Period

4Q15/FY15

Actual

Bank Internasional Indonesia (BII) posted FY15 net profit growth of 106% YoY on better Non Interest Income (NOII).

Dividends

No dividends were declared.

Key Results Highlights

FY15 vs. FY14, YoY

The surge in bottom-line (+106.0%) was primarily due to: (i) higher NII at +9.4% (FY14:+7.6%), and (ii) higher non-interest income (NOII) gains at +35.9% (FY14:-1.3%). NOII gain was driven by forex gains. Core net profit was also bolstered by operating gains of IDR192.5b (12M14: -104.3b).

Net interest margin (NIM) expanded 12bps to 4.44% thanks to better price discipline in loan pricing and active fund management.

Loan-to-deposit ratio (LDR) fell by 6ppts to 90.2% as deposits outpaced loans growth at 13.4% and 6.3%, respectively.

Cost-to-income ratio (CIR) fell 4.8ppts to 58.8% given that total income (+15.9%) accelerated at a quicker pace vs. opex (+7.1%).

Asset quality deteriorated where gross impaired loans (GIL) and credit charge ratio increased by 148bps and 41bps, respectively.

Annualised ROE was steady at 9.5% while Tier-1 Capital was flattish at 11.5% but Total Capital ratio fell 60bps to 15.2. 4Q15 vs. 3Q15, QoQ

In tandem with the above, net profit surged 321.4% due to strong NOII at 100.4% but mitigated by allowances for impairment at 20.9% and operating gains of IDR193.5b (3Q15: IDR- 2.0b).

NIM compressed by 8bps on top of loans growth of only 0.6% vs. deposits growth of 5.0%.

LDR fell by 4ppt to 90.2% due to the strong deposits growth.

CIR fell 13.6ppts to 47.5% on the back of improved total income (+23.5%) vis-à-vis a marginally improved opex (-4.1%).

Asset quality improved by 53bps at 3.66% but credit charge ratio rose by 46bps.

Outlook

BII's performance is likely to improve further in FY16, being a beneficiary of the infrastructure spending announced recently and the interest rate cut by 50bps. However, 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 (9M15: ~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) 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 - 24 Feb 2016