Financial Institutions in Focus: Bank Negara Indonesia (BNI)
The corporate earnings of Bank Negara Indonesia (BNI) up to the third quarter of 2016 are in line with expectations. Net income of Indonesia's fourth-largest lender (by assets) rose 28.7 percent (y/y) to IDR 7.7 trillion (approx. USD $529 million) compared to net income in the same period one year earlier (IDR 5.99 trillion), supported by a 21 percent (y/y) increase in credit disbursement to IDR 372 trillion (approx. USD $28.6 billion) and the higher net interest income margin (6.2 percent).
Credit disbursement at Bank Negara Indonesia (BNI) was primarily supported by rapid corporate credit growth, particularly to state-owned institutions. Being a state-controlled financial institution, BNI is a logical choice for the government and other state-owned institutions to obtain loans for governmental-led projects. Not unimportant, the quality of credit only weakened slightly. In the third quarter of 2016 BNI's non-performing loan (NPL) ratio stood at 3.1 percent, up slightly from 3.1 percent in the preceding quarter. This healthy NPL ratio is also the result of BNI's efforts to restructure some of its debtors loans.
Meanwhile, net interest income (the difference between interest paid to depositors and interest charged on debtors), expanded 15 percent (y/y) to IDR 21.9 trillion in the first nine months of 2016. All in all, these figures are much better compared to the overall performance of Indonesia's banking industry.
The 21 percent (y/y) growth in BNI's credit disbursement up to Q3-2016 was much better than the 7.6 percent (y/y) growth rate of the banking industry over the same period and higher than the 14.6 percent (y/y) growth rate that was achieved by BNI in the first nine months of 2015.
For the remainder of 2016 BNI will avoid high-risk sectors such as mining and instead focus on low-risk sector such as agribusiness, infrastructure, electricity and power plants.
In mid-October 2016 BNI - one of the gateways for the government's tax amnesty program - stated that it collected IDR 7.6 trillion (approx. USD $584 million) worth of penalty funds through the first phase of the amnesty program (up to 30 September 2016). It also managed IDR 781 billion in repatriated funds.
On Tuesday (18/10) shares of BNI listed on the Indonesia Stock Exchange tumbled 1.82 percent to IDR 5,400 a piece. So far this year, however, shares of BNI have risen 8.22 percent.
Stock Quote Bank Negara Indonesia - BBNI:
Meanwhile, for 2017, BNI has high ambitions to expand into the Malaysian market. The lender wants to introduce a remittance service to cater to the needs of Indonesian migrant workers living in Malaysia. Indonesia and Malaysia signed a bilateral partnership agreement on 1 August 2016 as part of the ASEAN Banking Integrated Framework. BNI already runs offices in China, Japan, Singapore, South Korea, United Kingdom and the USA. It recently also obtained a license to run a representative office in Myanmar to facilitate the financial transactions of Indonesian state-owned enterprises that expand into the country.
Future Projection Financial Performance Bank Negara Indonesia (BNI):
| 2014 | 2015 | 2016F | 2017F | 2018F | |
| Net Interest Income |
22,376 | 25,560 | 28,389 | 32,356 | 37,356 |
| Non Interest Income |
9,372 | 9,698 | 11,784 | 12,467 | 14,568 |
| Net Profit |
10,783 | 9,067 | 10,566 | 12,931 | 15,067 |
| P/BV (x) |
1.7 | 1.3 | 1.3 | 1.1 | 1.0 |
| P/E Ratio (x) |
9.5 | 11.1 | 9.5 | 7.8 | 6.7 |
in billion IDR rupiah, except stated otherwise
Source: CIMB Securities (17/10/2016)