) lower-than-expected loan growth, NIM and loan yield, b) higher than expected credit cost and c) higher inflation, slowing economic activity and d) deteriorating asset quality.