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Fundamental View
AS OF 12 Dec 2023Bank Negara Indonesia (BNI) is the fourth largest commercial bank in Indonesia by assets, and is rated Baa2(stable)/BBB-(stable)/BBB-(stable).
The bank is majority-owned by the Indonesian government (60%) and receives strong state support in the form of well-established relationships with SOEs, an area that the bank heavily loans to.
BNI’s asset quality is showing a steady improvement after COVID headwinds in Indonesia, mainly driven by its corporate loan book. It is de-risking its loan portfolio by focusing growth on top tier private corporates.
Business Description
AS OF 12 Dec 2023- Bank Negara Indonesia was founded in 1946, initially as a central bank, before becoming a commercial bank in 1968. It is now the 4th largest commercial bank in Indonesia by assets.
- The bank is majority-owned by the state (60%) and focuses its lending toward SOEs and domestic corporates. The loan book is split 52% corporates, 29% small and medium enterprises and 18% retail, with the remaining coming from its subsidiaries at end-September 2023.
- BNI employs ~27,000 staff across its ~1,800 outlets. It also has over 170,000 E-channels and over 13,000 ATMs across Indonesia as of end-September 2023.
Risk & Catalysts
AS OF 12 Dec 2023BNI’s NIM is much lower compared to Mandiri and BRI, and it is likely to remain so as the bank is shifting its loan mix towards safer but lower yielding top tier private corporates, focusing on the risk-adjusted NIM (net of credit costs) instead. Credit costs remain higher than Mandiri so profitability is slightly weaker, but is still generally quite strong with ROE at >15%.
Growth momentum is expected to hold up well in 2023 which would support asset quality and loan growth; management targets 7-9% FY23 loan growth and credit costs of <150 bp.
The COVID-19 impact is still being played out with regulatory forbearance measures being selectively extended to March 2024. However, similar to Mandiri, BNI is looking into pare down its LAR and NPL coverage ratios back to pre-pandemic levels starting next year so lower credit costs of ~100 bp are expected by 2025, along with an ~18% ROE. Capital is solid with a >19% CET1 ratio.
Key Metric
AS OF 12 Dec 2023| IDR bn | FY19 | FY20 | FY21 | FY22 | 9M23 |
|---|---|---|---|---|---|
| PPP ROA | 3.33% | 3.20% | 3.35% | 3.42% | 3.43% |
| ROA | 1.9% | 0.4% | 1.2% | 1.8% | 2.1% |
| ROE | 13.5% | 2.9% | 9.9% | 15.0% | 15.7% |
| Equity/Assets | 14.49% | 11.56% | 12.07% | 12.32% | 13.92% |
| CET1 Ratio | 18.7% | 16.0% | 17.4% | 17.5% | 19.6% |
| NPL Ratio | 2.27% | 4.26% | 3.70% | 2.81% | 2.27% |
| Provisions/Average Loans | 1.60% | 4.21% | 3.23% | 1.83% | 1.37% |
| LDR | 90.6% | 81.4% | 79.9% | 84.0% | 88.8% |
CreditSight View Comment
AS OF 01 Nov 2023BNI is the 4th largest commercial bank in Indonesia by assets with a 60% government shareholding. The bank thus has well-established relationships with SOEs and benefits from a strong domestic franchise. Despite its corporate-focused loan book, its asset quality was weaker than Bank Mandiri with a higher NPL ratio and credit costs. The bank switched its growth strategy to focus growth on better quality segments and risk-adjusted NIM (net of credit costs) in 2021 which is bearing fruit. Funding cost pressure has eroded the NIM but this appears to have turned a corner, and profitability is generally quite strong. The CET1 ratio is high at ~19%. We affirm our M/P recommendation on the $ Tier 2 as it does not have senior bonds outstanding. The $ AT1 however is on our preferred AT1s list.
Recommendation Reviewed: November 01, 2023
Recommendation Changed: July 26, 2023
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