Bank Negara Indonesia (BNI) to Thrive on Infrastructure Credit Growth?
Bank Negara Indonesia (BNI), one of the leading banks in Indonesia, is expected to maintain rising net profit figures in the years ahead due to its decision to focus on (corporate) credit disbursement for domestic infrastructure development projects. In fact, according to RHB OSK Securities, BNI may become the state-controlled bank that benefits most from the government decision to raise its infrastructure budget to IDR 313.5 trillion (approx. USD $24 billion) in the 2016 State Budget. Last year, growth of credit disbursed by BNI to infrastructure projects climbed 116.2 percent (y/y). This year infrastructure credit may grow by another 19 percent.
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)
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