- Malayan Banking Bhd’s (Maybank) 78.98%-owned Indonesian subsidiary, PT Bank Internasional Indonesia Tbk’s (BII) net earnings declined by 57.7% QoQ in 1QFY14, due to slower revenue and jumps in overhead and loan loss provision expenses. We estimate net earnings contribution of 3.3% to group earnings in 1QFY14, compared to 17.7% in 4QFY14 and 6.5% a year earlier in 1QFY13.

- Loans growth was subdued at only -0.7% QoQ in 1QFY14 (4QFY13: +11.3% QoQ). On a YoY basis, loans growth was strong at 27.1%. Deposit growth was also soft at -3.0% QoQ in 1QFY14 (4QFY13: +11.1%). The slower deposit growth may be due to general liquidity conditions in the market. Deposit growth on a YoY basis was 16.5%.

- Demand deposit (15% of total deposit) declined by 12.8% QoQ, while savings deposit (23% of total deposit) was 2.7% lower QoQ. This takes CASA contribution to total group deposit to 37.9% in 1QFY14, from 39.5% in 4QFY13. Fixed deposit (62% of total deposit) also came off by 4.0% QoQ.

- NIM deteriorated to 4.03% in 1QFY14, from 4.58% in 4QFY14. The company attributed this to increasing cost of funds and challenging market conditions. There was also a decrease of 23.8% QoQ in the non-interest income line, with lower fee and commission income (-26.6% QoQ), and other fee income (-9.7% QoQ). The company said there was positive impact from global market and cash management service.

- Loan loss provision increased to Rp336bil in 1QFY14, from Rp209.3bil in 4QFY13. This brings credit costs to an estimated 148bps in 1QFY14 (4QFY13: 86bps). The company said that gross NPL ratio stood at 2.05% in 1QFY14 (4QFY13: 2.11%).

- The company said that during the first quarter of 2014, it experienced some asset quality deterioration for a number of Global Banking Debtors related to commodities and structured trade financing. As a result, provisions increased by 72%. The company said that it continues to manage its commodity exposure through tighter control over its remaining exposure in Structured Trade and Commodity Finance. Global and domestic economic conditions, which led to a decline in export activities coupled with the rise in interest rates, also impacted the NPL level.

- Overall, BII’s net earnings have shifted lower a few rungs in 1Q, although on the flip side, BII is still not a major contributor to group earnings. Maintain HOLD on Maybank. 

Source: AmeSecurities