The central Indonesian government controls a 60 percent stake in Bank Negara Indonesia (BNI) and due to this close relationship the bank is likely to remain involved - or become increasingly involved - in the financing of government-led infrastructure development in Indonesia. In the next two years BNI's credit growth is estimated to reach nearly 20 percent (y/y). Accelerated credit expansion would offset the negative impact of Indonesian banks' lower net interest margin (NIM).

Indonesia's financial authorities are eager to push down the nation's lending rates in an effort to boost credit growth as well as economic growth. Therefore, the central bank (Bank Indonesia) cut its key interest rate (BI rate) by a total of 75 basis points to 6.75 percent during the first three months of 2016. This should contribute to push the NIM of Indonesian banks lower. RHB OSK Securities expects BNI's NIM to fall from 5.8 percent in 2015 to 5.6 percent in 2016.

Achmad Baiquni, General Director of BNI, says his bank targets to see corporate credit growth in the range of 15 - 16 percent (y/y) to IDR 156 trillion this year from IDR 137.91 trillion one year earlier, primarily supported by credit growth in the infrastructure sector (for the construction of projects including power plants and airports). BNI's total credit growth in 2016 is targeted at 14 - 15 percent (y/y).

In the first quarter of 2016, corporate credit growth of BNI in the construction sector rose 127.5 percent (y/y) to IDR 5.99 trillion (approx. USD $454 million).

BNI's net interest income in Q1-2016 rose 15 percent (y/y) to IDR 10.12 trillion, outperforming analyst expectations. Meanwhile, net profit grew 5.7 percent (y/y) to IDR 2.97 trillion in Q1-2016, also exceeding analyst forecasts.

Regarding the non-performing loan (NPL) ratio of BNI, RHB OSK Securities expects to see a continued improvement in 2016. The bank's NPL is estimated to decline to 2.4 percent in 2016 from 2.7 percent last year.

RHB OSK Securities set its target for BNI shares at IDR 6,200 a piece. Another securities firm, Danareksa Sekuritas, put its target for BNI shares at IDR 5,850 a piece. On Friday (22/04) the BNI's shares fell 0.71 percent to IDR 4,895 per share. So far in 2016 shares of BNI have fallen 1.90 percent.

Future Projection Financial Performance Bank Negara Indonesia (BNI):

     2014    2015   2016F   2017F   2018F
Net Interest Income
 22,376  25,560  28,901  32,004  34,873
Non Interest Income
  8,855   9,698  11,287  13,240  15,238
Net Profit
  8,922   9,067  11,235  12,760  14,638
P/BV (x)
    2.1     1.6     1.4     1.3     1.1
P/E Ratio (x)
   13.6    13.4    10.8     9.5     8.3

in billion IDR rupiah, except stated otherwise
Source: RHB OSK Securities (22/04/2016)