COMPANY UPDATE INDONESIA

November 24, 2010 Research Division

PT Bank Negara Indonesia (Persero) Tbk

Up Beat in 2011
Exercise Price Close to Our Estimate
BUY BBNI has announced the exercise price of right issue yesterday at Rp3,100,
slightly above our estimate at Rp3,050. Previously, the exercise price was
Last Price (Rp) 3,650 being offered at Rp2,700 – Rp3,700 a share. At Rp3,100 a share, BBNI will
Fair Value (Rp) 4,400 (+20.5%) get approximately Rp10.5 trillion, taking into account underwriter fees, it
would be around Rp10.2 trillion net. The ratio was set at 500.000 (old)
shares for 110.473 (new) shares. 80% of the proceed will be used for loan
expansion, 15% for IT & ATM expansion and 5% will be used for developing
Stock Data
its subsdiaries, BNI Life, BNI Syariah, BNI Securities and BNI Multifinance.
Bloomberg BBNI.IJ Time Schedule of Right Issue:
Issued Shrs. (m) 15,273.9 Effective Date 24-Nov-10
Market Cap (Rp bn) 55,749 Cum Date 2-Dec-10
52 W High / Low Rp4,150 / Rp1,730 Ex-Date 3-Dec-10
Recording Date 8-Dec-10
Major Shareholders : Rights Trading Date 10 - 16 Dec 2010
Government of RI 74.9% Allotment Date 21-Dec-10
Public 25.1%

TERP Doesn’t Justify Valuation, Better Catalysts in 2011

Theoretical Ex-Right Price after the right issue will be Rp3,700 but it should
Earnings Estimates be noted that TERP only captures the valuation at one period, 2010, not
2010F 2011F 2011. For the 2011, the following factors could drive the performance up.
Net Profit (Rp bn) 1). Ministry of Finance already approved the long awaited rule that allow
AAA Estimate 3,931 4,826 SOE banks to implement haircut (loss on principal) for the bad loans that
Consensus 3,918 4,870 already been written-off. The new rule is yet to be approved by The
EPS (Rp)
Legislative and ready for implementation by 2011. Currently, BBNI has total
outstanding of bad loans at around Rp20-Rp25 trillion. Using 20% recovery
AAA EPS 258 316
assumption that is based on IBRA experience in managing recovery of bad
Consensus EPS 252 296
loans, BBNI should cash in Rp4-Rp5 trillion in recovery income. 2). Assuming
that 80% proceed of the right issue will be allocated on loans, loan in 2011
should grow at 27%, resulting in higher net profit of 53% yoy, hence ROE
after right issue will be at 17.4% from 16% in 2010. 3) Management stated
that corporate loan portion will be reduced while consumer loan will be
increased further. In 2Q10, corporate loan yielded 12.3% vs 14.1% in
consumer loan. 4). With CASA portion steady at 57% - 60%, BBNI carries
lower cost of fund compare to BBRI and BMRI. And that is the positive things
to entice borrowers once primary lending rate has been applied.

Valuation, Upgrade TP to Rp4,400. BUY.

We upgrade our TP of BBNI from Rp3,600 to Rp4,400 on aforementioned
factors. Our TP implies 2.7x PBV and 13.9x PE 2011. Still at a discount
compare to peers that is traded at 3.2x PBV and average ROE at 25.6%. BUY.

FINANCIAL SUMMARY

A. G. Pahlevi (ext. 6650) Rp bn 2008 2009 2010F 2011F 2012F

agpahlevi@aaasecurities.com Operating Profit 6,233 7,437 8,076 9,376 12,046
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
Equity Tower Building 22nd Floor
Growth (%) 36.1 103.2 58.2 22.8 26.9
Jl. Jend. Sudirman Kav. 52 – 53
P/E (x) 49.5 24.4 15.4 12.6 9.9
Jakarta 12190
P/BV (x) 3.9 3.2 2.8 2.4 2.1
Ph : +62 21 2991 6600
Div. Yield (%) 0.2 1.4 2.3 2.8 3.5
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
November 24, 2010 Research Division

Proceed for Expansion

Figure 1. Right Issue Impact on P&L Before Rights 2010F After Rights 2010F
2011F
Balance Sheet
Cash 7,842 18,482 10,532
% of assets 3% 7% 4%
Loan 140,165 140,165 178,070
% yoy growth 16% 16% 27%
Total Earnings Assets 238,968 238,968 278,477
% of Assets 94% 90% 94%
Third Fund Deposits 211,480 211,480 240,390
% yoy growth 12% 12% 14%
Total Equity 21,865 32,504 36,521
Government of RI 75% 59% 56%
Public 25% 41% 41%
Total Assets 253,508 264,147 297,282
# of share (in million) 15,274 18,649 18,649
Government of RI 11,446 10,973 10,973
Greenshoe 0 473 473
Right Issue 0 3,375 3,375
Public 3,828 7,675 7,675
Proceed (Rp billion) 0 10,462 10,462
Income Statement
Net Interest Income 13,381 13,381 15,681
PPOP 8,076 8,076 10,609
Provisioning (2,677) (2,677) (2,860)
Net Income 3,931 4,204 6,019
Ratio
EPS (Rp) 257 225 323
BVPS (Rp) 1,432 1,743 1,958
ROE (long-term) 21% 16% 19%
Tier-1 10.7% 17.5% 16.4%
Tier-2 3.5% 3.5% 3.1%
Total CAR 13.6% 20.3% 19.0%
Source : AAA Securities

Figure 1 : ROAE before & after right issue, slightly Figure 2 : Higher NIM after rights
decline

25.0% 8.0%
7.0%
20.0%
6.0%

15.0% 5.0%
7 .6 %
2 2 .4 %

7 .4 %

7 .4 %

4.0%
7 .3 %

7 .3 %
2 1 .7 %

7 .1 %
7 .0 %
6 .9 %
2 0 .5 %

2 0 .5 %
1 9 .2 %

1 9 .1 %

1 9 .0 %

6 .3 %
1 8 .9 %

6 .1 %
6 .1 %
1 8 .5 %

6 .1 %
1 7 .6 %
1 7 .4 %

10.0%
1 6 .3 %

3.0%
2.0%
5.0%
1.0%
0.0% 0.0%
FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 FY14 FY15

ROE ante-rights ROE ex-rights NIM ante-rights NIM ex-rights

Source : Company Source : Company

PT Andalan Artha Advisindo Sekuritas 2

 COMPANY UPDATE INDONESIA
November 24, 2010 Research Division

Figure 3 : Bigger capacity to grow Figure 4 : LDR will up, reducing penalty from LDR-RR
linked

25.0% 100.0%
90.0%
20.0% 80.0%
70.0%
15.0% 60.0%
50.0%

8 7 .2 %
8 4 .4 %

8 1 .9 %
8 1 .3 %
2 0 .3 %

7 9 .1 %
7 8 .4 %

7 6 .1 %
1 9 .0 %

7 4 .1 %

7 3 .4 %
1 8 .0 %
40.0%

6 9 .2 %
1 7 .2 %
10.0%

6 6 .3 %
6 6 .3 %
1 6 .4 %

1 5 .4 %
1 3 .6 %

1 3 .5 %

1 3 .1 %

1 2 .7 %
30.0%

1 2 .3 %

1 1 .7 %
5.0% 20.0%
10.0%
0.0% 0.0%
FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 FY14 FY15

CAR ante-rights CAR ex-rights LDR ante-rights LDR ex-rights

Source : Company Source : Company

Figure 5 : Average loan yield 2Q10 Figure 6 : Banking valuation FY11F

35% ROE
40
30% 28.7% BBRI
35
BTPN
25%
30 Avg. 25.6%
BDMN BBCA
20% 25
13.5% 14.1% BBNI
15% 12.3% 20
11.8% BMRI
10% 15

10
5%
5 Avg. 3.2x
0%
Corporate Medium Small Consumer Credit Card 0 PBV
0 1 2 3 4 5 6

Source : Company Source : Company

Valuation, Upgrade TP to Rp4,400. BUY.

We upgrade our TP of BBNI from Rp3,600 to Rp4,400 on aforementioned factors. Our TP implies 2.7x PBV and 13.9x PE 2011.
Still at a discount compare to peers that is traded at 3.2x PBV and average ROE at 25.6%. BUY.

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) 19.5%
G 15%
Target PBV 2.7x
BVPS FY11F (Rp) 1,644
Company Value Per Share (Rp) (round) 4,400

PT Andalan Artha Advisindo Sekuritas 3

COMPANY UPDATE INDONESIA
November 24, 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
November 24, 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
November 24, 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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