PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH
FULL REPORT

PT Bank Tabungan Negara (Persero), Tbk.

Mortgage Champion
11 March 2016
Initiate Coverage
BUY
Last Price (11 March 2016)
1,650
Target Price
1,845
52-Week Range
935-1,720
PBV 2016F
1.16x
Market Cap (Bio IDR)
17,550
Issued Shares (Mio Shares) 10,573.17
Shareholders List
Government
60.04%
Maryono
0%
Irman A. Zahiruddin
0.05%
Mansyur S. Nasution
0.00%
Sis Apik Wijayanto
0%
Public
39.91%

HIGHLIGHTS
Its All about Collection. BTN has increasing
loan quality due to their effort to control the
assets. BTN managed to reduce to 2.11% Net
NPL in 2015 by start selling non-performing
assets before the collectability categorized as
loss
Interesting Interest Rate. As the portfolio
of BTN mostly are on mortgage loan, we
expect that lower interest rate will give the
Bank more mortgage loan. BTN has around
5% net interest margin and still have room to
cut around 50 Bps to improve more
mortgage loan growth around 20% in 2016
which is in line with the BI Rate outlook.
FINANCIAL SUMMARY

Initiate BUY. With current price at Rp. 1,650

per share, PBV ratio stands at 1.4x P/BV16.
We set our target price at Rp.1,845 which
translates to 0.96x PBV16 as well as 12% of
upside potential from the latest price.

2013A 2014A 2015A

2016F

2017F

2018F

CASA Ratio

25.12%

24.31%

23.76%

23.95%

24.02%

22.45%

Coverage Ratio

28.13%

14.84%

22.21%

25.19%

21.42%

21.43%

PPOP Margin

24.71%

18.70%

23.71%

25.29%

23.17%

23.18%

Provision to PPOP

16.83%

33.30%

26.08%

24.51%

26.75%

26.75%

6.24%

5.30%

5.50%

5.26%

4.93%

4.54%

17.84%

16.31%

19.65%

18.23%

16.67%

15.78%

Net Interest Income

Capital Adequacy Ratio
Gross NPL

Frederik Rasali
+62 21 525 5555
fred@minnapadi.com

Unconventional Expansion. With more

portfolio weight on mortgage loan, the risk
would be high if in the case consumer buying
power for housing is deteriorating. BTN has
taken precaution to mitigate the risk by using
new business such as life insurance firm,
Mortgage Backed Security, and multi finance
subsidiary to reduce NPL and increase
income at the same time.

4.82%

4.88%

4.15%

3.96%

3.66%

3.59%

Return on Equity (ROE)

13.52%

8.81%

12.87%

13.62%

12.51%

11.67%

Return on Assets (ROA)

1.19%

0.77%

1.08%

1.13%

1.02%

0.96%

0.793

1.007

1.194

1.160

1.365

2.100

Price-to-Book Value (P/BV)

Source: BBTN, MPI Research

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH

INDUSTRY OUTLOOK
When we are talking about countrys growth, we would be thinking about the capital
needed for firms to grow with and we know that banks are the most common solution
for firms to look for capitals. Based on an IMF survey on Indonesia, economic outlook is
seen growing around 5.4% this year. This means banking growth on average will also be
around 5%, just slightly below the GDP due to not all of Indonesian firms use 100% bank
loans to fund their businesses.
Performance Indicator
Capital Adequacy Ratio (%)
Core Capital Ratio to ATMR (%)
Return on Assets Ratio (%)
Operating Expenses / Operating Income (%)
Net Interest Margin Ratio (%)
Loan to Deposit Ratio (%)
Liquid Assets Ratio (%)

Jan
21.01
18.75
2.82
82.15
4.24
88.48
16.88

Feb
21.26
18.99
2.51
81.59
4.06
88.26
17.35

Mar
20.98
18.40
2.69
79.49
5.30
87.58
18.74

Apr
20.79
18.19
2.53
79.94
5.30
87.94
18.16

Exhibit 1: Indonesian Banking Performance

May
20.51
17.98
2.45
80.42
5.33
88.72
17.26

Jun
20.28
17.75
2.29
81.40
5.32
88.46
17.35

Jul
20.78
18.21
2.27
81.39
5.32
88.50
17.03

Aug
20.73
18.19
2.30
81.46
5.32
88.81
16.87

Sep
20.62
18.14
2.31
81.82
5.32
88.54
17.56

Oct
21.05
18.54
2.30
81.11
5.34
89.74
16.69

Nov
21.33
18.85
2.33
81.62
5.35
90.47
16.44

Dec
21.39
19.00
2.32
81.49
5.39
92.11
16.70

Source: Otoritas Jasa Keuangan

Banking sector in 2015 was quite robust in terms of average Net Interest Margin (NIM)
although consumption was slowing down in Q4 2015. The average Net Interest Margin in
December stood at 5.39%, increasing gradually after four months of being stagnant at
5.32% (June 2015-September 2015).
Capital Adequacy Ratio (CAR) also improved from 21.01% to 21.39% from January 2015 to
December 2015, which means rising capital has offset Risk-Based Balanced Asset (ATMR)
where banks have more durability against risks. Average Loan-to-Deposit ratio reportedly
stood at 92.11% at the end of 2015, suggesting that loan activities were picking up beyond
Bank Indonesias upper band of 92% set for banks with NPL above 5%. Third-party fund
growth has slowed down however, as lower BI rate has pushed investors to pick riskier
investment to gain better yield.
The lowering of BI rate early in 2016 from 7.25% to 7.00% has pushed the banking sector
to decrease their loan and deposit interest rates as well. While this will put pressure on
NIM in the future, lower interest rate is expected to lead to more consumption. More
consumption means more consumer credit in which in this case will directly affect banks
focusing on credit cards, mortgage and vehicle loans (Kredit Kendaraan Bermotor). Banks
indirectly affected will be those who channel credit to the retail sector. NIM is seen around
4.9% to 5.1% but we would say that the total frequency of credit will increase by 10% on
average as big banks may give more credits and this is seen offsetting the downside of
the decline in NIM.
Indonesian banking assets are mostly have no significant differences, in fact the portion
of total third party funds is now channeled by banks to more credits assets (92.16% of
total third party funds on December 2015 versus 88.29% on average from January 2015
November 2015) rather than focusing on non-credit assets such as treasury gains from
foreign exchange trades or gains from securities available for trade (see Exhibit 2)

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH

The composition of third party funds portion also saw a significant change in December
2015 where the total current saving has increased from 28% on average from January to
November 2015 to 31% in December 2015 while demand deposit fell from 18% on
average from January 2015 to November 2015 to 16% in December 2015. Time deposit
remained constant at 42% in December 2015. The increase in savings means that more
customers are expecting to spend more rather than put their money in demand deposit
and time deposit accounts.
Rp7,000,000
Rp6,000,000
Rp5,000,000
Rp4,000,000
Rp3,000,000
Rp2,000,000
Rp1,000,000
Rp0
Jan

Feb

Mar

Apr

Mei

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2015
Asset

Credit

Third Party Funds

Exhibit 2: Indonesian Banking Asset Growth

Source: Otoritas Jasa Keuangan

Exhibit 3: Indonesian Bank Funding Portion

Source: Otoritas Jasa Keuangan

Total credit channeled in November 2015 reached 2,952 trillion rupiah, an increase of 106
trillion rupiah from November 2015. Commercial banks are focusing on retail credit as
much as 27% of total credit while processing industry took as much as 25.75%. It is
forecast that the retail credit will grow larger in line with consumption as BI rate
decreased by 50 basis points. The credit for construction will also increase as the
government launched its housing project called 1 Juta Rumah Jokowi and a lot of other
infrastructure projects such as toll road and power plant. We may also need to pay a
closer look on banks that channel credit to retail, construction, household and financials.

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH
1.96% 0.09% 0.00%
0.41%
0.30%
8.64%
4.58%
6.26%

0.73%

0.28%

0.44%

Agriculture
Fishery
Mining

5.58%

Processing Industry

6.01%

Electricity, Gas and Water

Construction

2.91%
25.75%

Retail
Food Provision
Logistic and Communication

26.84%

Financials
5.86%

Business Services and Ownership

3.37%

Exhibit 4: Credit Channeling as of December 2015

Government

Source: Otoritas Jasa Keuangan

This year, total credit to be channeled is predicted to grow by 14%, which will give us
3,244.4 trillion rupiah by 2016. The breakdown can be seen on Exhibit 5.

Exhibit 5: Predicted Credit Channeling for 2016

Source: Otoritas Jasa Keuangan

Based on the various government stimulus packages and Bank Indonesias recent rate
decision, we expect that the retail business will get a boost due to lower deposit rate
(down from 7.5% to 7%). More people may also put more of their savings to riskier
investments and spending as investing in time deposit seems to become less attractive.
In turn, this will lead to more consumption.

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH

ECONOMIC OUTLOOK
Economic Growth
5.10%
5.00%

5.04%

4.90%
4.80%
4.70%

4.74%

4.72%
4.67%

4.60%
4.50%
4.40%
Q1 2015

Q2 2015

Exhibit 6: Indonesia GDP Growth (Y/Y)

Q3 2015

Q4 2015

Source: Bank Indonesia

Indonesia GDP managed to beat the market expectation in the final quarter of 2015,
rising by 5.04% vs. 4.74% in prior quarter. Government spending played its part in terms
of infrastructure construction and also investment from foreign direct investment. What
actually pushed the economy were the consumption and the balance of trade at the end
of the day. Consumer confidence index was also getting better in January 2016 when it
reached 112.6 according to a survey conducted by Bank Indonesia. On exhibit 7 the
Consumer Confidence Index is displayed in blue line and it has been in an uptrend since
October 2015 and in January 2016 the robust confidence level was influenced by further
fuel price cut and electricity tariff.

PT MINNA PADI INVESTAMA

EQUITY RESEARCH

Member of Indonesia Stock Exchange

The consumer confidence index shows an increase on December 2015 when it reached
112.6, up from 100 at September 2015 according to BI data, which gives us the idea that
retail business will have more activities and will need loans to grow their businesses
further. Total loan growth is seen to be around 17% this year while the portion of loans
for the retail sector is expected to stand at 30.8%.

Exhibit 7: Consumer Confidence Index as of January 2016

Source: Bank Indonesia

PT MINNA PADI INVESTAMA

EQUITY RESEARCH

Member of Indonesia Stock Exchange

COMPANY OVERVIEW
Brief Company Profile
Bank Tabungan Negara which is famous with the abbreviation BTN has been operational
from 1950. BTN focuses on mortgage loan channeling with the largest market share
around 30% compared to other banks that mainly channels mortgage loan. BTN was
publicly listed back in 2009. Prior going public in the same year, BTN managed to create
Asset backed security as mortgage bond securitization namely KIK-EBA which is the first
mortgage security in Indonesia, since then BTN upgrade the banking business into more
non-conventional way. In 2012 BTN has released right issue and managed to get 2.12
Trillion Rupiah with the goal to maintain capital quality and increase credit capacity. In
2013 BTN has fully integrated to focus on securing their market share by increasing loan
quality, reducing non-performing loan and focus more on the transaction process.
BTNs efforts to become global bank with three transformational steps that can be
categorized as:
1. Survival Period
Transformation 1 called Survival Period (2013 2015) where BTN maintain current
condition by protecting current market condition, create a predictable change,
financial capital driven and dominance the market by size.
2. Digital Banking Period
Transformation 2 called Digital Banking Period (2015- - 2019) in which BTN focuses
more on dominance by speed in transaction and process through technology and will
focus more on human capital driven.
3. Global-playership Period
Transformation 3 called Global Playership Periods (2020 2025) focuses more on
size and speed through network to face global free trade while BTN will continuously
change to fulfill global demand. In this level focuses more on human and financial
capital driven.

Exhibit 8: BBTN Transitional Plan

Source: BBTN

PT MINNA PADI INVESTAMA

EQUITY RESEARCH

Member of Indonesia Stock Exchange

Nowadays, BTN focuses on the transaction service by improving the IT quality such as EBanking, EDC payment, E-Cash, Mobile Banking, Vending Machine and digital offices.
These efforts are in line with BTNs transformation plan number 2 to improve speed,
technology and human capital driven.

Human Capital
Talking about the focus of BTN in human capital, the management team in BTN are
experienced in Banking with astounding achievement and have solid team that can
support the business. BTN has setup robust organizational structure where the retail and
commercial banking are separated to focus more on each business. All of the position
are monitored by independent audit committee to ensure all of the management and
staff are comply with the company goal.

Exhibit 9: Organization Chart

Source: BBTN

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH

Board of Commissioners
Board of Commissioners
Name
Chandra M Hazah
Kamaruddin Sjam
Catherinawati Hadiman
Arie Coerniadi

Experience

Position
President
Commissioner
Independent
Commissioner
Independent
Commissioner
Independent
Commissioner

Sumiyati

Commissioner

Fajar Harry Sampurno

Commissioner

Lucky Fathul Aziz H

Commissioner

Also president commissioner in PT. PLN (Perusahaan Listrik Negara), former President of KPK (Anti Corruption
Commissioner)
Former member of DPR Commissioner XI. President Commissioner of PT. Lanang Bersatu, and Director of BPKP
(Financial Oversight Agencies and Development)
President Director of PT. Diaspora Saraswati Gemilang. Former Deputy Director of CIMB Niaga and Director of
Corporate Banking at Bank Niaga
CFO in PT. Sarana Global Indonesia. Former Vice President in NISP securities, Group Head Vice President of
National Restructuring Bank
Current Commissioner in PT. Jiwasraya and Head of Financial Education and Training Agency (BPPK), Indonesia
Finance Ministry. Former Head of Financial Planing Bureau, Secretary General Ministry of Finance
Deputy of Mining , Strategic Industry and Media in Indonesia Ministry of State Owned Enterprise. Former
President Director of PT. Dahana and PT. Industri Kapal Indonesia
Deputy Commissioner Strategic Management 1B OJK. Former Head of Repesentative Bank Indonesia Region VI
West Java and Head of Bank Indonesia Representative New York

Exhibit 10: Board of Commissioners

Source: BBTN

Board of Directors
Board of Directors
Name

Position

Maryono

President Director
Managing Director

Irman A Zahidruddin

for Funding and

Distribution

Experience
Former President Director at Bank Mutiara, Head of Network Group Bank Mandiri Jakarta, Head Regional 1 of
Bank Mandiri Medan
7 years in BTN. Formerly as Consumer Group Director of Bank Permata, Director at GE Capital, Director GE Astra
Fiannce, Director Card Area Citibank NA - Indonesia Timur

Managing Director
Mansyur S Nasution

for Mortgage &

Consumer

Former Executive Vice President - Coordinator Consumer Finance Bank Mandiri and Head of Corporate
Secretary Group Bank Mandiri

Lending
Iman Nugroho Soeko

Director

Previously as Chief Executive and Head of Bank Mandiri Europe Limited

Oni Febriarto R

Director

Previously as Head of Small and Micro Lending Division and Branch Manager for branch office BTN Ciputat

Sis Apik Wijayanto

Director

Previously as Regional II Head for Bank BRI and as Branch Manager for Bank BRI Yogyakarta

Sulis Osdoko

Director

Adi Setianto

Director

Previously as Head of Retail Funding & Service Division, Head of Consumer Funding & Service Division and Head
of Information and Communication Technology in BTN
Previously as Network and Service Director and Treasury and Financial Institution Director of Bank BNI

Exhibit 11: Board of Directors

Source: BBTN

Exhibit 12: Ownership Structure

Source: BBTN

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH

Company Highlights
Superb Loan Management
BBTN is actively engage to reduce their gross Non-performing loan (NPL) from an average
of 4.03% from December 2012 to December 2014 into 3.42% in December 2015 where in
the December 2014 gross NPL reached 4.01% through focusing on collection. For the Net
NPL which mean only count the credit loss can be reduced from 2.76% at December 2014
to 2.11% at December 2015. And we found out the spread between gross and net NPL
are increasing every year from 0.52% in December 2011 to 1.25% in December 2014 and
1.31% in 2015 which mean that the portion of credit loss decreases more in each year.

Gross Vs. Net NPL

4.00%

4.05%

4.09%

4.01%

3.50%

3.42%

3.12%

3.04%

3.00%

2.76%

2.75%
2.50%
2.23%

2.11%

2.00%
Dec - 11

Dec - 12

Dec - 13
Gross NPL

Exhibit 13: BBTNs Gross NPL vs. Net NPL

Dec - 14

Dec - 15

Net NPL
Source: BBTN

Pre-emptive Strike
Talking about BTN loan quality, BTN has great policy regarding to loan collectability. Every
time BTN found a doubtful account, BTN will try to push the borrower from higher
collectability level to become one level lower within 3 months this will reduce the credit
risk acquired by BTN regarding to the borrower. To make sure the lead time between
assets acquired by BTN that expected to become collectability 5 or loss, BTN started to
offer the collateral when the loan turns into collectability 3 in which by the time if the loan
reached collectability 5. With collateral sold, BTN can write off the doubtful account with
minimum bad debt expense which later on will save provision by 1% of total credit at
least. The coverage ratio of BTN now stand at 43.14% in December 2015 as the provision
increased from 33.77% in December 2014 where provision on earning asset increased by
30.55% to 2,064 Billion Rupiah in December 2015 and 1,581 Billion Rupiah in 2014 and
NPL is falling as shown in exhibit 13.

10

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH

Focus Made Easy

BTN loan portfolio will overweigh the non-subsidized mortgage loans as the mortgage
loan rate from BTN is seen lower from the average since BI rate cut from 7.5% to 7% in
early 2016. With upward property sales outlook in 2016 after BI cut the rate, it is expected
that housing loan in BTN will grow around 27% from 2015, giving nominal total loan of
Rp.158.2 trillion Rupiah in 2016, increasing from Rp.124.9 trillion Rupiah in 2015. By
focusing more on housing loan, BTN can get a certain business model that cannot be
done by other banks that has spread out loan portfolio among all sectors. BTN has
worked with developers and property agencies to improve the credit channeling. We can
see that the growth of housing loan portfolio is much higher than the non-housing loans
and this was resulted by business sector focus.
Mostly BTNs mortgage valued at Rp200 300 million per unit. This customer segment
mostly earns Rp 72 360 Million per year and mostly are first time home buyers. In
addition, this segment is forecasted to grow from 74 Million people in 2012 to 141 million
people in 2020.
Jokowis One Million Housing is aiming at providing housing for the low income segment
through BTNs mortgage business. The project will give boost to BTN in 2017.
BTN Loan Composition (in Billion Rupiah)
Loan Type

31-12-13 A

31-12-14 A

31-12-15 A

31-12-16 F

31-12-17 F

31-12-18 F

Rp.

Rp.

Rp.

Rp.

Rp.

Rp.

Housing Loans

87,005

87

102,614

89

124,927

90

158,168

91

191,383

93

214,349

94

Subsidized Mortgages

28,429

28

34,347

30

43,527

31

52,232

30

49,759

24

45,013

20

Non-Subsidized Mortgages

39,548

39

45,601

39

53,567

39

73,092

42

95,691

46

109,318

48

7,198

8,179

8,934

10,542

17,224

27,865

12

Construction Loan

11,829

12

14,486

13

18,900

14

22,302

13

28,707

14

32,152

14

Non-Housing Loans

13,463

13

13,302

11

14,029

10

14,871

15,316

13,785

2,597

2,916

3,839

4,858

9,190

4,824

10,865

11

10,386

10,190

10,013

6,126

8,960

Other Housing Loans

Consumer Loan
Commercial Loan

Exhibit 14: BBTN Loan Portfolio

Source: BBTN, MPI Research

Interest Rate Sensitive

BTN to focus more on providing cheap mortgage for medium to low market segment.
This market segment is very sensitive towards their cash flow, therefore interest rate level
will influence the market segment decision whether to get mortgage loan or not. It is a
good news for the bank as BTN is one of the leading mortgage loan providers. With
decision from BI to cut rate by 50 basis points from 7.5% to 7.0% in 2016, this means that
BTN can give cheaper mortgage rate. Currently BTN also provides mortgage loan at 6.6%
for non-subsidized mortgage loan and 5% for subsidized mortgage loan in early 2016 to
boost the mortgage loan. Right now, BTN normal mortgage rate stays at 9.6% - 10.6%
which varies across different fixed rate period. If BTN to cut another 0.5% interest rate,
we expect total mortgage loan growth will reach around 20%. BTN focuses more on
improving CASA as the demand for deposit will be the main source of the banks low cost
of fund, while time deposit will be reduced by portion in the future as lower BI rate will

11

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH

eventually decrease the demand for time deposit. CASA in FY 2015 has reached 47.56%
increases from FY 2014 45.81%.

Deposits
Current Account
Savings Account
Time Deposits
Total

BTN deposit mix In Tillion

FY2011
FY2012 FY2013 FY2014 FY2015 y.o.y
13.15
13.27
19.12
23.23
30.88 32.93%
14.82
21.54
24.24
25.55
29.87 16.93%
34.01
45.88
52.86
57.7
66.99 16.10%
61.97
80.69
96.21
106.48
127.75 19.97%

Exhibit 15: BBTN Deposit Mix

Source: BBTN

Competitive Interest Rate

What makes us believe that BTN can hold the biggest market share at 30% for mortgage
loan is that BTN mortgage rate is very competitive compared to other banks. BTN has the
lowest 1 year fix rate period and BTN can serve 25 years of mortgage while other banks
are mostly only 20 years. Although banking service is still hold by BCA, but BTN now has
increased their investment to create more convenient transaction by improving IT system
and create strategic outlet location. Customers in middle to low income segment are the
most price sensitive segment in which they are looking for the lowest total monthly
payment and transaction cost with benefits for additional value of the loan.
Normal Mortgage Rate Comparison
Bank Name
BTN

Rate

Additional Service

9.60% 25 years mortgage period, 1 year fixed rate, life insurance and fire insurance

BCA

10.25% Fastest process, lowest floating rate, can withdraw mortgage

BRI

10.25% lowest downpayment

BNI

10.75% longest fixed rate for 5 years compared to other banks

CIMB Niaga

9.75% No fee for late payment (terms and condition apply)

Exhibit 16: Non-Promotional Mortgage List

Source: BBTN, BBCA, BBRI, BBNI, BNGA

Expansionary business model

As a bank that focuses on long term mortgage loan, using conventional banking business
model would give a very high risk because longer loan age with uncertain economic
condition. BTN has the longest mortgage loan at 25 years compared to other banks. With
long term bonds issued by BTN have an average maturity of 7 to 10 years, this creates
maturity mismatch, however BTN has increased the fee based income since 2014 where
BTN manage to create 496 Billion IDR versus FY 2013 only 31 Billion IDR. It turns out the
fee based income is pretty successful to cover up borrowing cost as fund borrowing
interest in FY 2015 reached 516 Billion IDR, Fee based income in FY 2015 has reached 596
Billion IDR (+20.2% YoY).
BTN was the first bank to create a mortgage backed security (MBS) in Indonesia
back in February 2009 named as kontrak investasi kolektif efek beragun aset (KIK EBA).
Until 2015 BTN has created seven mortgage backed security with total Rp. 5.46 Trillion in
total value. With this kind of security, BTN expect to diversify the source of fund and also
12

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH

fee-based income. This product also enables BTN to mitigate risk and increase its credit
capacity. The first mortgage backed security gained idAA rating from Pefindo, AA (idn)
rating from Fitch Ratings and from Moodys with three different ratings from categories
Baa3 for bank deposits, D for bank financial strength, while Ba2 for baseline credit
assessment.
BTN Securitization
No.

Securitization

KIK EBA 1 / DSMF01

Nominal

Transaction date

Maturity

111,111,108,501

11-Feb-09

10-Jan-18

KIK EBA 2 / DSMF02

391,305,329,159

10-Nov-09

10-Dec-19

KIK EBA 3 / DBTN01

750,000,230,717

27-Dec-10

27-Sep-19

KIK EBA 4 / DBTN02

703,450,414,156

16-Nov-11

27-Feb-21

KIK EBA 5 / DBTN03

1,000,000,005,997

12-Dec-12

7-Jan-23

KIK EBA 6 / DBTN04

1,000,000,005,941

20-Dec-13

26-Feb-22

KIK EBA 7 / DBTN05

1,500,000,001,615

28-Nov-14

7-Sep-25

EBA SP 1 / SPBTN1

200,000,000,041

27-Nov-15

7-Mar-22

TOTAL
Exhibit 17: Mortgage-Backed Securities

5,655,867,096,127
Source: BBTN

Other than creating robust fee-based income, BTN in 2016 is planning to create two
subsidiaries that are focused in increasing profitability and reducing the default risk at
the same time. There will be a life insurance business where BBTN will be partnering with
JASINDO. The focus of this subsidiary will be on bundling life insurance sales with
property. The second subsidiary will be a multi finance company focusing more on
collection for BTN loan. The aim of this subsidiary is to reduce the NPL of BBTNs main
business. The multi finance business is also meant to enable credit loan for economic
segment that have fluctuative income such as peddler, food hawker, and others. Thus,
the subsidiaries that will be created by BTN will contribute profit by enabling the BTN to
provide more loans as well as reducing both risk and total NPL ratio.
Strong Banking Network
BTN has established robust network to give better service in both credit and funding
services. BTN has made one of the biggest mutual agreements with PT Pos Indonesia in
order to reach retail customers all around Indonesia. Post offices mainly help BTN to gain
more third-party funding from saving accounts. Services that Pos Indonesia provide
include opening of saving account, deposit, withdrawal, mortgage payment and school
tuition payment. There are 2,951 post offices around Indonesia with BTNs product
13

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH

eBataraPos for saving account. So far, the total number of accounts opened in
eBataraPos has reached 2,094,909 and its total value reached Rp2.09 Trillion as of
September 2015.
BTN Total Service Outlet
2009
Regional Office

2010

2011

2012

2013

2014

9m 2015

61

63

65

65

65

65

65

Subsidiary Branch

204

214

218

223

223

223

223

Cash Office

111

316

415

479

479

479

26

39

50

50

50

50

13

23

34

37

Branch Office

Syariah Outlet

21

Priority Outlet

Total Outlet
Pos Indonesia Office

286

416

647

769

843

854

857

2,045

2,661

2,738

2,922

2,922

2,951

2,951

528

745

1,181

1,404

1,504

1,830

1,830

4,340

5,312

6,337

7,142

8,011

8,582

8,814

ATM
Employees

Exhibit 18: BTN Total Service Outlet

Source: BBTN

14

PT MINNA PADI INVESTAMA

Member of Indonesia Stock Exchange

EQUITY RESEARCH

VALUATION
Key Ratios
Loan to Deposit Ratio (LDR)
Special Mention
CASA Ratio
Coverage Ratio
PPOP Margin
Provision to PPOP
Cost of Fund
Net Interest Income
Capital Adequacy Ratio
Gross NPL
Third Party Fund Growth
Dividend Pay Out Ratio
Return on Equity (ROE)
Return on Assets (ROA)
Book Value Per Share
P/BV
Latest Price
Exhibit 19: Key Ratios

2013 A

2014 A

2015 A

2016F

2017F

2018F

104.13%

107.68%

107.36%

105.22%

103.79%

102.62%

12.54%

14.87%

15.19%

13.22%

12.06%

10.95%

25.12%

24.31%

23.76%

23.95%

24.02%

22.45%

28.13%

14.84%

22.21%

25.19%

21.42%

21.43%

24.71%

18.70%

23.71%

25.29%

23.17%

23.18%

16.83%

33.30%

26.08%

24.51%

26.75%

26.75%

49.36%

59.24%

56.42%

55.44%

57.98%

57.96%

6.24%

5.30%

5.50%

5.26%

4.93%

4.54%

17.84%

16.31%

19.65%

18.23%

16.67%

15.78%

4.82%

4.88%

4.15%

3.96%

3.66%

3.59%

23.46%

11.57%

20.23%

21.50%

18.63%

14.63%

26.19%

42.05%

12.59%

15.00%

14.50%

17.20%

13.52%

8.81%

12.87%

13.62%

12.51%

11.67%

1.19%

0.77%

1.08%

1.13%

1.02%

0.96%

Rp1,097

Rp1,197

Rp1,361

Rp1,591

Rp1,818

Rp2,059

0.793

1.007

1.194

1.160

1.365

2.100

Rp870

Rp1,205

Rp1,625

Rp1,846

Rp2,482

Rp4,323

Source: BBTN, MPI Research

Asset quality
What makes BTN interesting is that coverage ratio will increase to 25.19% in 2016, while
the outlook for 2018 is that coverage ratio will decrease to 21.43%. Based on the current
information we expect that banking will have tighter competition in the future, leading to
higher cost of fund.
Gross NPL will decrease to 3.96% in 2016 and gradually getting lower to 3.59% in 2018 as
the subsidiary that predicted to start operating in this 2016 will help to control the NPL
and collection of credit loan.
LDR in the other hand will stay high as the bank has a long term credit period at 20 25
years on average, compared to other banks which only 5 15 years loan period which
cause BTN loan to deposit ratio (LDR) remains above 100%. This LDR may worry the
investor in the case the loan will not getting paid, then the deposit cant cover up the loan
loss. In this case, we would clarify that BTN has substantial fee-based income and good
asset handling as the customer get into collectability category of 3, the asset will be taken
and started to be offered by BTN to other potential buyer. In conclusion the recoverability
of the asset and liquidity is expected to remain manageable.
Capital adequacy ratio predicted to decrease to 18.23% in 2016 as the bank gives more
credit, so the risk weighted asset will increase and predicted to be 15.78% in 2018. As long
as the CAR stays above 8%, the bank is considered to have enough capital to support the
main banking activity towards the risk.
15

PT MINNA PADI INVESTAMA

EQUITY RESEARCH

Member of Indonesia Stock Exchange

Current account and saving account ratio (CASA) predicted to grow to 23.95% in 2016 and
peaked at 24.02% in 2017 while decreasing to 22.45% in 2018 as we assume the
competition is getting harder, pushing BTN to offer higher deposit rate before they can
give more credit for profitability.
Profitability
What makes a firm interesting to invest is the ability to give profitability to the
shareholders. In the case of banking, we would use net interest income as the indicator
of profitability. Net interest income predicted to be at 5.26%, while the outlook of the NIM
will gradually decrease over three years period to 4.73%.
The pre-provision operation profit predicted around 25% in 2016 while in the long run
the pre-provision operating profit will be around 27% as the cost can be lowered but
result in higher provision at the same time. High pre-provision operating profit means
that the bank is actually making profit from operation despite the provision.
Although both ROA and ROE are expected to fall, we would like to highlight that the total
asset and equity growth in 2016 will be significantly higher. The challenge towards these
metrics will be related to net interest margin outlook that is seen to be tighter as BI rate
outlook is still seen going downward. What makes the bank gives more profit is in terms
of nominal return and we assume that in 2018 the banking environment may not be the
same. ROA and ROE in 2016 predicted to be 1.13% and 13.62%, respectively, increasing
from 2015 and later in 2018 will decline to 0.96% for ROA and 11.67% for ROE.
Cost of fund is the direct cost of lending which must be the focus on determining bank
profitability. Cost of fund seen to be rising as competition in banking will rise in 2016 and
onward. The calculation is using assumption that the banking condition in Indonesia until
2018 will be the same as current condition and taking MEA into account is expected to
make cost of fund in 2016 is 55.44% and up further to 57.96% in 2018.

RISKS TO OUR VIEW

Since BTN has more than 70% of their loan portfolio on mortgage, we should focus more
on mortgage growth in Indonesia. As the mortgage loan slows down, the bank will greatly
suffer in terms of total loan can be given to the market. Loan payment for mortgage can
be influenced by the housing price outlook. As the price is going up and interest rate of
BI outlook going up, borrower will find the loan payment more expensive which
eventually will raise concern over credit default.
BTN has more than just traditional banking strategy. BTN actively engages in bond
securitization and creates new business units to support the core activity of the bank
which has the risk of failure in the investment of new business or bond securitization
which will burden the core activity of BTN
Government and BI regulation may influence the profitability and cost structure of the
banking industry in Indonesia, including that of BTN.
16

PT MINNA PADI INVESTAMA

EQUITY RESEARCH

Member of Indonesia Stock Exchange

Head Office
Equity Tower 11th Floor, SCBD Lot 9
Jl. Jend. Sudirman Kav. 52-53
Jakarta Selatan Indonesia
Tel. +62 21 525 5555
Fax. +62 21 527 1527

Branches
Jakarta
Ruko Plaza Intercon,
Taman Kebon Jeruk Blok A 15-16,
Lantai 2,
Intercon
Jakarta Barat 11630
Tel. +62-21-8257-5555
Fax. +62-21-584-1839
Surabaya
Spazio Office Tower 2nd Floor
Kompleks Graha Festival Kav. 3
Graha Famili
Jl Mayjen Yono Sewoyo
Surabaya 60225
Tel. +62-31-9900-1000
Fax. +62-31-9900-1001

Solo
Jl. Monginsidi No. 27 A/B Solo
Tel. +62-271-635470
Fax. +62-271-663935
Semarang
Jl. Sriwijaya No.8A
Semarang 50257
Tel. +62-24-8411555
Fax. +62-24-8313032
Bandung
Jl. Veteran 42 Bandung 40112
Tel. +62-22-4216-555
Fax. +62-22-4203-100

DISCLAIMER
This research report is prepared by PT MINNA PADI INVESTAMA Tbk. for information purposes
only and is not to be used or considered as an offer or the solicitation of an offer to sell or to
buy or subscribe for securities or other financial instruments. The report has been prepared
without regard to individual financial circumstance, need or objective of person to receive it.
The securities discussed in this report may not be suitable for all investors. The appropriateness
of any particular investment or strategy whether opined on or referred to in this report or
otherwise will depend on an investors individual circumstance and objective and should be
independently evaluated and confirmed by such investor, and, if appropriate, with his
professional advisers independently before adoption or implementation (either as is or varied).

17