COMPANY UPDATE INDONESIA

September 27, 2010 Research Division

PT Bank Negara Indonesia (Persero) Tbk

Higher Growth Capacity, Less ROE
After long overhang on the right issue timeline, the government finally gave
HOLD the time limit for BBNI to conduct new capital issuance until the end of
2010. Size is expected at Rp10 trillion, slightly higher than our initial
Last Price (Rp) 3,725 forecast at Rp9.6 trillion (assuming exercise price same with greenshoe). On
that amount, top quality capital known as Tier-1 CAR ratio should hike to
Fair Value (Rp) 3,600 (-3.4%)
17.3% giving higher growth capacity but then will need another injection by
2014 (as loan mostly on SME and corporate, RWA 100%), ROE will eased from
21.7% to 17.2%. HOLD.
Stock Data
Bloomberg BBNI.IJ Exercise price should be at Rp3,050/share
Issued Shrs. (m) 15,273.9 Given target proceed at Rp10 trillion, at 3.3 million new shares, exercise
Market Cap (Rp bn) 45,821.8 price should be at Rp3,050/share, implying 18% discount to last week
52 W High / Low Rp4,000 / Rp1,730
closing price at Rp3,725/share. Ratio would be at 9:4 (9 old shares eligible
for 4 new shares). To seal on the target proceed, timing will be essential as
Major Shareholders : BBNI will compete with BMRI, the biggest bank by total assets. BMRI aims to
Government of RI 74.9% raise bigger proceed, Rp13 trillion but with less dilution effect since current
Public 25.1% floating already at 33% compares to 25% floating at BBNI. Hence, BBNI’s
right issue compares to BMRI is quite less attractive, thus BBNI should be the
first runner on this event in our view.
Earnings Estimates
New Capital, 21% annual loan growth through 2014
2010F 2011F
Under the new LDR-RR linkage, BBNI will get penalty at around Rp375
Net Profit (Rp bn)
billion, given their LDR at 2Q10 was at 68%, resulting in 10% difference from
AAA Estimate 3,931 4,826 minimum 78% LDR imposed by the government, thus 1% additional penalty.
Consensus 3,922 4,658 Since primary RR was inched up from 5% to 8%, and taking account the
EPS (Rp) additional penalty, cost of fund should also increase by 20 bps. The
AAA EPS 258 316 increasing cost of fund in our view will be passed through in form of
Consensus EPS 252 295 increasing lending rate, otherwise NIM should go down by the same degree.
Going forward, under the new central bank regulation that oblige banks to
display prime lending rate, BBNI should continue to maintain margin through
enhancing its lending growth thanks to its low LDR and new capital that
could support 21% average annual loan growth in the next five years.
700
600 BBNI Valuation, maintain HOLD recommendation, TP Rp3,600
500 JCI Currently the bank is still trading at 2.3x PBV and 11.8x PE FY11F, factoring
400 right issue and the net effect of 5% tax deduction, BBNI would be trading at
300 2.0x PBV and 13.8x PE FY11F, still at discount to peers that are trading at
200 3.0x PBV and 12.6x PE FY11F. Nevertheless the bank has improving NIM, low
100 cost funding, high liquidity and decreasing trend of NPL but at the end it
- will be about the bottom line. BBNI will be the only bank in our banking
Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10
stock coverage which has ROE below 20% in FY11, which justify the discount
given by the market. We remain our HOLD rating, with TP Rp3.600.

FINANCIAL SUMMARY
Rp bn 2008 2009 2010F 2011F 2012F
A. G. Pahlevi (ext. 178)
Operating Profit 6,233 7,437 8,076 9,376 12,046
agpahlevi@aaasecurities.com
Net Profit 1,222 2,484 3,931 4,826 6,126
PT. Andalan Artha Advisindo Sekuritas EPS (Rp) 80.3 162.8 257.5 316.1 401.2
Artha Graha Building 26th Floor Growth (%) 36.1 103.2 58.2 22.8 26.9
Jl. Jend. Sudirman Kav. 52 – 53 P/E (x) 46.4 22.9 14.5 11.8 9.3
Jakarta 12190 P/BV (x) 3.7 3.0 2.6 2.3 1.9
Ph : +62 21 515 2640 Div. Yield (%) 0.2 1.5 2.4 3.0 3.8
Fax : +62 21 515 2644 ROE (%) 7.5 14.4 19.2 20.5 22.4
Source: Company, AAA Securities

PT Andalan Artha Advisindo Sekuritas 1

COMPANY UPDATE INDONESIA
September 27, 2010 Research Division

Figure 1. The Effect of Right Issue

Pre-Issue % Post-Issue % % Chg
Shares Out. (mn) 15,273.9 100% 19,077.2 100% 25%
Right issue (mn) 0.0 3,330.2
Greenshoe (mn) 473.0
Government of RI (mn) 11,446.3 75% 11,446.3 60%
Public (mn) 3,827.6 25% 7,157.9 40%
Market Cap 50,404.0 61,393.7 22%
Fund Raised from Rights (Rp bn)* 10,157.1
Net Income (Rp bn) 3,930.6 4,203.8 7%
EPS (Rp) 257.5 220.5 -14%
Equity (Rp bn) 21,865.0 32,199.7 47%
BVPS 1,431.5 1,687.9 18%
ROE (2010F-2015F) 21.8% 17.2% - 460 bps
Tier-1 CAR 10.7% 17.3% + 660 bps
Total CAR 13.6% 20.1% + 650 bps
Source : AAA Research

Figure 2. The Impact of New RR

Ticker CAR LDR CASA Penalty Weighted Deposits Rate Cost of Fund Difference
Before After
BBRI.IJ 15% 88% 58% No 5.0% 5.3% 5.5% 17 bps
BMRI.IJ 15% 66% 57% 1.1% 4.6% 4.8% 5.0% 16 bps
BBCA.IJ 15% 51% 73% 2.6% 2.9% 3.0% 3.1% 10 bps
BBNI.IJ 14% 68% 60% 1.0% 4.4% 4.6% 4.8% 15 bps
BDMN.IJ 20% 105% 31% No 7.4% 7.8% 8.1% 25 bps
BTPN.IJ 16% 88% 11% No 8.9% 9.3% 9.6% 30 bps
Source : AAA Research

Figure 3 : BBNI share price depends on ROE Figure 4 : New NPL formation (2004-2009)

30% 3,000 4.5% 4.2%

4.0%
25% 2,500
3.4%
3.5%
20% 2,000 3.0%
2.5% 2.3%
15% 1,500
2.0% 1.8%
10% 1,000
1.5%
5% 500 1.0%
0.5% 0.3%
0% 0
0.0%
2Q05
3Q05
4Q05
1Q05
2Q06
3Q06
4Q06
1Q06
2Q07
3Q07
4Q07
1Q07
2Q08
3Q08
4Q08
1Q08
2Q09
3Q09
4Q09
1Q09
2Q10
10

BMRI BBNI BDMN BBRI BBCA

1Q

ROE Average Share Price (RHS) New NPL addition

Source : AAA Research Source : Company

PT Andalan Artha Advisindo Sekuritas 2

 COMPANY UPDATE INDONESIA
September 27, 2010 Research Division

Valuation, Upgrade TP to Rp3,600 maintain HOLD recommendation

Currently the bank is still trading at 2.3x PBV and 11.8x PE FY11F, factoring right issue and the net effect of 5% tax deduction,
BBNI would be trading at 2.0x PBV and 13.8x PE FY11F, still at discount to peers that are trading at 3.0x PBV and 12.6x PE FY11F.
Nevertheless the bank has improving NIM, low cost funding, high liquidity and decreasing trend of NPL but at the end it will be
about the bottom line. BBNI will be the only bank in our banking stock coverage which has ROE below 20% in FY11, which justify
the discount given by the market. We remain our HOLD rating, with TP Rp3.600.

Risk Free Rate 8.90%

Assets Beta 1.37
Market Risk Premium 5.5%
Cost of Equity 16.4%
RR 65%
Sustainable ROE (average 2010-2015) 21.8%
g 12%
Target PBV 2.2x
BVPS FY11F (Rp) 1,644
Company Value Per Share (Rp) (round) 3,600

Figure 6 : Forward PE Band Figure 7 : Forward PBV Band

6,000 4,500

25.0x 4,000
5,000 2.5x
3,500
20.0x
4,000 3,000 2.0x

15.0x 2,500
3,000 1.5x
2,000

2,000 9.0x 1,500 1.0x

5.0x 1,000
1,000 0.5x
500

0 0
J-05 J-05 N-05 A-06 S-06 F-07 J-07 D-07 M-08 O-08 M-09 A-09 J-10 J-10 J-05 J-05 N-05 A-06 S-06 F-07 J-07 D-07 M-08 O-08 M-09 A-09 J-10 J-10

Source : Company Source : Company

Banking Valuation Matrix

Div
Price (Rp) Mkt. Cap PE PBV ROE Coeff.
Company Ticker Yield
(19/8) (Rp bn) (x) (x) (%) (%) Beta

Bank Rakyat Indonesia BBRI.IJ BUY 12,100 103,193 9.9 3.1 34.0 5.0
Bank Mandiri BMRI.IJ BUY 7,100 110,029 13.6 3.3 25.6 4.0
Bank Negara Indonesia BBNI.IJ HOLD 3,600 35,157 11.8 2.3 18.6 3.6
Bank Central Asia BBCA.IJ BUY 7,100 124,483 16.2 4.0 26.6 2.4
Bank Danamon BDMN.IJ HOLD 6,300 42,402 13.6 2.6 21.0 4.1
Bank Tabungan Pensiunan Nasional BTPN.IJ HOLD 12,100 6,915 10.5 2.7 24.0 3.3
Average Neutral 12.6 3.0 25.0 3.7
Source : Bloomberg, AAA Research

PT Andalan Artha Advisindo Sekuritas 3

COMPANY UPDATE INDONESIA
September 27, 2010 Research Division

Balance Sheet
Year-end 31 Dec (Rp bn) 2007 2008 2009 2010F 2011F 2012F

Cash 3,259 4,428 4,903 7,842 10,893 9,939

Current Account with BI 17,573 9,351 8,531 10,779 12,479 14,342
Current Account with Other Banks 1,171 1,701 6,858 6,858 6,960 6,934
Placement at BI & Other Banks 14,809 22,642 29,622 29,805 30,699 29,422
Marketable Securities - net 16,201 9,874 19,198 19,996 18,698 19,790
Recap Government Bonds 36,701 34,655 31,040 31,366 31,572 32,403
Loan - gross 88,651 111,994 120,843 140,165 166,387 199,165
Allowance for Losses (5,336) (5,652) (6,920) (7,773) (7,424) (7,179)
Fixed Assets 3,871 3,733 3,708 3,785 3,848 3,910
Other Assets 6,490 9,015 9,714 10,685 11,754 12,929
Total Assets 183,390 201,741 227,497 253,508 285,866 321,655
Customer Deposits 146,189 163,164 188,469 211,480 240,390 271,484
Borrowing from Other Banks 3,804 4,100 3,819 3,934 3,973 4,092
Marketable Securities Issued 0 0 0 0 0 0
Subordinated Borrowings 934 0 0 0 0 0
Other Liabilities 15,168 19,015 16,034 16,195 16,357 16,520
Total Liabilities 166,094 186,279 208,322 231,608 260,720 292,096
Minority Interest 28 31 31 35 39 45
Shareholders' Equity 17,267 15,431 19,144 21,865 25,107 29,514
Total Liabilities & Equity 183,390 201,741 227,497 253,508 285,866 321,655
Source : Company, AAA Research

Income Statement
Year-end 31 Dec (Rp bn) 2007 2008 2009 2010F 2011F 2012F

Interest Income 14,878 16,628 19,447 23,310 26,460 31,780

Interest Expense (7,410) (6,716) (8,314) (9,930) (11,824) (13,204)
Net Interest Income 7,467 9,912 11,133 13,381 14,636 18,576
Fee Based Income 4,130 3,549 4,295 4,064 5,826 6,508
Other Operating Expense (7,626) (7,228) (7,991) (9,368) (11,085) (13,038)
Pre-Provision Opr. Profit 3,971 6,233 7,437 8,076 9,376 12,046
Provisions (2,704) (4,359) (4,051) (2,677) (2,740) (3,611)
Other Income / (Expense) 213 58 58 64 70 77
Profit before tax 1,481 1,932 3,444 5,463 6,706 8,512
Tax (579) (706) (957) (1,530) (1,878) (2,383)
Minority Interest (4) (3) (3) (3) (3) (3)
Net Profit 898 1,222 2,484 3,931 4,826 6,126
Source : Company, AAA Research

PT Andalan Artha Advisindo Sekuritas 4

COMPANY UPDATE INDONESIA
September 27, 2010 Research Division

Key Ratio
Year-end 31 Dec (Rp bn) 2007 2008 2009 2010F 2011F 2012F

Growth
Total Assets 8.2 10.0 12.8 11.4 12.8 12.5
Gross Loans 33.4 26.3 7.9 16.0 18.7 19.7
Customer Deposits 7.7 11.6 15.5 12.2 13.7 12.9
Net Interest Income 1.2 32.7 12.3 20.2 9.4 26.9
Pre-Provision Operating Profit (0.2) 57.0 19.3 8.6 16.1 28.5
Net Income (53.4) 36.1 103.2 58.2 22.8 26.9
Profitabilty
Earning Asset Yield 9.9 9.8 10.0 10.7 11.0 11.7
Cost of Fund 5.1 4.2 4.3 4.9 5.1 5.1
NIM 5.7 5.9 5.7 6.1 6.1 6.9
ROAA 0.5 0.6 1.2 1.6 1.8 2.0
ROAE 5.6 7.5 14.4 19.2 20.5 22.4
Cost to Income 65.8 53.7 51.8 53.7 54.2 52.0
Opr. Expense to Opr. Income 85.1 93.3 90.7 85.7 80.3 79.4
Capital
Tier-1 CAR 12.8 11.7 10.1 10.7 10.9 10.7
Tier-2 CAR 5.8 4.4 3.8 3.5 3.2 3.0
Total CAR 17.8 15.2 13.1 13.6 13.5 13.1
LDR 60.6 68.6 64.1 66.3 69.2 73.4
Assets Quality
NPL 8.5 5.0 4.8 4.7 3.8 3.0
Coverage Ratio 71.9 101.0 120.1 112.8 111.4 114.8

Source : Company, AAA Research

PT Andalan Artha Advisindo Sekuritas 5

COMPANY UPDATE INDONESIA
September 27, 2010 Research Division

PT Andalan Artha Advisindo Sekuritas

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the accuracy or completeness of the information.All opinions and estimates included in this report constitute our judgement as of this date, without
regards to its fairness, and are subject to change without notice.This document has been prepared for general information only, without regards to the
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