COMPANY UPDATE INDONESIA

October 19, 2010 Research Division

PT Bank Negara Indonesia (Persero) Tbk

HOLD
Last Price (Rp)
Fair Value (Rp)
Not A Blue Ocean Margin
Despite higher potential growth after right issue, we view that it will be
difficult for BBNI to deliver ROE higher than 20%. This is mainly because
BBNI’s portfolio consists of largerly SME and corporate borrowers which
3,975 considering the stiff competition in this sector, could only generate an
average lending rate of 12.5%, far from a blue ocean margin.
3,600 (-9.4%)
Maintain HOLD.

Net Income Growth Helped by Lower Provisioning

Stock Data BBNI is still be able to deliver strong bottom line growth in 9M10 despite its
Bloomberg BBNI.IJ weak CAR ratio at 12.0% that detained the bank’s ability to grow faster. Net
Issued Shrs. (m) 15,273.9 income rose to Rp2.9 trillion vs Rp1.9 trillion in 9M09, translated into a 59%
Market Cap (Rp bn) 60,713 yoy and 12% qoq growth. The number was inline with and has approximately
52 W High / Low Rp4,150 / Rp1,730
reached 75% of our full year estimate at Rp3.9 trillion (+58% yoy). Higher
net income was largely contributed by lower provisioning expense which
Major Shareholders : was down to Rp1.8 trillion from Rp3.5 trillion. In fact, on quarterly basis,
Government of RI 74.9% BBNI has written back the amount it sets aside for credit losses by as much
Public 25.1% as Rp410 billion. As such, NPL down from 6.4% in 9M09 to 4.4% in 9M10.
Beyond 2011, earnings growth will be normalized at a range of 15% - 25% per
annum. Therefore, we expect no significant jump in provisioning expense
Earnings Estimates due to better assets quality with NPL expected to be at 3.8% in FY11F and
3.0% in FY12F.
2010F 2011F
Net Profit (Rp bn)
Loan Grew by 11% yoy ; Net Interest Income Up by 8% yoy
AAA Estimate 3,931 4,826 On a quarterly basis Net Interest Income and PPOP retreated by -8% and -
Consensus 3,922 4,658 41% respectively (yoy: +8% and 5% resp.) This modest results were primarily
EPS (Rp) due to low loan expansion at 11% yoy and 6% qoq. Another factor was about
AAA EPS 258 316 half (52%) of BBNI’s marketable securities were sensitive to interest rate
Consensus EPS 252 295 movement. NIM inched down from 6.0% in 9M09 to 5.9% in 9M10. However,
going forward and given foreseeable hike in reference rate, BBNI should be
able to enjoy better margin performance. The bank’s LDR in 9M10 was 68%
and the right issue (assuming Rp10 trillion proceed) is expected to boost the
ratio up to 73% in FY11F based on our simulation. This will save penalty of
new RR, from 1.0% to 0.5%, resulting in lower cost of fund by 17 bps. With
combination of higher capital and low cost of fund, loan penetration will be
strong in our view.

Valuation, maintain TP at Rp3,600. HOLD.

We maintain our 12-month forward TP at Rp3,600 implying 2.2x PBV FY11F
and 11.4x PE. Currently, BBNI is traded at 2.8x/2.3x PBV and 15.4x/12.6x
PE FY10F/FY11F.

FINANCIAL SUMMARY
A. G. Pahlevi (ext. 178) Rp bn 2008 2009 2010F 2011F 2012F
agpahlevi@aaasecurities.com Operating Profit 6,233 7,437 8,076 9,376 12,046

PT. Andalan Artha Advisindo Sekuritas Net Profit 1,222 2,484 3,931 4,826 6,126

Artha Graha Building 26th Floor EPS (Rp) 80.3 162.8 257.5 316.1 401.2

Jl. Jend. Sudirman Kav. 52 – 53 Growth (%) 36.1 103.2 58.2 22.8 26.9

Jakarta 12190 P/E (x) 49.5 24.4 15.4 12.6 9.9

Ph : +62 21 515 2640 P/BV (x) 3.9 3.2 2.8 2.4 2.1

Fax : +62 21 515 2644 Div. Yield (%) 0.2 1.4 2.3 2.8 3.5
ROE (%) 7.5 14.4 19.2 20.5 22.4
Source: Company, AAA Securities

PT Andalan Artha Advisindo Sekuritas 1

COMPANY UPDATE INDONESIA
October 19, 2010 Research Division

9M10 Performance
(Rp bn) 3Q10 %QoQ %YoY 9M09 9M10 %YoY FY10F %YoY %AAA
Interest Income 4,595 -6% 0% 14,581 14,400 -1% 23,310 20% 62%
Interest Expense (1,719) -2% -7% (6,271) (5,395) -14% (9,930) 19% 54%
Net Interest Income 2,876 -8% 6% 8,310 9,005 8% 13,381 20% 67%
Fee Based Income 287 -81% -73% 3,146 3,404 8% 4,064 -5% 84%
Other Operating Expense (1,854) -23% -14% (5,708) (6,391) 12% (9,368) 17% 68%
Pre-Provision Opr. Profit 1,309 -41% -19% 5,748 6,018 5% 8,076 9% 75%
Provisions 410 -139% -146% (3,483) (1,776) -49% (2,677) -34% 66%
Other Income / (Expense) (10) 232% -148% 78 7 -91% 64 10% 11%
Profit before tax 1,709 44% 132% 2,343 4,249 81% 5,463 59% 78%
Tax (690) 153% 728% (488) (1,293) 165% (1,530) 60% 85%
Net Profit 1,019 12% 56% 1,855 2,956 59% 3,931 58% 75%

Loan 126,074 6% 11% 113,469 126,074 11% 140,165 16% 90%

Total Assets 224,811 5% 11% 203,102 224,811 11% 253,508 11% 89%
Customer Deposits 183,772 5% 12% 163,654 183,772 12% 211,480 12% 87%
Total Equity 21,318 -1% 16% 18,448 21,318 16% 21,865 14% 97%

NIM 5.9% 6.0% 5.9% 6.1%

ROAE 25.1% 16.8% 25.1% 19.2%
Cost to Income 45.0% 49.8% 45.0% 53.7%
Total CAR 12.0% 14.6% 12.0% 13.6%
LDR 68.6% 73.8% 68.6% 66.3%
NPL 4.4% 6.4% 4.4% 4.7%
Coverage Ratio 118.5% 110.0% 118.5% 112.8%
Source : Company, AAA Research

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

PT Andalan Artha Advisindo Sekuritas 2

 COMPANY UPDATE INDONESIA
October 19, 2010 Research Division

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 : Loan composition in 2Q10 Figure 4 : Average assets yield in 2Q10

35%

30% 28.7%
Consumer, 23%
25%
Corporate, 36%
20%

13.5% 14.1%
15% 12.3% 11.8%
10%
Small, 22%
5%
Medium, 20%
0%
Corporate Medium Small Consumer Credit Card

Source : AAA Research Source : Company

Valuation, Upgrade TP to Rp3,600 maintain HOLD recommendation

We maintain our 12-month forward TP at Rp3,600 implying 2.2x PBV FY11F and 11.4x PE. Currently BBNI is traded at 2.8x/2.4x
PBV and 15.5x/12.7x PE FY10F/FY11F. Despite higher potential growth after right issue, delivering ROE higher than 20% will not
be an easy task for BBNI since the bank focuses on SME and corporate loans which in the last quarter has only generate an
average lending rate (yield) of 12.5%, not a blue ocean margin.

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

PT Andalan Artha Advisindo Sekuritas 3

COMPANY UPDATE INDONESIA
October 19, 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

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COMPANY UPDATE INDONESIA
October 19, 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
October 19, 2010 Research Division

PT Andalan Artha Advisindo Sekuritas

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Disclaimer : The information contained herein has been compiled from sources that we believe to be reliable.No warranty (express or implied) is made to
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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