Period

3Q15/9M15

Actual

Bank Internasional Indonesia (BII) posted 9M15 net profit growth of 70% YoY on better Net Interest Income (NII).

Dividends

No dividends were declared.

Key Results Highlights

9M15 vs. 9M14, YoY

The surge in bottom-line (+70%) was primarily due to: (i) higher NII at +10.5% (9M14:+4.7%), and (ii) higher noninterest income (NOII) gains at +22% (9M14:-11.8%). NOII gained driven by advisory activities, insurance and forex.

Total income growth was commendable (+13%) but it was dragged by higher provision for bad loans (+6.5%) and higher operating expenses (+9.9%).

Net interest margin (NIM) expanded 23bpts, thanks to better price discipline in loan pricing and active fund management.

Loan-to-deposit ratio (LDR) was flattish at 94% as loans and deposits grew at a lethargic pace of 6.7% and 6.2%, respectively.

Cost-to-income ratio (CIR) fell 2ppts to 63% given that total income (+13%) accelerated at a quicker pace vs. opex (+10%).

Asset quality deteriorated where gross impaired loans (GIL) and credit charge ratio increased by 168bpts and 5bpts, respectively.

Annualised ROE was steady at 5.3% while regulatory capital ratios improved 80-134bpts. 3Q15 vs. 2Q15, QoQ

In tandem with the above, net profit surged 52% due to strong NII at +13% but mitigated by higher loan loss provisions at +15%.

NIM improved 47bpts on top of loans growth of 4%.

LDR was flatish at 94% as deposits growth was at 3.3% compared to loans growth of 3.8%.

CIR fell 5ppts to 61% on the back of improved total income (+8%) vis-à-vis a marginally improved opex (- 0.3%).

Asset quality dipped given that GIL and credit charge ratio rose by 73bpts and 28bpts, respectively.

Outlook

Asset quality issues should continue to linger (gross NPL ratio to stay at elevated levels), since commodity prices remain soft.

Change to Forecasts

Forecasts left unchanged as BII’s contribution to overall Group’s PBT is immaterial (1H15: ~2%).

Rating

Maintain OUTPERFORM

Valuation

Our GGM-TP of RM9.74 is kept. This is based on 1.5x FY16 P/B, where we utilised: (i) COE of 8.5%, (ii) FY16 ROE of 11.3%, and (iii) terminal growth of 3%.

All in, we continue to like Maybank for its: (i) superior yield offerings of ~7% and (ii) extensive regional exposure in ASEAN 5.

Risks to Our Call

Steeper margin squeeze.

Slower-than-expected loans and deposits growth.

Worse-than-expected deterioration in asset quality.

Adverse currency fluctuations.

Source: Kenanga Research - 2 Nov 2015