June 23, 2015 Banks...PT Trimegah Securities Tbk - SECTOR FOCUS 1 Consumer and corporate-based banks will be better performers The main concerns in investing in Indonesian banks stocks

SECTOR FOCUS PT Trimegah Securities Tbk - www.trimegah.com 1

Consumer and corporate-based banks will be better performers The main concerns in investing in Indonesian banks stocks now are dete-

riorating asset quality risk and temporary disturbing tax issues. However,

our deeper analysis suggests that banks with higher exposure to corpo-

rate and consumer loans are expectedly have lower rising NPL risk due to

better loan performance. We therefore recommend to own consumer-

based banks (BBTN, BJBR) for their minimal NPL risk and corporate-based

banks (BBNI, BMRI) for their high proportion of non-interest income. Our

corporate-based banks picks are also less exposed to regulatory tax risks

and expectedly better NPL performance—corporate debtors have more

stable cash flows and strong balance sheet. Longer term we expect the

sector to benefits from the execution of government infrastructure spend-

ing.

Rising NPL risk is considerably low and concentrated among some sectors and debtors Data shows that absolute NPL amount growth had already peaked in

2M15. Thus, we expect a rising NPL ratio in the upcoming months but

more because of slower loan growth than new NPL formation. Moreover,

our finding suggest that new NPL formation risk is higher among some

sectors (construction, mining, and trading) and among micro and SME

debtors. That being said, we recommend to underweight BBRI and BDMN

since both have high exposure to such sectors as well as micro and SME

loans.

Low impact from the disturbing tax issues The impact of the recent non-tax deductible written off loans without tax

ID issues will only have small impact to most banks under our coverage.

BDMN is the bank with the highest earnings risk from this issue consider-

ing its high proportion of auto loans and white goods financing through its

subsidiaries. However, this is also subject to the regulation implementa-

tion, i.e., whether it will be implemented in the financing sector as well.

Reiterate Overweight The sector had been over punished by negative sentiment regarding asset

quality and tax noises. However, the recent share price decline should

provide an opportunity to Buy. As our analysis says that things may not

be as bad as it seems, we reiterate our Overweight call to the sector with

BBTN (high earnings visibility, minimum NPL risk), BJBR (a turnaround

play with minimum NPL risk), BBNI and BMRI (beneficiary of government

infrastructure spending with high proportion of non-interest income) as

our top picks.

Banks Sector Focus

OVERWEIGHT

June 23, 2015

Things May Not Be As Bad As It Seems

Market Capitalization

Angga Aditya Assaf

([email protected])

Companies Data

Ticker Price Jun 22 (Rp)

TP (Rp) Rec 2015F PBV (x)

2015F PE (x)

2015F EPS Growth

(%)

2015F ROE (%)

2015F Div Yield

(%)

BBTN 1,125 1,300 Buy 0.9 8.3 27.3 10.6 2.4

BJBR 895 1,300 Buy 1.1 7.3 6.9 15.7 7.1

BBNI 5,600 6,400 Buy 1.6 9.5 1.5 16.3 2.6

BMRI 9,975 11,200 Buy 2.0 11.1 5.3 17.6 2.1

BTPN 3,750 4,300 Buy 1.6 10.8 9.4 14.5 0.0

BJTM 483 575 Buy 1.1 7.4 3.3 15.2 8.7

BBRI 10,950 12,300 Buy 2.3 11.5 -2.8 20.4 2.2

BBCA 13,700 11,400 Sell 3.7 20.2 1.8 18.5 1.1

BDMN 4,370 4,100 Sell 1.2 15.9 0.5 9.1 1.9

Ups. (%)

15.6

45.3

14.3

12.3

14.7

19.0

12.3

-16.8

-6.2

Mkt Cap (Rp bn)

11,770

8,591

103,388

230,422

21,682

7,133

267,426

335,006

41,466

BBNI

11%

BBRI

27%

BMRI

23%

BBCA

30%

BJTM

1%

BBTN

1%BTPN

2%

BJBR

1%BDMN

4%

PT Trimegah Securities Tbk - www.trimegah.com SECTOR FOCUS 2

Figure 1. Indonesian banks liquidity, loan and deposit YoY growth trend (%)

Source: Bank Indonesia, Trimegah Research

Yes, the loan growth is slowing. But at least, liquidity condition is less volatile than in 2007-2008 Yes, we know that Indonesian banks are experiencing slowing loan growth which then resulted in rising NPL ratio.

However, the condition is better due to less volatile liquidity condition as reflected by relatively stable deposit

growth compared to 2007-2008 period. The current slowing condition is more because of weaker loan demand

rather than tight liquidity.

Loan growth was even slower during 2009, with more volatile liquidity condition Data from Bank Indonesia shows that the loan growth was even slower during 2009 as indicated by steeper

decline in growth across all types of loans while at the same time, deposit growth was also relatively volatile.

Hence, the current condition is relatively better compared to 2009. Banking industry now needs something to

attract loan demand.

Growth momentum will start in 2H15 at the earliest We view that the momentum of rising growth will start somewhere in 2H15, at the earliest, as the government

starts executing infrastructure spending. This should lead to pick up in private and public consumption as well as

gross fixed capital formation.

Figure 2. Indonesian banks detailed loan growth trend (%)


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Working Capital Loans Investment Loans Consumption Loans

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LDR (%, RHS) YoY Loan Growth YoY Deposit Growth


Figure 4. Indonesian banks non-performing loans ratio trend (%)


NPL ratio to rise but more because of slower loan growth rather than new NPL formation Figure 3 illustrates that absolute NPL amount growth had already peaked in 2M15 (+36.9% YoY), indicating less

risk of new NPL formation in the following quarters. Thus, we still foresee NPL ratio to increase but more because

of slower loan growth rather than new NPL formation. NPL ratio is expected to rise to 2.7% in FY15 assuming

35% absolute NPL amount growth and 9% YoY loan growth.

Rising NPL risks are rather concentrated in some sectors and debtors Our finding suggest that rising NPL risks are more concentrated in sectors like construction, agriculture, mining,

and trading, with the former has the highest NPL ratio and the latter contributes largely to absolute NPL amount

growth. Furthermore, our deeper analysis on each bank’s loan book shows that rising NPL risks is higher among

micro and SME debtors. Conversely, corporate debtors are performing better in terms of asset quality. This is

also proven lower leverage ratio and net debt/EBITDA multiple compared to 1997-98 periods and also much

higher interest coverage ratio compared to 1997-99 periods.

A piece of strategy: overweight consumer-based banks and corporate-based banks Our analysis lead to the expectation that consumer-based banks (BBTN, BJBR) and corporate-based banks

(BBNI, BMRI) on the back of lower rising NPL risks as reflected by lower absolute NPL YoY growth.

Figure 3. NPL amount and loans growth trend


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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

NPL YoY growth Loan YoY growth

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Working Capital NPL (%) Investment NPL (%) Consumption NPL (%) Industry NPL (%)


Figure 5. Sectors NPL ratio trend(%)


Figure 6. Sectors NPL amount YoY growth


Figure 7. Sectors NPL amount YoY growth (...cont’d)


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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Agricultute NPL (%) Construction NPL (%) Mining and Quarrying NPL (%)

Electricity, Gas & Water NPL (%) Trade, Restaurants, and Hotels NPL (%) Manufacturing NPL (%)

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Construction Manufacturing Trade, Restaurants, and Hotels Agriculture

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mining and Quarrying Electricity, Gas & Water Fishery


Figure 8. Net debt/equity ratio of listed Indonesian corporations (excl. finance)

Source: Bloomberg, Trimegah Research


Figure 9. Net debt/EBITDA multiple of listed Indonesian corporations (excl. finance)

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Figure 10. Interest coverage ratio of listed Indonesian corporations (excl. finance)

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Figure 11. BBRI loan book split and segmental NPL ratios and growth

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2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1

Micro NPL ratio Micro NPL YoY growth (RHS)

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2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1

Consumer NPL ratio Consumer NPL YoY growth (RHS)

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Small Commercial NPL ratio Small Commercial NPL YoY growth (RHS)

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Corporate NPL ratio Corporate NPL YoY growth (RHS)

Source: Company, Trimegah Research

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Medium NPL ratio Medium NPL YoY growth

Micro34%

Consumer17%

Small Commercial

21%

Medium4%

Corporate24%


Figure 12. BBNI loan book split and segmental NPL ratios and growth

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Consumer NPL Ratio Consumer NPL YoY growth (RHS)

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Medium NPL Ratio Medium NPL YoY growth (RHS)

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Small NPL Ratio Small NPL YoY growth (RHS)


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Corporate NPL Ratio Corporate NPL YoY growth (RHS)

Consumer25%

Small15%

Medium15%

Corporate45%


Figure 13. BMRI loan book split Segmental NPL ratios and growth

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Consumer NPL Ratio Consumer NPL YoY growth (RHS)

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Small NPL ratio Small NPL YoY growth (RHS)

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Commercial NPL ratio Commercial NPL YoY growth (RHS)


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Consumer

14%

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8%

Small

12%

Commercial

30%

Corporate

36%


Figure 14. BBCA loan book split and Segmental NPL ratios and growth

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Commercial & SME NPL ratio Commercial & SME NPL YoY growth (RHS)

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Corporate

33%

Commercial

and SME

40%

Consumer

27%


Figure 15. BBTN loan book split Segmental NPL ratios and growth

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Housing NPL ratio Housing NPL YoY growth (RHS)

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Construction NPL ratio Construction NPL YoY growth

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2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1



Housing Loans75%

Construction Loans12%

Consumer2%

Commercial11%


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Mass Market NPL ratio Mass Market NPL YoY growth (RHS)

Figure 16. BDMN loan book split Segmental NPL ratios and growth

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Retail NPL ratio Retail NPL YoY growth (RHS)

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SME&Commercial NPL ratio SME&Commercial NPL YoY growth (RHS)

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Wholesale NPL ratio Wholesale NPL YoY growth (RHS)


Wholesale16%

SME&Commercial

28%

Retail6%

Mass market50%


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Pension NPL ratio Pension NPL YoY growth (RHS)

Figure 17. BTPN loan book split Segmental NPL ratios and growth

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Sharia NPL ratio Sharia NPL YoY growth (RHS)


Pension66%

Micro26%

Sharia5%

Consumer3%


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Figure 18. BJTM loan book split Segmental NPL ratios and growth

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SME NPL ratio SME NPL YoY growth (RHS)


Consumer 64%

Commercial 19%

SME17%


Figure 19. BJBR loan book split Segmental NPL ratios and growth

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8

10

12

2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1

Commercial NPL ratio Commercial NPL Yoy growth (RHS)


Consumer70%

Micro8%

Commercial13%

Mortgage9%


Indonesian banks next strategy: maintain NIM and maximize non-interest income The current economic condition would surely impair banks’ performance However, we view that Indonesian banks

will still looking for a way to maintain profitability. One thing they can do is to maintain net interest margins and

maximize non-interest income.

The notion is supported by the fact that average lending rates for working capital and investments purpose are

shown to be stable ytd. Big banks under our coverage generally have lowered lending rates for productive loans

while smaller banks (excl. BJTM) are seen to not lowering lending rates yet. This is justifiable that big banks have

higher funding strength therefore they can manage cost of funds better without lowering margins.

In regards to non-interest income, we expect BBNI and BMRI to yield a better earnings momentum than the rest

of productive business-based banks as they have higher proportion of non-interest income.

Figure 20. IDR lending rates



Figure 21. USD lending rates

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2010 2011 2012 2013 2014 2015

Working Capital Investment Consumption

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2010 2011 2012 2013 2014 2015

Working Capital Investment Consumption


Figure 22. Corporate prime lending rates of bank under our coverage



Figure 23. Retail prime lending rates of banks under our coverage

Figure 24. Micro prime lending rates of banks under our coverage


9.0

9.5

10.0

10.5

11.0

11.5

Jan-14

Feb-1

4

Mar-

14

Apr-

14

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Jun-1

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14

Aug-14

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4

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14

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Dec-1

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Feb-1

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15

Apr-

15

BBNI BMRI BBRI BBCA

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

Jan-14

Feb-1

4

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BBTN BDMN BJBR BJTM

10.0

10.5

11.0

11.5

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12.5

13.0

Jan-14

Feb-1

4

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14

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5

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15

Apr-

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BBNI BMRI BBRI BBCA

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Jan-14

Feb-14

Mar-

14

Apr-1

4

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Jun-1

4

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14

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4

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15

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5

BBTN BDMN BTPN BJBR BJTM

15.0

16.0

17.0

18.0

19.0

20.0

21.0

22.0

23.0

Jan-14

Feb-1

4

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BMRI BBRI

9.0

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9.0

9.5

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11.5

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BBNI BMRI BBRI BBCA

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BBTN BDMN BJBR BJTM

Figure 25. Mortgage prime lending rates of banks under our coverage


7.0

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BBNI BMRI BBRI BBCA

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Figure 26. Consumer prime lending rates of banks under our coverage


0.0

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BBNI BMRI BDMN BBCA BBRI BBTN BJTM BJBR BTPN

Figure 27. Portion of non-interest income to net revenue of banks (%)



Disturbing tax issues Other cause of banks share price de-rating was the temporary disturbing tax issues, particularly about the non-

taxable written-off loans for consumptive purpose with the principal amount between Rp5mn-Rp100mn without

tax ID. The tax department regulation No. 105/PMK.03/2009 has been very clear that written-off loans with the

principal amount of Rp5mn-Rp100mn for consumptive purpose without tax ID will be non-tax deductible. That

being said, banks with high exposure to such consumptive loans (auto loans, multipurpose loans, and credit

cards) have the highest risk of paying additional taxes in the future. As a result, banks are likely to hold extra

cash buffer as a precautionary measure.

Figure 28. Banks’ tax dispute

Banks Fiscal Period Dispute amount (Rp bn)

% paid by the com-pany

Status of the appeal cause of tax dispute

BBNI 2010-11 1,634 100% on-going shariah-related

2012-13 19 100% on-going VAT

2014-… 620 100% on-going written off loans, but not because of Tax ID (confirmed by the company)

BMRI 2010-11 1,108 100% on-going corporate income tax-es, written off loans

2012-13 1,313 100% on-going corporate income tax-es

BBRI 2010-11 1,484 98% on-going written-off loans (confirmed by the company)

BBCA 2010-11 137 11% on-going unclear

BBTN 2010-11 37 100% Win written off loans

2012-13 4 100% on-going unclear

BDMN 2008 107 13% on-going employment taxes, VAT, corporate taxes

2009 8 0% on-going corporate taxes

2011 0.13 100% completed employment taxes

BTPN 2010 19 100% completed VAT, Article 4 (2)

Source: Respective Companies, Trimegah Research


Figure 29. Illustration of expected additional non-tax deductible expenses

BBNI BMRI BBRI BBCA BBTN BDMN BTPN BJTM BJBR

Portion of auto-loans, credit cards, and multipurpose (%)

2.0 4.4 4.4 11.0 3.0 37.0 20.0 0.0 0.0

Total expected additional non-tax deductible expenses for 2015-19F (Rp bn)

359 1,714 2,552 757 117 7,095 952 0 0

Proportion of additional ex-penses to total Profit before Tax 2015-2019F (%)

0.3 0.8 1.1 0.5 0.7 16.3 2.8 0.0 0.0

Figure 30. Banks Valuation Table

Ticker Price 19 Apr (Rp)

TP (Rp) Rec 2015F PBV (x)

2015F PE (x)

2015F EPS Growth

(%)

2015F ROE (%)

2015F Div Yield

(%)

BBTN 1,125 1,300 Buy 0.9 8.3 27.3 10.6 2.4

BJBR 895 1,300 Buy 1.1 7.3 6.9 15.7 7.1

BBNI 5,600 6,400 Buy 1.6 9.5 1.5 16.3 2.6

BMRI 9,975 11,200 Buy 2.0 11.1 5.3 17.6 2.1

BTPN 3,750 4,300 Buy 1.6 10.8 9.4 14.5 0.0

BJTM 483 575 Buy 1.1 7.4 3.3 15.2 8.7

BBRI 10,950 12,300 Buy 2.3 11.5 -2.8 20.4 2.2

BBCA 13,700 11,400 Sell 3.7 20.2 1.8 18.5 1.1

BDMN 4,370 4,100 Sell 1.2 15.9 0.5 9.1 1.9

Ups. (%)

15.6

45.3

14.3

12.3

14.7

19.0

12.3

-16.8

-6.2

Mkt Cap (Rp bn)

11,770

8,591

103,388

230,422

21,682

7,133

267,426

335,006

41,466

Conclusion: reiterate Overweight! Top picks are consumer and corporate-based banks Indonesian banks share price has been over punished by negative sentiment about rising NPL risks and adverse

government intervention. However, things may not be as bad as it seems since rising NPL risks are rather con-

centrated among some debtors and regulatory tax issues have small impact to most of banks under our cover-

age. Longer term, we expect the sector to benefit from the execution of government infrastructure spending. We

therefore reiterate our Overweight call with selective picks from consumer and corporate-based banks. Our top

picks are BBTN (higher earnings visibility, minimum NPL risks), BJBR (a turnaround play, minimum NPL risks),

BBNI and BMRI (main beneficiary of the government infrastructure spending, high proportion of non-interest

income, and more attractive to own after share prices down by ~20% recently).

We recommend to underweight BBRI despite having a Buy call due to high exposure on micro and SME loans

(higher NPL risks). We also recommend to underweight BDMN as the company has higher risk of paying addition-

al taxes in the future.

Source: Respective companies, Trimegah Research

Source: Trimegah Research

BDMN has the highest risk of paying additional taxes from written-off loans without tax ID We have taken the additional non-tax deductible expenses into our forecast. Assuming the non-tax deductible

expenses equal to the portion of auto loans, credit cards, and multipurpose multiplied by the expected write-offs

amount at each respective year, we conclude that BDMN has the highest risk to pay additional tax expense from

written-off loans without tax ID. This is considering its high proportion of consumer loans with outstanding

amount between Rp5mn-100mn (many auto loans and white goods financing from its subsidiary are allegedly

disbursed without tax ID). However, it is subject to whether such regulation will be implemented to financing

companies or not.

Meanwhile, we expect BJBR and BJTM to have lower risk of paying additional tax expense from written-off loans

without tax ID since they are unlikely to write-off their multipurpose loans—they would just rather auto-charge

the payment directly from civil servant’s account.


Investment Thesis:

• BBNI is the leading lender to soft infrastructure (power plants), of

which the execution of the spending is expectedly faster than hard infrastructure (toll-roads, seaports, etc). Hence, should the govern-ment starts disbursing infrastructure funds, BBNI is expected to gain benefits faster than its SOE peer, BMRI.

• BBNI has life insurance business (BNI Life) which is expected to

deliver stable premium income going forward. This is positive for the company since it translates to stable non-interest income amidst margins pressure.

• High exposure to corporate banking loans is a positive since risk

from new NPL formation is minimal.

• The company has the highest CASA ratio among its SOE peers. This

should benefit the company more in terms of managing cost of funds.

Valuation: reiterate Buy with TP Rp6,400

We cut our earnings target by 12.5/3.2% in 2015/16F accounting for higher provisioning expenses—we assume the company to stay con-servative albeit less asset quality deterioration risk. Our new GGM-based TP is Rp6,400, implying 1.8x 2015F PBV under the assumptions of 19% sustainable ROAE, 10% growth rate, and 15.1% cost of equity (7.75% risk free rate). Our Buy call is reiterated.

Risks to our call

• More unexpected delays on the government infrastructure spending.

• Adverse government intervention on tax issues and lowering lending

rates.

• Unexpected deteriorating corporate and consumer loans quality.

Bank Negara Indonesia is the third

biggest state owned bank by asset size.

The Bank primarily lend to SMEs,

corporates and consumers.

Share Price Rp5,600

Sector Bank

Price Target Rp6,400 (14%)

Year end Dec 2013 2014 2015F 2016F 2017F

Net Profit (Rpbn) 9,054 10,783 10,943 14,078 17,312

EPS (Rp) 486 578 587 755 928

EPS Growth (%) 28.6 18.9 1.5 28.6 23.0

DPS (Rp) 113 146 145 147 189

BVPS (Rp) 2,555 3,167 3,589 4,197 4,936

P/E (x) 11.5 9.7 9.5 7.4 6.0

P/BV (x) 2.2 1.8 1.6 1.3 1.1

ROE (%) 19.0 18.3 16.3 18.0 18.8

Div Yield (%) 2.0 2.6 2.6 2.6 3.4

Bank Negara Indonesia

BUY Rp6,400

Reuters Code BBNI.JK

Bloomberg Code BBNI.IJ

Issued Shares 18,649

Mkt Cap. (Rpbn) 103,966

Avg. Value Daily 6 Month (Rpbn)

160.8

52-Wk range 7275 / 4740

Indonesian Government 58.8%

Perseroan Terbatas 14.6%

Badan Usaha Asing 23.0%

Public 3.6%

EPS 15F 16F

Consensus (Rp) 634 720

TRIM vs Cons. (%) -7.4 4.9

Still Our Favorite Among Big Banks

Company Update

Stock Data

Major Shareholders

Consensus

Stock Price vs Value Trade

Company Data

0.0

0.1

0.1

0.2

0.2

0.3

0.3

0.4

0.4

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15

(Rpbn)Avg. 5 Day MA Trading Value (RHS) Price (LHS)


Old New

2015F 2016F 2017F 2015F 2016F 2017F 2015F 2016F 2017F

Gross loans(%) 15.0 16.0 17.0 8.7 12.9 19.7 -6.3 -3.1 2.7

Deposits growth (%) 14.2 15.3 16.4 10.2 12.9 15.1 -4.0 -2.4 -1.3

in Rp bn

Gross Loans 319,266 370,348 433,307 301,735 340,761 407,764 -5.5 -8.0 -5.9

Deposits 359,401 414,344 482,144 346,808 391,396 450,454 -3.5 -5.5 -6.6

Total Assets 475,257 541,358 622,290 465,805 527,357 607,241 -2.0 -2.6 -2.4

in Rp bn

Net interest income 24,972 28,452 32,819 23,610 27,013 31,324 -5.5 -5.1 -4.6

Non-interest income 11,850 13,740 16,146 12,601 14,560 16,547 6.3 6.0 2.5

Provisioning 3,302 3,940 4,622 4,873 4,389 4,515 47.6 11.4 -2.3

Non-interest expenses 18,006 20,196 22,719 17,676 19,581 21,726 -1.8 -3.0 -4.4

Net income 12,510 14,538 17,383 10,943 14,078 17,312 -12.5 -3.2 -0.4

NIM (%) 6.3 6.3 6.4 6.1 6.2 6.3 -0.2 -0.2 -0.1

ROE (%) 18.2 18.0 18.3 16.3 18.0 18.8 -1.8 0.0 0.5

LDR (%) 88.8 89.4 89.9 87.0 87.1 90.5 -1.8 -2.3 0.7

Gross NPL (%) 2.0 2.0 1.9 2.3 2.2 2.1 0.4 0.2 0.1

Credit Costs (%) 1.0 1.1 1.1 1.6 1.3 1.1 0.6 0.2 0.0

EPS (Rp) 671 780 933 587 755 928 -12.6 -3.2 -0.5

DPS (Rp) 116 134 156 145 147 189 24.9 9.3 20.9

BVPS (Rp) 3,693 4,329 5,099 3,589 4,197 4,936 -2.8 -3.0 -3.2

PE (x) 8.3 7.2 6.0 9.5 7.4 6.0

PBV (x) 1.5 1.3 1.1 1.6 1.3 1.1

Changes (%)

BBNI Estimates revision



Income Statement (Rpbn)

Year end Dec 2013 2014 2015F 2016F 2017F

Interest Income 26,451 33,365 34,536 38,373 43,786

Interest

Expense -7,392 -10,989 -10,925 -11,360 -12,462

NII 19,058 22,376 23,610 27,013 31,324

Non Interest

Income 9,441 10,715 12,601 14,560 16,547

Operating

Expense -14,573 -16,103 -17,676 -19,581 -21,726

PPOP 13,926 16,988 18,535 21,991 26,145

Loan Loss

Provision -2,708 -3,642 -4,873 -4,389 -4,515

Operating Profit 11,219 13,346 13,662 17,603 21,630

Profit

Before Tax 11,278 13,524 13,800 17,741 21,768

Tax Expense -2,220 -2,695 -2,750 -3,535 -4,338

Net Profit 9,054 10,783 10,943 14,078 17,312

EPS (Rp) 486 578 587 755 928

EPS Growth

(%) 28.6 18.9 1.5 28.6 23.0

Dividend

Per Share 113 146 145 147 189

Dividend

Growth (%) 81.5 28.3 -0.8 1.5 28.6

Balance Sheet (Rpbn)

Year end Dec 2013 2014 2015F 2016F 2017F

Cash and

CA with BI 33,220 36,033 41,542 46,798 53,827

Interbank

Placement 27,575 19,023 28,498 37,008 32,027

Marketable

Securities 11,966 12,738 15,804 17,836 20,538

Government

Bonds 41,432 43,830 49,692 56,197 64,936

Loans-net 243,758 270,652 292,985 331,560 397,570

Net Fixed Assets 5,514 6,222 7,466 8,586 9,445

Other Assets 23,191 28,075 29,818 29,371 28,898

Total Assets 386,655 416,574 465,805 527,357 607,241

Total Earning

Assets 341,740 367,451 409,169 463,365 534,056

Deposit 301,040 314,669 346,808 391,396 450,454

Borrowings 18,951 11,212 13,974 15,821 18,217

Other Liabilities 18,980 15,268 20,596 23,148 26,987

Total Liabilities 338,971 341,149 381,378 430,365 495,658

Total

Shareholder's Equity 47,600 59,072 66,949 78,291 92,083

BVPS (Rp/Share) 2,555 3,167 3,589 4,197 4,936

Key Ratio Analysis

Year end Dec 2013 2014 2015F 2016F 2017F

Earning Asset Yield (%) 8.3 9.4 8.9 8.8 8.8

Cost of Funds (%) 2.4 3.3 3.1 2.8 2.7

NIM (%) 6.0 6.3 6.1 6.2 6.3

ROE (%) 19.0 18.3 16.3 18.0 18.8

ROA (%) 2.5 2.7 2.5 2.8 3.1

Cost to Income Ratio (%) 51.1 48.7 48.8 47.1 45.4

Loan Growth (%) 24.9 10.8 8.7 12.9 19.7

Deposit Growth (%) 13.7 4.5 10.2 12.9 15.1

LDR (%) 85.9 88.2 87.0 87.1 90.5

RRR (%) 7.9 8.2 8.0 8.0 8.0

CAR (%) 17.5 16.5 15.8 14.5 13.5

Asset/Equity (x) 8.1 7.1 7.0 6.7 6.6

Gross NPL (%) 2.2 2.0 2.3 2.2 2.1

Loan Loss Coverage (%) 126.9 126.5 124.1 122.6 121.4

Cost of Credit (%) 1.1 1.3 1.6 1.3 1.1

Interim Result (Rpbn)

1Q14 2Q14 3Q14 4Q14 1Q15

Total Loans (Gross) 247,120 257,868 267,942 277,622 269,513

Total Deposit 273,966 314,197 308,327 313,893 290,190

Total Asset 371,461 407,817 408,047 416,574 407,215

Net Interest Income 5,289 5,464 5,640 5,982 6,096

Net revenue 7,657 7,900 8,128 9,407 9,035

Operating profit 2,977 3,081 3,122 4,166 3,565

Net Profit 2,396 2,552 2,664 3,172 2,817

Capital History

Date

25-Nov-96 IPO @ Rp850

23-Dec-03 Reverse Stock


Investment thesis:

• BMRI is the leading lender for hard infrastructures (toll roads, railways,

and seaports). Therefore, it will benefit from the execution of govern-ment infrastructure spending in the following years.

• High proportion of corporate and commercial loans in its book should

translate to better asset quality performance.

• Its insurance subsidiary is expected to contribute a stable non-interest

income for the company.

• BMRI plans to increase exposure toward retail-based loans in the

following years. This should translate to higher margins but rising cost of credit this year. However, as we expect the economy to improve in the next 2-3 years, cost of credit is also expected to decline.

• Sharia subsidiary is undergoing a restructuring process. The new man-

agement indicate asset quality improvement as the new KPI for loan officers. Therefore, we expect NPF ratio to improve in the following years.

Valuation: cut TP to Rp11,200 but upgrade to Buy (old: Neutral)

We cut our 2015/16F earnings target by 13/4% to account for slower net interest income due to slower loan growth. Our new GGM-based TP is 11,200, implying 2.2x 2015F PBV under the assumptions of 20.4% sus-tainable ROAE, 10% growth rate, and 14.8% cost of equity (7.75% risk-free rate). The stock currently trades at 2.0x 2015F PBV. We upgrade our call to Buy (old: Neutral).

Risks to our call

• More unexpected delays in the government infrastructure spending.

• Unexpected rise in corporate, commercial, and consumer NPLs.

• Adverse government intervention in term of taxes and lending rates.

Bank Mandiri is Indonesia’s biggest

bank by asset. The state owned

bank is focused on wholesale and re-

tail lending and funding

Share Price Rp9,975

Sector Bank

Price Target RP11,200 (12%)

Year end Dec 2013 2014 2015F 2016F 2017F

Net Profit (Rpbn) 18,204 19,872 20,920 26,237 33,647

EPS (Rp) 780 852 897 1,124 1,442

EPS Growth (%) 18.3 9.2 5.3 25.4 28.2

DPS (Rp) 199 234 213 224 281

BVPS (Rp) 3,747 4,400 5,080 5,967 7,117

P/E (x) 12.8 11.7 11.1 8.9 6.9

P/BV (x) 2.7 2.3 2.0 1.7 1.4

ROE (%) 20.8 19.4 17.6 18.8 20.3

Div Yield (%) 2.0 2.3 2.1 2.2 2.8

Bank Mandiri

BUY Rp11,200

Reuters Code BMRI.JK

Bloomberg Code BMRI.IJ




260.5

52-Wk range 12550 / 9300


Public 39.1%

EPS 15F 16F

Consensus (Rp) 947 1077 TRIM vs Cons. (%) -5.3 4.3

Upgrade to Buy

Company Update

Stock Data

Major Shareholders

Consensus


Company Data

0.0

0.2

0.4

0.6

0.8

1.0

1.2

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2,000

4,000

6,000

8,000

10,000

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14,000




Old New

2015F 2016F 2017F 2015F 2016F 2017F 2015F 2016F 2017F

Gross loans(%) 15.0 16.0 17.0 8.0 14.1 20.5 -7.0 -1.9 3.5

Deposits growth (%) 12.7 13.5 14.4 11.9 13.7 16.4 1.7 -1.6 -0.6

in Rp bn

Gross Loans 601,567 697,818 816,447 564,902 644,361 776,357 -6.1 -6.1 -7.7

Deposits 717,670 814,986 932,477 711,914 809,432 939,849 -0.8 -0.8 -0.7

Total Assets 961,077 1,095,040 1,259,024 959,693 1,096,237 1,277,092 -0.1 -0.1 0.1

in Rp bn


Non-interest income 19,599 22,066 24,820 17,906 22,299 28,438 -8.6 1.1 14.6

Provisioning 7,340 8,228 9,752 7,512 7,734 8,217 2.3 -6.0 -15.7

Non-interest expenses 27,757 31,853 36,680 27,757 31,853 36,680 0.0 0.0 0.0

Net income 24,032 27,278 30,941 20,920 26,237 33,647 -12.9 -3.8 8.7

NIM (%) 6.0 6.1 6.2 5.8 6.0 6.1 0.2 -0.1 -0.1

ROE (%) 19.7 18.9 18.3 17.6 18.8 20.3 -1.4 -2.0 -0.0

LDR (%) 83.8 85.6 87.6 79.3 79.6 82.6 3.7 -0.0 -6.0

Gross NPL (%) 2.2 2.1 2.0 2.5 2.5 2.3 -0.1 0.4 0.4

Credit Costs (%) 1.2 1.2 1.2 1.3 1.2 1.0 -0.0 0.1 0.0

EPS (Rp) 1,030 1,169 1,326 897 1,124 1,442 -12.9 -3.8 8.7

DPS (Rp) 170 206 234 213 224 281 25.0 8.8 20.2

BVPS (Rp) 5,241 6,188 7,260 5,080 5,967 7,117 -3.1 -3.6 -2.0

PE (x) 9.7 8.5 7.5 11.1 8.9 6.9

PBV (x) 1.9 1.6 1.4 2.0 1.7 1.4

Changes (%)

BMRI Estimates revision




Year end Dec 2013 2014 2015F 2016F 2017F

Interest Income 50,209 62,638 71,724 80,346 92,447

Interest

Expense -17,432 -23,506 -26,660 -28,344 -31,567

NII 32,777 39,132 45,064 52,002 60,880

Non Interest

Income 17,132 17,749 17,906 22,299 28,438

Operating

Expense -21,501 -25,374 -27,757 -31,853 -36,680

PPOP 28,408 31,507 35,213 42,449 52,639

Loan Loss

Provision -4,856 -5,529 -7,512 -7,734 -8,217


Profit

Before Tax 24,062 26,008 27,645 34,638 44,360

Tax Expense -5,232 -5,353 -5,690 -7,130 -9,131

Net Profit 18,204 19,872 20,920 26,237 33,647

EPS (Rp) 780 852 897 1,124 1,442

EPS Growth

(%) 18.3 9.2 5.3 25.4 28.2

Dividend

Per Share 199 234 213 224 281

Dividend

Growth (%) 91 17 -9 5 25


Year end Dec 2013 2014 2015F 2016F 2017F

Cash and

CA with BI 62,956 71,303 73,131 83,038 96,196

Interbank

Placement 59,150 70,101 109,182 136,726 141,034

Marketable

Securities 26,802 40,465 36,441 41,238 47,682

Government

Bonds 82,227 86,154 97,971 96,583 103,753

Loans-net 450,635 505,395 544,566 621,809 751,514

Net Fixed Assets 7,646 8,929 10,715 12,858 15,429

Other Assets 43,683 72,692 87,688 103,986 121,484

Total Assets 733,100 855,040 959,693 1,096,237 1,277,092

Total Earning

Assets 627,676 728,519 815,673 925,124 1,075,206

Deposit 556,342 636,382 711,914 809,432 939,849

Borrowings 15,997 24,227 23,229 26,695 32,404


Total Liabilities 644,309 750,195 838,967 954,825 1,108,836

Total

Shareholder's

Equity

87,419 102,658 118,540 139,226 166,069

BVPS (Rp/Share) 3,747 4,400 5,080 5,967 7,117

Key Ratio Analysis

Year end Dec 2013 2014 2015F 2016F 2017F


Cost of Funds (%) 3.1 3.7 3.7 3.5 3.4

NIM (%) 5.6 5.8 5.8 6.0 6.1

ROE (%) 20.8 19.4 17.6 18.8 20.3

ROA (%) 2.5 2.3 2.2 2.4 2.6


Loan Growth (%) 21.5 12.0 8.0 14.1 20.5

Deposit Growth (%) 14.9 14.6 11.9 13.7 16.4

LDR (%) 84.0 82.2 79.3 79.6 82.6

RRR (%) 8.6 8.7 8.0 8.0 8.0

CAR (%) 14.9 16.6 16.5 16.7 16.5

Asset/Equity (x) 8.4 8.3 8.1 7.9 7.7

Gross NPL (%) 1.9 2.2 2.5 2.5 2.3

Loan Loss Coverage (%) 185 157 141 139 142

Cost of Credit (%) 1.0 1.0 1.3 1.2 1.0


4Q13 1Q14 2Q14 3Q14 4Q14


Total Deposit 482,647 507,241 590,890 636,382 577,011

Total Asset 729,483 764,938 798,161 855,040 868,348


Net revenue 12,934 13,502 14,756 16,527 14,592


Net Profit 5,123 4,843 5,073 5,418 5,318

Capital History

Date

25-Nov-96 IPO @ Rp850

23-Dec-03 Reverse Stock


Investment thesis:

• BBRI is the leading micro and SME loans in the country, which expect-

edly has the highest risk of deteriorating asset quality at the current economic condition despite sustained high margins. That being said, the company’s cost of credit is expected to increase significantly in the following years which would then lead to worse earnings momentum than its SOE peers.

• BBRI is going to be the leading government-sponsored micro loans

(KUR) again, but at lower interest rate. At a glance, this should lead to declining margins. However, the impact to earnings is limited assum-ing the lower KUR rate is applied for new loans only

• Its plan to acquire an insurance company is a positive for its non-

interest income growth.

• The company has entered branchless banking business which in turn

should translate in high growth of fee-based income going forward.

Valuation: cut TP to Rp12,300 but reiterate Buy with asset quality risk

We cut our 2015/16F earnings target by 11/5% in 2015/16F accounting for higher provisioning expenses due to high risk of deteriorating micro and SME loans quality. Assuming 22.5% sustainable ROAE, 10% growth rate, and 14.8% cost of equity (7.75% risk-free rate), we arrive at our new GGM-based TP of Rp12,300, implying 2.6x 2015F PBV. The stock currently trades at 2.4x 2015F PBV. Providing 11% potential upside, we reiterate our Buy call but with deteriorating asset quality risk.

Risks to our call

• Unexpected rise in corporate and consumer special mentions and

NPLs.

• Unexpected hike in inflation which could impair micro and SME asset

quality further.

• Adverse government intervention on micro-related loans (e.g., inter-

vention on lending rates, etc)

BBRI is Indonesia’s biggest MSME lender

with the most extensive network of

branches and outlets throughout the

country. The bank also offers corporate

and consumer loans.

Share Price Rp10,950

Sector Bank


Year end Dec 2013 2014 2015F 2016F 2017F

Net Profit (Rpbn) 21,344 24,242 23,551 28,178 35,061

EPS (Rp) 865 983 955 1,142 1,421

EPS Growth (%) 14.3 13.6 -2.8 19.6 24.4

DPS (Rp) 225 257 246 239 286

BVPS (Rp) 3,209 3,955 4,670 5,573 6,709

P/E (x) 12.7 11.1 11.5 9.6 7.7

P/BV (x) 3.4 2.8 2.3 2.0 1.6

ROE (%) 27.0 24.8 20.4 20.5 21.2

Div Yield (%) 2.1 2.4 2.2 2.2 2.6

Bank Rakyat Indonesia

BUY Rp12,300

Reuters Code BBRI.JK

Bloomberg Code BBRI.IJ




335.3

52-Wk range 13450 / 9850


Public 43.2%

EPS 15F 16F


TRIM vs Cons. (%) -11.5 -6.9

Buy at Risk

Company Update

Stock Data

Major Shareholders

Consensus


Company Data

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000




Old New

2015F 2016F 2017F 2015F 2016F 2017F 2015F 2016F 2017F

Gross loans(%) 15.8 16.5 17.2 10.0 14.5 16.7 -5.8 -2.0 -0.4

Deposits growth (%) 13.3 14.3 15.3 12.1 14.4 15.3 -1.2 0.1 0.0

in Rp bn

Gross Loans 573,429 667,997 782,695 544,607 623,416 727,826 -5.0 -6.7 -7.0

Deposits 704,971 805,620 928,633 697,793 798,214 920,420 -1.0 -0.9 -0.9

Total Assets 870,784 991,038 1,145,937 891,450 1,017,512 1,174,865 2.4 2.7 2.5

in Rp bn

Net interest income 50,740 58,349 67,324 58,818 67,726 79,047 15.9 16.1 17.4


Provisioning 6,257 8,108 9,708 8,615 9,349 10,008 37.7 15.3 3.1

Non-interest expenses 31,287 36,733 43,333 31,287 36,733 43,146 0.0 0.0 -0.4

Net income 26,511 29,770 34,645 23,551 28,178 35,061 -11.2 -5.3 1.2

NIM (%) 8.3 8.7 8.9 8.0 8.2 8.4 -0.3 -0.5 -0.5

ROE (%) 22.2 20.7 20.1 20.4 20.5 21.2 -1.8 -0.2 1.1

LDR (%) 83.7 85.5 87.0 80.3 80.4 81.5 -3.5 -5.1 -5.5

Gross NPL (%) 1.6 1.6 1.6 2.0 1.9 1.8 0.3 0.3 0.2

Credit Costs (%) 1.1 1.2 1.2 1.6 1.5 1.4 0.5 0.3 0.1

EPS (Rp) 1,075 1,207 1,404 955 1,142 1,421 -11.2 -5.3 1.2

DPS (Rp) 197 215 241 246 239 286 25.0 11.0 18.3

BVPS (Rp) 4,839 5,830 6,994 4,670 5,573 6,709 -3.5 -4.4 -4.1

PE (x) 10.2 9.1 7.8 11.5 9.6 7.7

PBV (x) 2.3 1.9 1.6 2.3 2.0 1.6

Changes (%)

BBRI Estimates revision




Year end Dec 2013 2014 2015F 2016F 2017F

Interest Income 59,461 75,122 85,156 95,758 109,032

Interest

Expense -15,355 -23,680 -26,338 -28,032 -29,985

NII 44,106 51,442 58,818 67,726 79,047

Non Interest

Income 8,335 9,299 11,446 14,654 19,122

Operating

Expense -22,368 -26,660 -31,287 -36,733 -43,146

PPOP 30,074 34,081 38,978 45,647 55,023

Loan Loss

Provision -3,946 -5,719 -8,615 -9,349 -10,008


Profit

Before Tax 27,910 30,859 30,363 36,298 45,014

Tax Expense -6,556 -6,605 -6,499 -7,769 -9,635

Net Profit 21,344 24,242 23,551 28,178 35,061

EPS (Rp) 865 983 955 1,142 1,421

EPS Growth

(%) 14.3 13.6 -2.8 19.6 24.4

Dividend

Per Share 225 257 246 239 286

Dividend

Growth (%) 84.2 14.3 -4.6 -2.8 19.6


Year end Dec 2013 2014 2015F 2016F 2017F

Cash and

CA with BI 59,890 73,654 74,247 84,649 97,447

Interbank

Placement 36,307 62,035 94,168 104,838 113,899

Marketable

Securities 42,674 84,168 70,360 80,460 92,745

Government

Bonds 4,511 4,304 6,784 7,753 8,933

Loans-net 419,145 479,211 526,635 603,466 704,536

Net Fixed Assets 3,973 5,917 8,876 12,870 18,019

Other Assets 59,683 92,665 110,380 123,474 139,286

Total Assets 626,183 801,955 891,450 1,017,512 1,174,865

Total Earning

Assets 540,517 694,877 775,319 880,382 1,011,867

Deposit 504,281 622,322 697,793 798,214 920,420

Borrowings 9,085 24,987 27,486 24,937 21,835


Total Liabilities 546,856 704,218 776,080 879,851 1,009,188

Total


BVPS (Rp/Share) 3,209 3,955 4,670 5,573 6,709

Key Ratio Analysis

Year end Dec 2013 2014 2015F 2016F 2017F


Cost of Funds (%) 3.1 3.9 3.7 3.5 3.3

NIM (%) 8.7 8.3 8.0 8.2 8.4

ROE (%) 27.0 24.8 20.4 20.5 21.2

ROA (%) 3.6 3.4 2.8 3.0 3.2


Loan Growth (%) 23.8 14.0 10.0 14.5 16.7

Deposit Growth (%) 12.0 23.4 12.1 14.4 15.3

LDR (%) 88.5 81.8 80.3 80.4 81.5

RRR (%) 8.3 8.5 8.0 8.0 8.0

CAR (%) 17.0 14.8 15.2 15.5 15.7

Asset/Equity (x) 7.9 8.2 7.7 7.4 7.1

Gross NPL (%) 1.6 1.7 2.0 1.9 1.8


Cost of Credit (%) 0.9 1.2 1.6 1.5 1.4


1Q14 2Q14 3Q14 4Q14 1Q15


Total Deposit 487,669 508,142 544,272 622,322 593,413

Total Asset 615,719 643,484 683,212 801,955 806,005


Net revenue 14,227 14,691 14,679 17,146 16,285


Net Profit 5,938 5,812 6,374 6,118 6,143

Capital History

Date

10-Nov-03 IPO @ Rp875

11-Jan-11 1:2 Stock Split


Investment thesis:

• BBCA is expected to maintain its margins in the upcoming years be-

cause of its high deposit pricing power. To date, BBCA is the only bank who lower its lending rate across the board.

• Unlike SOE banks, BBCA is less exposed to government intervention

risk.

• The company’s prudent strategy should help its asset quality from

deteriorating. However, we assume higher NPL and credit cost this year which is likely to come from SME and commercial segments.

• Despite its best asset quality performance and defensive attributes,

BBCA still trades at high premium over SOE banks (~148% over BBRI and much higher over BMRI and BBNI) makes it less attractive in terms of valuation.

Valuation: cut TP to Rp11,400 maintain Sell

We adjust down our earnings target in 2015/16F by 8/1% on the back of higher provisioning expenses in 2015F—we still expect the company to stay prudent in maintaining asset quality. Our new GGM-based TP is Rp11,400 implying 3.1x 2015F PBV, under the assumptions of 20.1% sustainable ROAE, 10% growth rate, and 13.3% cost of equity (7.75% risk-free rate). The stock currently trades at 3.7x 2015F PBV. We reiterate our Sell call due to its demanding valuation.

Risks to our call

• Unexpected rise in corporate and consumer special mentions and NPLs.

• Its plan for anorganic growth entails some risks should the bank raised

funds through rights issue.

Bank Central Asia is the largest

transactional bank in Indonesia which

provides various financial services

including leasing, consumer financing

services, securities brokerage and

investment banking service

Share Price Rp13,725

Sector Bank

Price Target Rp11,400 (-17%)

Year end Dec 2013 2014 2015F 2016F 2017F

Net Profit (Rpbn) 14,254 16,486 16,788 20,081 23,371

EPS (Rp) 579 669 681 814 948

EPS Growth (%) 20.4 15.5 1.8 19.6 16.4

DPS (Rp) 116 125 147 150 179

BVPS (Rp) 2,594 3,151 3,675 4,339 5,108

P/E (x) 23.7 20.5 20.2 16.9 14.5

P/BV (x) 5.3 4.4 3.7 3.2 2.7

ROE (%) 22.3 21.2 18.5 18.8 18.6

Div Yield (%) 0.8 0.9 1.1 1.1 1.3

Bank Central Asia

SELL Rp11,400

Reuters Code BBCA.JK

Bloomberg Code BBCA.IJ




194.7

52-Wk range 15600 / 10700

FarIndo Investments 47.2%

Anthony Salim 2.0%

Public 50.8%

EPS 15F 16F


TRIM vs Cons. (%) -9.7 -4.7

Demanding Valuation. Maintain Sell

Company Update

Stock Data

Major Shareholders

Consensus


Company Data

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000




Old New Changes (%)

2015F 2016F 2017F 2015F 2016F 2017F 2015F 2016F 2017F

Gross loans(%) 12.0 13.0 14.0 8.7 13.1 17.5 1.1 0.1 3.5

Deposits growth (%) 10.4 11.3 12.2 9.8 12.2 15.4 1.8 0.9 3.2

in Rp bn

Gross Loans 388,151 438,611 500,016 376,721 426,077 500,440 -2.9 -2.9 0.1

Deposits 497,182 553,518 621,323 494,337 554,637 640,218 -0.6 0.2 3.0

Total Assets 602,308 670,926 754,894 610,285 688,674 796,777 1.3 2.6 5.5

in Rp bn

Net interest income 36,158 40,551 46,013 35,559 40,316 46,534 -1.7 -0.6 1.1


Provisioning 2,295 2,516 3,025 2,821 1,460 1,849 22.9 -42.0 -38.9


Net income 18,281 20,269 22,883 16,788 20,081 23,371 -8.2 -0.9 2.1

NIM (%) 6.7 6.9 7.0 6.6 6.7 6.8 -0.1 -0.1 -0.2

ROE (%) 19.9 18.7 18.1 18.5 18.8 18.6 -1.3 0.1 0.5

LDR (%) 78.1 79.2 80.5 76.2 76.8 78.2 -1.9 -2.4 -2.3

Gross NPL (%) 0.6 0.6 0.6 0.9 0.9 0.8 0.2 0.2 0.1

Credit Costs (%) 0.6 0.6 0.6 0.7 0.3 0.4 0.2 -0.2 -0.2

EPS (Rp) 741 822 928 681 814 948 -8.2 -0.9 2.1

DPS (Rp) 147 163 181 147 150 179 0.0 -8.2 -0.9

BVPS (Rp) 3,735 4,394 5,141 3,675 4,339 5,108 -1.6 -1.2 -0.6

PE (x) 18.5 16.7 14.8 20.2 16.9 14.5

PBV (x) 3.7 3.1 2.7 3.7 3.2 2.7

BBCA Estimates revision




Year end Dec 2013 2014 2015F 2016F 2017F

Interest Income 34,277 43,771 48,070 53,439 60,421

Interest

Expense -7,852 -11,745 -12,511 -13,123 -13,887

NII 26,425 32,027 35,559 40,316 46,534

Non Interest

Income 7,301 9,028 10,198 12,375 15,612

Operating

Expense -14,631 -18,311 -21,938 -26,076 -30,999

PPOP 19,094 22,744 23,819 26,615 31,147

Loan Loss

Provision -2,016 -2,240 -2,821 -1,460 -1,849


Profit

Before Tax 17,816 20,741 21,270 25,428 29,570

Tax Expense -3,559 -4,229 -4,337 -5,185 -6,030

Net Profit 14,254 16,486 16,788 20,081 23,371

EPS (Rp) 579 669 681 814 948

EPS Growth

(%) 20.4 15.5 1.8 19.6 16.4

Dividend

Per Share 116 125 147 150 179

Dividend

Growth (%) 2.2 7.6 17.7 1.8 19.6


Year end Dec 2013 2014 2015F 2016F 2017F

Cash and

CA with BI 51,553 58,453 65,736 73,457 84,352

Interbank

Placement 15,701 16,116 10,086 33,985 58,977

Marketable

Securities 17,740 47,835 47,661 48,130 49,391

Government

Bonds 34,345 28,945 49,153 44,101 38,180

Loans-net 306,679 339,859 368,056 417,130 490,931

Net Fixed Assets 7,440 8,845 10,172 11,189 12,308

Other Assets 62,845 52,371 59,423 60,682 62,639

Total Assets 496,305 552,424 610,285 688,674 796,777

Total Earning

Assets 428,967 476,031 563,919 637,393 739,229

Deposit 411,180 450,155 494,337 554,637 640,218

Borrowings 501 3,081 2,081 881 881



Total


BVPS (Rp/Share) 2,594 3,151 3,675 4,339 5,108

Key Ratio Analysis

Year end Dec 2013 2014 2015F 2016F 2017F


Cost of Funds (%) 2.0 2.7 2.6 2.5 2.3

NIM (%) 6.0 6.5 6.6 6.7 6.8

ROE (%) 22.3 21.2 18.5 18.8 18.6

ROA (%) 3.0 3.1 2.9 3.1 3.1


Loan Growth (%) 21.6 11.0 8.7 13.1 17.5

Deposit Growth (%) 10.7 9.5 9.8 12.2 15.4

LDR (%) 75.9 77.0 76.2 76.8 78.2

RRR (%) 8.6 8.6 8.0 8.0 8.0

CAR (%) 16.0 17.2 17.6 18.1 18.1

Asset/Equity (x) 7.8 7.1 6.7 6.4 6.3

Gross NPL (%) 0.4 0.6 0.9 0.9 0.8

Loan Loss Coverage (%) 409 324 267 241 243

Cost of Credit (%) 0.6 0.6 0.7 0.3 0.4

Interim Results (Rpbn)

1Q14 2Q14 3Q14 4Q14 1Q15

Total Loans 311,462 315,395 330,677 388,151 335,729

Total Deposit 406,799 421,190 431,984 450,155 445,092

Total Asset 502,188 522,714 537,210 552,424 557,439


Net revenue 9,748 9,893 10,448 10,967 10,962


Net Profit 3,671 4,190 4,333 4,291 4,057

Capital History

Date

31-May-00 IPO @ Rp1,400


Investment thesis:

• BBTN is the only bank which benefits from the government interven-

tion. The company’s now has higher earnings visibility because of the government has initiated the “one million houses program” where BBTN is appointed as the sole lender. This makes BBTN’s loan growth looks more guaranteed, and therefore higher earnings visibility.

• The government covers all NPL risks in its subsidized mortgage busi-

ness. This should translate to lower rising NPL risk and therefore lower cost of credit.

• The company is negotiating to get offshore funding from ADB and IFC,

which is a significant benefits as it could lead to lower blended cost of funds and hence, increasing margins.

• We conservatively assume higher blended NPL which is likely to come

from its commercial segment (micro and KUR loans), but the impact to bottom line is minimal considering its low proportion to total loans.

Valuation: maintain Buy at TP Rp1,300

We maintain our Buy call with GGM-based TP Rp1,300, assuming 14.4% sustainable ROAE, 6% growth rate, and 14.3% cost of equity (7.75% risk-free rate). Our new TP implies 1.0x 2015F PBV. The stock currently trades at 0.9x 2015F PBV.

Risks to our call

• Short-term supply side problems on the public housing program, e.g.,

lengthy approval process, lack of political willing, etc.

• More-than-expected rise in non-subsidized housing, construction, and

commercial loans NPLs.

• Adverse government intervention risk in its subsidized mortgage busi-

ness

Bank Tabungan Negara is a state-owned

bank which focuses on providing mort-

gage loans. The bank also offers sharia

Share Price Rp1,125

Sector Bank


Year end Dec 2013 2014 2015F 2016F 2017F

Net Profit (Rpbn) 1,562 1,116 1,421 1,799 2,272

EPS (Rp) 148 106 135 171 216

EPS Growth (%) 0.0 -28.4 27.3 26.6 26.3

DPS (Rp) 39 45 27 34 43

BVPS (Rp) 1,095 1,160 1,268 1,413 1,586

P/E (x) 7.6 10.6 8.3 6.6 5.2

P/BV (x) 1.0 1.0 0.9 0.8 0.7

ROE (%) 13.5 9.1 10.6 12.1 13.6

Dividend Yield (%) 3.4 4.0 2.4 3.0 3.8

Bank Tabungan Negara

BUY Rp1,300

Reuters Code BBTN.JK

Bloomberg Code BBTN.IJ




46.3

52-Wk range 1270 / 980

Indonesian Goverment 60.2%

Singapore Goverment 6.4%

Public 33.4%

EPS 15F 16F


TRIM vs Cons. (%) -6.7 -4.2

High Earnings Visibility

Company Update

Stock Data

Major Shareholders

Consensus


Company Data

0.0

0.0

0.0

0.1

0.1

0.1

0.1

0.1

0.2

0.2

-

200

400

600

800

1,000

1,200

1,400




Old New Changes (%)

2015F 2016F 2017F 2015F 2016F 2017F 2015F 2016F 2017F

Gross loans(%) 15.7 16.7 18.6 15.7 16.7 18.6 0.0 0.0 0.0

Deposits growth (%) 10.6 15.0 16.5 10.6 15.0 16.5 0.0 0.0 0.0

in Rp bn

Gross Loans 134,059 156,485 185,630 134,059 156,485 185,630 0.0 0.0 0.0

Deposits 117,787 135,397 157,736 117,787 135,397 157,736 0.0 0.0 0.0

Total Assets 164,588 190,200 223,423 163,999 189,523 222,634 -0.4 -0.4 -0.4

in Rp bn



Provisioning 780 809 897 789 817 905 1.2 1.1 0.9


Net income 1,407 1,744 2,185 1,421 1,799 2,272 1.0 3.1 4.0

NIM (%) 4.6 4.6 4.7 4.6 4.7 4.7 0.0 0.0 0.0

ROE (%) 10.6 11.8 13.2 10.6 12.1 13.6 0.1 0.3 0.4

LDR (%) 113.8 115.6 117.7 113.8 115.6 117.7 0.0 0.0 0.0

Gross NPL (%) 4.1 4.1 4.0 4.2 4.2 4.1 0.1 0.1 0.1

Credit Costs (%) 0.6 0.5 0.5 0.6 0.5 0.5 0.0 0.0 0.0

EPS (Rp) 134 166 208 135 171 216 1.0 3.1 4.0

DPS (Rp) 27 33 42 27 34 43 1.0 3.1 4.0

BVPS (Rp) 1,267 1,408 1,574 1,268 1,413 1,586 0.1 0.4 0.7

PE (x) 8.4 6.8 5.4 8.3 6.6 5.2

PBV (x) 0.9 0.8 0.7 0.9 0.8 0.7

BBTN Estimates revision




Year end Dec 2013 2014 2015F 2016F 2017F

Interest Income 10,783 12,807 14,132 15,896 18,084

Interest

Expense -5,130 -7,343 -7,781 -8,454 -9,268

NII 5,653 5,465 6,351 7,441 8,816

Non Interest

Income 625 895 1,061 1,222 1,410

Operating

Expense -3,710 -4,041 -4,636 -5,331 -6,146

PPOP 2,568 2,318 2,776 3,332 4,080

Loan Loss

Provision -432 -772 -789 -817 -905


Profit

Before Tax 2,141 1,548 1,989 2,517 3,177

Tax Expense -579 -433 -556 -703 -888

Net Profit 1,562 1,116 1,421 1,799 2,272

EPS (Rp) 148 106 135 171 216

EPS Growth

(%) 0.0 -28.4 27.3 26.6 26.3

Dividend

Per Share 39 45 27 34 43

Dividend

Growth (%) 59.7 14.9 -39.4 26.6 26.3


Year end Dec 2013 2014 2015F 2016F 2017F

Cash and

CA with BI 10,783 10,292 10,443 11,982 13,950

Interbank

Placement 4,839 1,496 1,721 1,979 2,276

Marketable

Securities 4,202 5,437 6,048 6,946 8,085

Government

Bonds 8,385 8,238 8,094 7,952 7,813

Loans (incl. sharia -

net 99,330 114,339 132,115 154,216 183,031

Net Fixed Assets 1,523 1,488 1,637 1,719 1,805

Other Assets 2,107 3,284 3,941 4,729 5,675

Total Assets 131,170 144,576 163,999 189,523 222,634

Total Earning

Assets 116,757 129,512 147,978 171,093 201,205

Deposit 96,208 106,471 117,787 135,397 157,736

Borrowings 7,073 6,998 11,199 12,797 20,507



Total


BVPS (Rp/Share) 1,095 1,160 1,268 1,413 1,586

Key Ratio Analysis

Year end Dec 2013 2014 2015F 2016F 2017F


Cost of Funds (%) 4.8 6.1 5.7 5.4 5.1

NIM (%) 5.2 4.4 4.6 4.7 4.7

ROE (%) 13.5 9.1 10.6 12.1 13.6

ROA (%) 1.2 0.8 0.9 0.9 1.0


Loan Growth (%) 23.4 15.4 15.7 16.7 18.6

Deposit Growth (%) 19.3 10.7 10.6 15.0 16.5

LDR (%) 104.4 108.9 113.8 115.6 117.7

RRR (%) 10.2 8.8 8.0 8.0 8.0

CAR (%) 15.6 14.6 16.1 16.2 16.5

Asset/Equity (x) 11.4 11.8 12.3 12.7 13.3

Gross NPL (%) 4.0 4.0 4.2 4.2 4.1


Cost of Credit (%) 0.4 0.7 0.6 0.5 0.5


1Q14 2Q14 3Q14 4Q14 1Q15

Total Loans (gross) 102,820 105,345 109,209 115,916 118,705

Total Deposit 102,011 101,329 101,835 106,471 109,509

Total Asset 136,964 135,623 142,428 144,576 149,289


Net revenue 1,640 1,412 1,493 1,815 1,799

Operating profit 466 275 309 496 558

Net Profit 341 198 217 360 402

Capital History

Date

17-Dec-09 IPO @ Rp800


Investment thesis:

• BDMN allegedly has high proportion of consumptive loans without tax

ID in its subsidiaries (ADMF and Adira Quantum) which puts the com-pany’s earnings at risk should the regulation regarding written-off loans without tax ID is implemented on financing companies.

• BDMN’s loan book has high proportion of segments that have high

deteriorating asset quality risk (retail and SME commercial) which also puts the company’s earnings at risk.

• The company is still undergoing a restructuring process under the new

management, in which the result is yet to be visible in the next 1-2 years. Its ROE will be mainly driven by how much it can cut costs rather than growing revenues. Thus, the challenging economic condi-tion would put BDMN’s business in a hard position.

Valuation: downgrade to Neutral with TP Rp4,100

We cut our earnings target in 2015/16F by 26/22% and therefore down-grade our call to Sell (old: Buy) with the new GGM-based TP of Rp4,100, implying 1.1x 2015F PBV. The new TP assumes 12.5% sustainable ROAE, 6% growth rate, and 11.8% cost of equity (7.75% risk-free rate). The stock currently trades at 1.2x 2015F PBV.

Risks to our call

• The regulation of written-off loans without tax ID is not going to be

applied to financing companies.

• Higher-than-expected loan growth and non-interest income.

• More cost efficiencies from the strategic consolidation of its subsidiar-

ies.

PT Bank Danamon Indonesia Tbk pro-

vides general banking services. The bank’

s head office is located in Jakarta with

branch offices throughout Indonesia.

Share Price Rp4,370

Sector Bank

Price Target RP4,100 (-6%)

Year end Dec 2013 2014 2015F 2016F 2017F

Net Profit (Rpbn) 4,042 2,604 2,617 3,378 4,714

EPS (Rp) 422 272 273 352 492

EPS Growth (%) 0.7 -35.6 0.5 29.1 39.6

DPS (Rp) 126 127 82 82 106

BVPS (Rp) 3,261 3,420 3,612 3,882 4,268

P/E (x) 10.4 16.1 15.9 12.4 8.9

P/BV (x) 1.3 1.3 1.2 1.1 1.0

ROE (%) 12.9 7.9 7.6 9.1 11.5

Div Yield (%) 2.9 2.9 1.9 1.9 2.4

Bank Danamon

SELL Rp4,100

Reuters Code BDMN.JK

Bloomberg Code BDMN.IJ

Issued Shares 9,585



11.7

52-Wk range 5200 / 3650

Asia Financial (Ina)Pte.Ltd. 67.4%

Others 6.9%

Public 25.7%

EPS 15F 16F


TRIM vs Cons. (%) -23.8 -18.6

In a Hard Position

Company Update

Stock Data

Major Shareholders

Consensus

Stock Price & Value

Company Data

-

5

10

15

20

25

30

35

40

45

-

1,000

2,000

3,000

4,000

5,000

6,000

May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15

(Rpbn)

Avg. 5 Day MA Trading Value (RHS) Price (LHS)


Old New Changes (%)

2015F 2016F 2017F 2015F 2016F 2017F 2015F 2016F 2017F

Gross loans(%) 4.0 6.0 8.0 3.9 10.5 15.6 -0.1 4.5 7.6

Deposits growth (%) 6.6 7.1 7.6 7.1 10.0 12.5 0.6 2.9 4.9

in Rp bn

Gross Loans 113,958 120,796 130,459 113,874 125,870 145,447 -0.1 4.2 11.5

Deposits 124,153 132,977 143,115 124,808 137,289 154,468 0.5 3.2 7.9

Total Assets 206,179 221,940 241,834 205,351 224,809 255,312 -0.4 1.3 5.6

in Rp bn



Provisioning 3,978 4,187 4,560 4,371 4,711 5,167 9.9 12.5 13.3


Net income 3,521 4,330 5,146 2,617 3,378 4,714 -25.7 -22.0 -8.4

NIM (%) 8.3 8.4 8.4 8.5 8.5 8.4 0.2 0.0 0.0

ROE (%) 9.9 11.2 12.1 7.6 9.1 11.5 -2.4 -2.1 -0.5

LDR (%) 91.8 90.8 91.2 91.2 91.7 94.2 -0.5 0.8 3.0

Gross NPL (%) 2.6 2.6 2.6 2.8 2.8 2.6 0.2 0.2 0.0

Credit Costs (%) 3.5 3.5 3.5 3.8 3.7 3.6 0.3 0.3 0.1

EPS (Rp) 367 452 537 273 352 492 -25.7 -22.0 -8.4

DPS (Rp) 82 110 136 82 82 106 0.0 -25.7 -22.0

BVPS (Rp) 3,706 4,047 4,449 3,612 3,882 4,268 -2.5 -4.1 -4.1

PE (x) 11.9 9.6 8.1 15.9 12.4 8.9

PBV (x) 1.2 1.1 1.0 1.2 1.1 1.0

BDMN Estimates revision




Year end Dec 2013 2014 2015F 2016F 2017F

Interest Income 20,131 22,991 23,735 25,048 27,756

Interest

Expense -6,600 -9,312 -9,368 -9,703 -10,704

NII 13,531 13,680 14,368 15,345 17,052

Non Interest

Income 5,643 4,763 5,704 6,447 7,356

Operating

Expense -10,221 -10,394 -10,557 -10,761 -10,988

PPOP 8,953 8,049 9,514 11,031 13,419

Loan Loss

Provision -3,348 -3,986 -4,371 -4,711 -5,167


Profit

Before Tax 5,530 3,554 5,143 6,320 8,253

Tax Expense -1,371 -871 -1,286 -1,580 -2,063

Net Profit 4,042 2,604 2,617 3,378 4,714

EPS (Rp) 422 272 273 352 492

EPS Growth

(%) 0.7 -35.6 0.5 29.1 39.6

Dividend

Per Share 126 127 82 82 106

Dividend

Growth (%) 20.3 0.7 -35.6 0.5 29.1


Year end Dec 2013 2014 2015F 2016F 2017F

Cash and

CA with BI 12,205 13,125 13,604 14,915 16,734

Interbank

Placement 12,735 14,533 15,258 16,786 18,895

Marketable

Securities 7,727 8,888 9,338 10,272 11,557

Government

Bonds 5,598 6,605 7,625 8,388 9,443

Loans-net 103,468 106,774 110,629 122,220 141,374

Net Fixed Assets 2,199 2,490 2,689 2,904 3,137

Other Assets 40,305 43,294 46,207 49,325 54,173

Total Assets 184,237 195,709 205,351 224,809 255,312

Total Earning

Assets 26,034 30,032 32,153 35,264 39,061

Deposit 109,161 116,495 124,808 137,289 154,468

Borrowings 16,068 14,497 11,178 11,152 14,959



Total


BVPS (Rp/Share) 3,261 3,420 3,612 3,882 4,268

Key Ratio Analysis

Year end Dec 2013 2014 2015F 2016F 2017F


Cost of Funds (%) 5.1 6.5 6.3 6.1 6.0

NIM (%) 9.2 8.4 8.5 8.5 8.4

ROE (%) 12.9 7.9 7.6 9.1 11.5

ROA (%) 2.2 1.3 1.3 1.5 1.8


Loan Growth (%) 13.6 3.6 3.9 10.5 15.6

Deposit Growth (%) 21.4 6.7 7.1 10.0 12.5

LDR (%) 96.9 94.1 91.2 91.7 94.2

RRR (%) 8.5 8.8 8.0 8.0 8.0

CAR (%) 17.9 17.9 16.9 16.6 16.0

Asset/Equity (x) 5.9 6.0 5.9 6.0 6.2

Gross NPL (%) 2.0 2.4 2.8 2.8 2.6


Cost of Credit (%) 3.2 3.6 3.8 3.7 3.6


1Q14 2Q14 3Q14 4Q14 1Q15


Total Deposit 110,251 109,151 114,361 116,495 113,974

Total Asset 185,920 185,433 194,373 195,709 193,811


Net revenue 4,691 3,443 6,768 4,678 4,488

Operating profit 1,206 866 881 1,111 941

Net Profit 904 660 634 435 687

Capital History

Date

6-Dec-89 IPO @ Rp. 12.000

7-Sep-11 Additional Share HMETD


Investment theses:

• BTPN is the market leader in pensioners niche market, which expect-

edly would sustain its margins in a long term.

• Our analysis on NPL book suggest low bad loans risk as reflected by

low NPL amount YoY growth.

• The company has booked a strong fee-based income growth in the

past few quarters. We expect a continuing strong fee-based income growth in the following years on the back of its branchless banking services and bancassurance business.

Valuation: cut TP to Rp4,300 but upgrade to Buy (old: Neutral)

We cut our earnings target by 10/7% for 2015/16F on the back of lower net interest income and non-interest income due to slower loan growth condition. Our new GGM-based TP is Rp4,300, implying 1.8x 2015F PBV. The TP assumes 15.4% sustainable ROAE, 5% growth rate, and 10.8% cost of equity (7.75% risk-free rate). The stock currently trades at 1.6x 2015F PBV. Upgrade to Buy.

Risks to our call

• Deteriorating asset quality in its micro and productive poor segments.

• Slower-than-expected loan growth.

PT Bank Tabungan Pensiunan Nasional

Tbk is a financial institution that special-

izes in funding and lending. It offers

accounts in deposits and savings, pen-

sion loans, SME loans, and other financial

Share Price Rp3,750

Sector Bank


Year end Dec 2013 2014 2015F 2016F 2017F

Net Profit (Rpbn) 2,131 1,869 2,025 2,324 2,709

EPS (Rp) 365 317 347 398 464

EPS Growth (%) 7.0 -13.2 9.4 14.8 16.5

DPS (Rp) - - - - -

BVPS (Rp) 1,697 2,065 2,396 2,794 3,258

P/E (x) 10.3 11.8 10.8 9.4 8.1

P/BV (x) 2.2 1.8 1.6 1.3 1.2

ROE (%) 21.5 15.5 14.5 14.2 14.2

Div Yield (%) - - - - -

Bank Tabungan Pensiunan Nasional

BUY Rp4,300

Reuters Code BTPN.JK

Bloomberg Code BTPN.IJ

Issued Shares 5,840



0.4

52-Wk range 4650 / 3600

Sumitomo Mitsui Banking Corp 40.0%

TPG Nusantara S.A.R.L 25.9%

Public 32.3%

PT Multi Kencana Mulia 1.0%

Directors & Commissioners 0.8%

EPS 15F 16F


TRIM vs Cons. (%) -8.7 -10.6

Benefits From its Niche Market

Company Update

Stock Data

Major Shareholders

Consensus


Company Data

0.0

0.0

0.0

0.0

0.0

0.0

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000


(Rpbn)Avg. 5 Day M A Trading Value (RHS) Price (LHS)


Old New Changes (%)

2015F 2016F 2017F 2015F 2016F 2017F 2015F 2016F 2017F

Gross loans(%) 14.5 15.0 15.0 5.7 10.2 15.4 -8.8 -4.8 15.4

Deposits growth (%) 12.4 13.2 14.1 5.0 9.9 18.8 -7.4 -3.3 18.8

in Rp bn

Gross Loans 60,970 70,116 80,633 55,588 61,250 70,671 0.9 1.3 1.2

Deposits 61,316 69,435 79,224 53,942 59,291 70,415 1.2 1.5 1.1

Total Assets 88,512 101,037 115,619 79,443 88,798 104,735 -10.2 1.2 0.9

in Rp bn


Non-interest income 988 1,291 1,638 1,043 1,168 1,410 5.6 -9.6 -13.9

Provisioning 889 1,017 1,167 995 807 925 11.9 -20.7 -20.7


Net income 2,241 2,486 2,925 2,025 2,324 2,709 -9.7 -6.5 -7.4

NIM (%) 11.5 11.4 11.6 11.7 11.7 11.5 0.2 0.3 -0.1

ROE (%) 15.9 15.0 15.0 14.5 14.2 14.2 -1.4 -0.7 -0.7

LDR (%) 99.4 101.0 101.8 103.1 103.3 100.4 3.6 2.3 -1.4

Gross NPL (%) 0.7 0.7 0.7 0.8 0.8 0.7 0.1 0.0 0.0

Credit Costs (%) 1.5 1.5 1.4 1.8 1.3 1.3 0.3 -0.1 -0.1

EPS (Rp) 384 426 501 347 398 464 -9.7 -6.5 -7.4

DPS (Rp) 0 0 0 0 0 0 0.0 0.0 0.0

BVPS (Rp) 2,419 2,845 3,346 2,396 2,794 3,258 -0.9 -1.8 -2.6

PE (x) 9.8 8.8 7.5 10.8 9.4 8.1

PBV (x) 1.6 1.3 1.1 1.6 1.3 1.2

BTPN Estimates revision




Year end Dec 2013 2014 2015F 2016F 2017F

Interest Income 10,943 12,293 13,147 14,169 15,950

Interest

Expense -3,895 -5,252 -5,139 -5,401 -6,035

NII 7,048 7,041 8,008 8,768 9,914

Non Interest

Income 400 740 1,043 1,168 1,410

Operating

Expense -3,980 -4,501 -5,086 -5,746 -6,487

PPOP 3,469 3,279 3,965 4,189 4,837

Loan Loss

Provision -591 -744 -995 -807 -925


Profit

Before Tax 2,869 2,523 2,958 3,369 3,899

Tax Expense -738 -653 -766 -873 -1,010

Net Profit 2,131 1,869 2,025 2,324 2,709

EPS (Rp) 365 317 347 398 464

EPS Growth

(%) 7.0 -13.2 9.4 14.8 16.5

Dividend

Per Share 0 0 0 0 0

Dividend

Growth (%) 0.0 0.0 0.0 0.0 0.0


Year end Dec 2013 2014 2015F 2016F 2017F

Cash and

CA with BI 5,414 5,758 5,348 5,846 6,893

Interbank

Placement 0 6,713 8,037 9,973 13,162

Marketable

Securities 2,913 4,734 5,394 5,929 7,042

Government

Bonds 0 0 0 0 0

Loans-net 46,223 52,101 54,921 60,637 70,035

Net Fixed Assets 755 730 868 1,033 1,230

Other Assets 14,356 4,978 4,875 5,380 6,374

Total Assets 61,587 66,038 70,609 79,019 93,184

Total Earning

Assets 69,661 75,015 79,443 88,798 104,735

Deposit 51,103 51,364 53,942 59,291 70,415

Borrowings 1,423 3,903 2,779 3,062 3,534



Total


BVPS (Rp/Share) 1,697 2,065 2,396 2,794 3,258

Key Ratio Analysis

Year end Dec 2013 2014 2015F 2016F 2017F


Cost of Funds (%) 6.9 8.4 8.1 7.9 7.7

NIM (%) 12.4 11.0 11.7 11.7 11.5

ROE (%) 21.5 15.5 14.5 14.2 14.2

ROA (%) 3.1 2.5 2.5 2.6 2.6


Loan Growth (%) 18.6 12.6 5.7 10.2 15.4

Deposit Growth (%) 14.2 0.5 5.0 9.9 18.8

LDR (%) 91.4 102.4 103.1 103.3 100.4

RRR (%) 9.0 9.6 8.0 8.0 8.0

CAR (%) 23.1 25.3 24.0 22.8 21.7

Asset/Equity (x) 7.0 6.2 5.7 5.4 5.5

Gross NPL (%) 0.7 0.7 0.8 0.8 0.7


Cost of Credit (%) 1.3 1.4 1.8 1.3 1.3


1Q14 2Q14 3Q14 4Q14 1Q15

Total Loans 47,159 50,096 51,225 52,608 53,991

Total Deposit 49,506 52,934 52,798 51,364 52,277

Total Asset 67,349 71,411 71,698 75,015 76,566


Net revenue 1,875 1,985 1,925 1,995 2,026


Net Profit 494 503 429 436 481

Capital History

Date

17-Dec-09 IPO @ Rp800


Investment thesis:

• The nation’s slowing economy is expected to affect the East Java eco-

nomic growth as well. BJTM may experience slowing loan growth in its consumer loans and rising NPL from SME and commercial loans. The latest data, shows that NPL ratio reaches 4.2% in May 2015 due to deteriorating SME loans quality.

• Its dividend yield is considerably less attractive than before compared

to 10-year Indonesian government bond yield.

• Unlike BJBR, we still concern about its micro loans quality which could

deteriorate due to slowing economy.

• However, the stock is expected to give high returns during “dividends

season” next year. Our analysis says that the best time to buy BJTM is at November-December to gain maximum return from both capital gains and dividends.

Valuation: cut TP to Rp575, maintain Buy

We cut our earnings target in 2015/16F by 21/24% accounting for lower revenues and higher provisioning expenses. But our new GGM-based TP is raised to Rp575 (implying 1.3x 2015F PBV), assuming 15.4% sustainable ROAE, 5% growth rate, and 12.3% cost of equity (7.75% risk-free rate). We maintain our Buy call to the stock as it now trades cheaply at 1.1x 2015F PBV, but we prefer BJBR for its lower NPL risk

Risks to our call

• Deteriorating asset quality in its micro, SME, and commercial seg-

ments

• Slower-than-expected loan growth.

• Adverse East Java government intervention on lending rates, cost of

funds, and dividends.

PT Bank Pembangunan Daerah Jawa

Timur Tbk is a full service bank in

Indonesia based in Surabaya, East

Java.

Share Price Rp483

Sector Bank

Price Target Rp575 (19%)

Year end Dec 2013 2014 2015F 2016F 2017F

Net Profit (Rpbn) 824 939 970 1,053 1,162

EPS (Rp) 55 63 65 71 78

EPS Growth (%) -1.3 13.9 3.3 8.6 10.3

DPS (Rp) 40 41 42 42 46

BVPS (Rp) 383 405 428 457 489

P/E (x) 8.7 7.7 7.4 6.8 6.2

P/BV (x) 1.3 1.2 1.1 1.1 1.0

ROE (%) 14.4 15.5 15.2 15.5 15.9

Div Yield (%) 8.2 8.4 8.7 8.7 9.5

BPD Jawa Timur

BUY Rp575

Reuters Code BJTM.JK

Bloomberg Code BJTM.IJ




7.4

52-Wk range 580 / 405

Government of Province Jawa Timur 51.5%

Government of City/Regents 28.5%

Public 20.0%

EPS 15F 16F


TRIM vs Cons. (%) -12.5 -18.1

Growth is Cooling Down but Still A “Buy”

Company Update

Stock Data

Major Shareholders

Consensus

Stock Price

Company Data

-

10

20

30

40

50

60

70

80

90

100

-

100

200

300

400

500

600

Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14

(mn)(Rp)Volume (RHS) Price (LHS)


Old New Changes (%)

2015F 2016F 2017F 2015F 2016F 2017F 2015F 2016F 2017F

Gross loans(%) 20.5 21.0 22.0 13.0 17.5 20.9 -7.5 -3.5 -1.1

Deposits growth (%) 21.8 21.3 20.0 17.6 14.9 16.3 -4.2 -6.4 -3.7

in Rp bn

Gross Loans 31,934 38,640 47,141 29,595 34,768 42,029 0.7 1.0 1.1

Deposits 39,696 48,167 57,800 35,780 41,119 47,834 1.0 1.5 1.7

Total Assets 45,396 54,025 65,128 43,849 49,827 57,288 -3.4 0.8 1.2

in Rp bn


Non-interest income 437 508 595 372 416 456 -14.8 -18.2 -23.4

Provisioning 593 593 593 644 685 718 8.7 15.5 21.0


Net income 1,222 1,393 1,620 970 1,053 1,162 -20.7 -24.4 -28.3

NIM (%) 7.3 7.2 7.3 6.7 6.7 6.9 -0.6 -0.5 -0.4

ROE (%) 18.2 19.1 20.2 15.2 15.5 15.9 -3.1 -3.6 -4.3

LDR (%) 80.4 80.2 81.6 83.2 85.1 88.4 2.7 4.8 6.9

Gross NPL (%) 3.2 3.2 3.3 3.7 3.6 3.2 0.5 0.3 -0.1

Credit Costs (%) 1.9 1.8 1.8 2.2 2.0 1.7 0.3 0.2 -0.1

EPS (Rp) 82 93 109 65 71 78 -20.7 -24.4 -28.3

DPS (Rp) 46 53 61 42 42 46 0.0 0.0 0.0

BVPS (Rp) 449 489 537 428 457 489 -4.7 -6.7 -9.1

PE (x) 5.9 5.2 4.4 7.4 6.8 6.2

PBV (x) 1.1 1.0 0.9 1.1 1.1 1.0

BJTM’s Estimates revision




Year end Dec 2013 2014 2015F 2016F 2017F

Interest Income 3,386 4,084 4,709 5,400 6,229

Interest

Expense -913 -1,203 -1,350 -1,528 -1,709

NII 2,472 2,881 3,359 3,872 4,520

Non Interest

Income 361 373 372 416 456

Operating

Expense -1,127 -1,399 -1,690 -2,084 -2,580

PPOP 1,706 1,855 2,041 2,204 2,396

Loan Loss

Provision -596 -504 -644 -685 -718


Profit

Before Tax 1,154 1,376 1,421 1,543 1,702

Tax Expense -329 -437 -451 -490 -540

Net Profit 824 939 970 1,053 1,162

EPS (Rp) 55 63 65 71 78

EPS Growth

(%) -1.3 13.9 3.3 8.6 10.3

Dividend

Per Share 40 41 42 42 46

Dividend

Growth (%) 6.2 2.2 3.1 0.9 8.6


Year end Dec 2013 2014 2015F 2016F 2017F

Cash and

CA with BI 2,320 1,889 2,024 2,349 2,715

Interbank

Placement 3,069 3,326 4,947 4,367 2,859

Marketable

Securities 2,907 3,344 4,010 4,604 5,351

Government

Bonds 25 167 255 293 341

Loans-net 21,559 25,544 28,767 33,812 40,936

Net Fixed Assets 263 321 385 463 555

Other Assets 2,904 3,407 3,461 3,939 4,531

Total Assets 33,047 37,998 43,849 49,827 57,288

Total Earning

Assets 27,938 32,787 38,419 43,554 50,006

Deposit 26,091 30,419 35,780 41,119 47,834

Borrowings 316 919 969 1,088 1,235

Other Liabilities 607 617 712 809 930


Total


BVPS (Rp/Share) 383 405 428 457 489

Key Ratio Analysis

Year end Dec 2013 2014 2015F 2016F 2017F


Cost of Funds (%) 3.7 4.1 4.0 3.9 3.7

NIM (%) 7.1 6.9 6.7 6.7 6.9

ROE (%) 14.4 15.5 15.2 15.5 15.9

ROA (%) 2.7 2.6 2.4 2.2 2.2


Loan Growth (%) 19.0 18.6 13.0 17.5 20.9

Deposit Growth (%) 17.1 16.6 17.6 14.9 16.3

LDR (%) 85.0 86.5 83.2 85.1 88.4

RRR (%) 8.7 9.4 8.0 8.0 8.0

CAR (%) 23.7 22.2 27.6 24.4 21.5

Asset/Equity (x) 5.8 6.3 6.9 7.3 7.9

Gross NPL (%) 3.4 3.4 3.7 3.6 3.2


Cost of Credit (%) 2.7 1.9 2.2 2.0 1.7


1Q14 2Q14 3Q14 4Q14 1Q15

Total Loans 22,101 24,166 26,087 26,087 26,568

Total Deposit 28,205 35,480 35,704 35,704 37,974

Total Asset 35,464 42,147 42,694 42,694 45,825

Net Interest Income 728 685 717 750 767

Net revenue 817 778 802 857 843


Net Profit 312 231 200 196 257

Capital History

Date

17-Dec-09 IPO @ Rp800


Investment thesis:

• The company continues to be more prudent in preventing rising NPL,

particularly in micro segment. BJBR now channels its micro funds to its rural banks partners across the country with buyback guarantee. This should lead to minimal NPL formation from micro segment going for-ward.

• The company exhibits lower NPL formation risk as reflected by slower

growth of NPL amount across all segments.

• The company’s plan to acquire an insurance company is a positive as it

could translate to higher non-interest income growth.

• BJBR interestingly has an opposite earnings seasonality compared to

other banks on a QoQ basis. 1Q and 4Q earnings are usually the big-gest and 2Q and 3Q earnings are the smallest. The company booked stronger earnings momentum, in 1Q15, which therefore expectedly should lead to better earnings momentum in FY15.

• The management guided for lower dividend payout ratio going for-

ward, which would lead to lower dividend yield. However, we view this positively as it should translate to higher book value of equity growth. Despite that, BJBR’s share price is expected to outperform during dividends season (November–April)

Valuation: raise TP to Rp1,300, reiterate Buy

We adjust our earnings target in 2015/16F by –3/1% accounting for a slower revenue growth due to slowing economy. Assuming 17.2% sustain-able ROAE, 5% growth rate, and 12.8% cost of equity (7.75% risk-free rate), we arrive at our new GGM-based TP of Rp1,250. The TP implies 1.7x 2015F PBV. The stock currently trades cheaply at 1.1x 2015F PBV. Reiter-ate Buy.

Risks to our call

• Deteriorating asset quality in its commercial and mortgage segments

poor segments.

• Slower 1Q and 4Q earnings momentum in the upcoming years.

• Banten’s province plan to establish its own regional development

banks may be a risk for BJBR considering the size of business in the province.

PT Bank Pembangunan Daerah Jawa

Barat dan Banten Tbk is a commer-

cial bank. The bank offers wide

range of banking products and ser-

Share Price Rp895

Sector Bank


Year end Dec 2013 2014 2015F 2016F 2017F

Net Profit (Rpbn) 1,373 1,116 1,194 1,409 1,621

EPS (Rp) 142 115 123 145 167

EPS Growth (%) 15.1 -18.7 6.9 18.1 15.0

DPS (Rp) 68 78 63 49 58

BVPS (Rp) 689 726 786 882 991

P/E (x) 6.3 7.8 7.3 6.2 5.4

P/BV (x) 1.3 1.2 1.1 1.0 0.9

ROE (%) 20.5 15.8 15.7 16.5 16.9

Div Yield (%) 7.6 8.7 7.1 5.5 6.5

BPD Jawa Barat & Banten

BUY Rp1,300

Reuters Code BJBR.JK

Bloomberg Code BJBR.IJ

Issued Shares 9,696



15.5

52-Wk range 1025 / 720

Government of West Java Province 51.5%

Government of Banten Province 28.5%

Public 20.0%

EPS 15F 16F


TRIM vs Cons. (%) -2.9 -1.2

A Good Consumer-based Bank Choice

Company Update

Stock Data

Major Shareholders

Consensus


Company Data

0.0

0.0

0.0

0.0

0.0

0.1

0.1

-

200

400

600

800

1,000

1,200




Old New Changes (%)

2015F 2016F 2017F 2015F 2016F 2017F 2015F 2016F 2017F

Gross loans(%) 14.8 15.3 15.8 10.9 12.8 15.7 -3.8 -2.4 -0.1

Deposits growth (%) 17.2 18.1 19.1 13.6 14.3 15.0 -3.6 -3.9 -4.1

in Rp bn

Gross Loans 59,671 68,920 79,947 55,075 62,235 72,192 -7.7 -9.7 -9.7

Deposits 65,811 77,657 92,412 60,555 69,336 79,736 -8.0 -10.7 -13.7

Total Assets 87,910 101,105 118,060 84,851 95,977 109,265 -3.5 -5.1 -7.4

in Rp bn


Non-interest income 633 759 830 562 655 776 -11.2 -13.6 -6.6

Provisioning 904 795 1,398 835 713 608 -7.6 -10.3 -56.5


Net income 1,225 1,396 1,195 1,194 1,409 1,621 -2.6 0.9 35.6

NIM (%) 8.1 8.1 8.3 6.9 7.0 7.0 -1.2 -1.2 -1.3

ROE (%) 16.0 16.6 13.4 15.7 16.5 16.9 -0.4 -0.1 3.5

LDR (%) 89.6 87.4 84.9 90.4 89.2 89.8 0.8 1.8 4.8

Gross NPL (%) 3.7 3.4 3.2 4.2 4.1 3.9 0.5 0.7 0.8

Credit Costs (%) 1.5 1.2 1.7 1.5 1.1 0.8 0.0 0.0 -0.9

EPS (Rp) 126 144 123 123 145 167 -2.6 0.9 35.6

DPS (Rp) 63 63 72 63 49 58 0.9 -22.1 -19.3

BVPS (Rp) 789 870 921 786 882 991 -0.4 1.4 7.6

PE (x) 7.1 6.2 7.3 7.3 6.2 5.4

PBV (x) 1.1 1.0 1.0 1.1 1.0 0.9

Figure 1. Estimates revision




Year end Dec 2013 2014 2015F 2016F 2017F

Interest Income 8,133 8,792 9,910 11,192 12,578

Interest

Expense -3,351 -4,330 -4,839 -5,405 -5,962

NII 4,782 4,462 5,071 5,786 6,616

Non Interest

Income 457 566 562 655 776

Operating

Expense -2,871 -2,948 -3,274 -3,929 -4,715

PPOP 2,368 2,079 2,360 2,513 2,677

Loan Loss

Provision -616 -663 -835 -713 -608


Profit

Before Tax 1,753 1,438 1,525 1,800 2,069

Tax Expense -376 -318 -328 -387 -444

Net Profit 1,373 1,116 1,194 1,409 1,621

EPS (Rp) 142 115 123 145 167

EPS Growth

(%) 15.1 -18.7 6.9 18.1 15.0

Dividend

Per Share 68 78 63 49 58

Dividend

Growth (%) 14.1 -18.9 -22.2 18.1 15.0


Year end Dec 2013 2014 2015F 2016F 2017F

Cash and

CA with BI 7,049 7,946 7,914 9,053 10,408

Interbank

Placement 2,806 4,890 7,538 8,563 8,254

Marketable

Securities 10,292 7,694 8,608 9,737 11,085

Government

Bonds 0 0 0 0 0

Loans-net 44,289 48,028 53,147 60,056 69,846

Net Fixed Assets 699 1,045 1,169 1,344 1,546

Other Assets 5,823 6,234 6,475 7,223 8,126

Total Assets 70,958 75,837 84,851 95,977 109,265

Total Earning

Assets 62,032 66,633 76,097 85,946 97,593

Deposit 46,874 53,119 60,555 69,336 79,736

Borrowings 324 456 551 622 722



Total


BVPS (Rp/Share) 689 726 786 882 991

Key Ratio Analysis

Year end Dec 2013 2014 2015F 2016F 2017F


Cost of Funds (%) 5.8 7.4 7.5 7.3 7.1

NIM (%) 7.6 6.8 6.9 7.0 7.0

ROE (%) 20.5 15.8 15.7 16.5 16.9

ROA (%) 1.9 1.5 1.4 1.5 1.5


Loan Growth (%) 27.6 10.5 10.9 12.8 15.7

Deposit Growth (%) -0.8 15.4 13.6 14.3 15.0

LDR (%) 96.7 92.6 90.4 89.2 89.8

RRR (%) 9.5 9.7 8.0 8.0 8.0

CAR (%) 20.6 19.0 19.6 21.3 23.4

Asset/Equity (x) 10.6 10.8 11.1 11.2 11.4

Gross NPL (%) 2.8 4.2 4.2 4.1 3.9


Cost of Credit (%) 1.4 1.3 1.5 1.1 0.8


1Q14 2Q14 3Q14 4Q14 1Q15


Total Deposit 58,232 59,596 61,762 53,119 66,666

Total Asset 78,899 78,581 78,731 75,837 87,559


Net revenue 1,160 1,142 1,249 1,477 1,309


Net Profit 325 151 238 402 385

Capital History

Date

17-Dec-09 IPO @ Rp800

PT Trimegah Securities Tbk

Gedung Artha Graha 18th Floor

Jl. Jend. Sudirman Kav. 52-53

Jakarta 12190, Indonesia

t. +62-21 2924 9088

f. +62-21 2924 9150

www.trimegah.com

DISCLAIMER

This report has been prepared by PT Trimegah Securities Tbk on behalf of itself and its affiliated companies and is provided for information

purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. This report has

been produced independently and the forecasts, opinions and expectations contained herein are entirely those of Trimegah Securities.

While all reasonable care has been taken to ensure that information contained herein is not untrue or misleading at the time of publication,

Trimegah Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. This report is

provided solely for the information of clients of Trimegah Securities who are expected to make their own investment decisions without reliance

on this report. Neither Trimegah Securities nor any officer or employee of Trimegah Securities accept any liability whatsoever for any direct or

consequential loss arising from any use of this report or its contents. Trimegah Securities and/or persons connected with it may have acted

upon or used the information herein contained, or the research or analysis on which it is based, before publication. Trimegah Securities may in

future participate in an offering of the company’s equity securities.

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