Insights On Indonesian Banks - DBS

Indonesia Industry Focus
Indonesian Banks and Multifinance

Companies
Refer to important disclosures at the end of this report
DBS Group Research . Equity 4 Dec 2015
A Year of Two Halves JCI : 4,545.86

 Expect a weak 1H16; hopes pinned on a better 2H16 if
infra momentum picks up but there are risks Analyst
LIM Sue Lin +65 6682 3711
 Slow growth and asset quality to extend into 1H16 suelinlim@dbs.com
 BBCA and BMRI are bearish, BBTN is the most bullish;
others are expecting a slightly better year INDONESIAN BANKS COVERAGE
 BBCA is our top pick for the sector; stay cautious for now Price Mkt Cap
Target Performance (%)
Price
A year of two halves; hopes pinned on 2H16. 2016 will be Rp US$m Rp 3 mth 12 mth Rating
a year differentiating banks that can successfully defend their
balance sheet strength, in particular asset quality vs earnings Bank Central Asia 13,300 23,757 15,500 8.4 1.7 BUY
momentum. Asset quality woes have not peaked in our view Bank Danamon Indonesia 2,970 2,062 3,600 (14.9) (29.3) BUY
and will likely drag to at least 2Q16. Hopes are pinned on a Bank Mandiri 8,900 15,045 9,400 1.1 (16.2) HOLD
better 2H16 on the assumption that infrastructure momentum Bank Negara Indonesia 4,985 6,735 5,000 6.1 (19.9) HOLD
picks up, but risks prevail. Bank Rakyat Indonesia 11,275 20,151 10,200 10.5 (3.0) HOLD
Slow growth and asset quality issues extend to 1H16. Bank Tabungan Negara 1,280 981 1,080 24.9 12.3 HOLD
Although GDP growth is expected to improve in 2016, the Bank Tabungan
2,575 1,090 3,000 (12.0) (36.3) HOLD
macro environment is not set for a strong rebound at this Pensiunan Nasional
juncture. While infrastructure announcements will boost Panin Bank 860 1,501 900 (14.9) (27.7) HOLD
sentiment, disbursements will only be visible to banks until the
INDONESIAN MULTIFINANCE COMPANIES COVERAGE
later part of 2016. Our 2015 loan growth projection is 9% and
Target Performance (%)
we expect it to inch up to 11% in 2016 assuming partial Price Mkt Cap
Price
disbursement for infrastructure loans materialise in 2H16. We Rp US$m Rp 3 mth 12 mth Rating
see growth momentum stagnating for another 6 months. BFI Finance Ind 2,475 281 2,900 (4.5) 18.6 HOLD
Managing provisions and NPLs will be issues for most banks. Clipan Finance 267 77.1 290 (7.9) (40.7) HOLD
Bulls and bears in untested territory. Bank Central Asia Source: DBS Bank
(BBCA) and Bank Mandiri (BMRI) have both guided for a Indonesian Banks: Loan vs GDP growth trends
bearish 1H16. Bank Rakyat Indonesia (BBRI) painted a slightly
positive picture for 2016 but we believe downside risk lies on Loan growth %
6.5%
GDP growth %
35.0% 7.0%
lower Kredit Usaha Rakyat (KUR) lending rates particularly in 6.0% 6.1% 6.2%
5.7%
6.0%
relation to the subsidy portion funded by the government. 30.0% 5.2% 6.0%
4.8%
Bank Negara Indonesia (BBNI) guided for positive traction but 25.0%
4.6%
5.0%
we remain cautious on provisions and NPLs. Bank Danamon 20.0% 4.0%
(BDMN) is still in the midst of restructuring and we believe
results will start to surface from 2H16 with a full impact seen 15.0% 3.0%
in 2017. Among the smaller banks, Bank Tabungan Negara 10.0% 2.0%
(BBTN), is staying positive on its growth prospects but asset 5.0% 1.0%
quality issues may continue to take a toll limiting upside to 30.8% 10.1% 23.3% 24.7% 23.1% 21.2% 11.7% 9.4% 10.5%
0.0% 0.0%
valuations. While we still like Bank Tabungan Pensiunan 2008 2009 2010 2011 2012 2013 2014 2015 2016
Nasional (BTPN)’s business model, growth has normalised and Loan growth % (Industry) GDP growth %
on a positive note, asset quality remains stable for the bank.
Panin Bank (PNBN) remains one of the most conservative Source: Companies, DBS Bank
banks in our coverage with M&A speculation holding up Indonesian Banks: Credit cost trends
valuations. Multifinance companies are in for a challenging
8.0% 2.5%
year but these are reflected in its current low valuations. We 2.2%
prefer BFI Finance (BFIN) over Clipan Finance (CFIN). 7.0% 2.0%
2.0%
1.7%
BBCA is our top pick; risk-on approach prevails. BBCA is 6.0%
1.5%
our top pick; BUY with a Rp15,500 TP, as we remove the 5.0% 1.5%
50bps additional risk premium in our valuation. BBCA’s 4.0% 1.0% 1.0% 1.1%
0.9% 0.9%
financial metrics still stands out the best among peers. Its 3.0% 0.7% 1.0%
strong deposit franchise and excellent asset quality indicators 2.0%
justifies a premium valuation. We raise BDMN to BUY as we 0.5%
1.0%
believe valuations have bottomed; currently trading at 10-year
lows, we believe market is not attributing any upside to its 0.0%
2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F
0.0%
transition phase. Our other ratings for the banks remain

HOLDs at this juncture. We believe there will be better BBCA BDMN BMRI BBNI BBRI
opportunities in 2H16 if the macro momentum improves. It BBTN BTPN PNBN Total
would be best to stay on the sidelines for now.

Source: Companies, DBS Bank
ed-JS / sa- MA
Industry Focus
Indonesian Banks and Multifinance Companies
Table of Contents
Outlook for banks remain challenging in 2016 3
Multifinance companies face subdued growth 6
Valuation and recommendation 8
Company Guides 11
Bank Central Asia 12
Bank Danamon 18
Bank Mandiri 24
Bank Negara Indonesia 30
Bank Rakyat Indonesia 36
Bank Tabungan Negara 42
Bank Tabungan Pensiunan Nasional 48
Panin Bank 54
BFI Finance 60
Clipan Finance 66
Page 2
Industry Focus
Outlook for banks remains challenging in 2016 Banks on asset quality watch track, disregarding growth. Most
banks are focusing on preserving asset quality and managing
Bearish outlook at least up to 1H16. We believe growth will NPL issues for most of 2015 and at least until 1H16. Almost all
likely stagnate until end 1H16 at the very least. Loan growth banks will see higher NPL ratios in 2015 and right through
has stayed slow YTD-2015 and does not seem that it will pick 1H16, not just because of absolute NPLs but also as loan
up momentum in the coming few months. While growth slows down. Our sense from the banks is that loan
announcements on the infrastructure projects will boost demand remains weak in this uncertain environment and
sentiment, we do not expect growth or earnings visibility to sentiment of stagnating growth going forward could continue
show for the banks until late 2016. Earnings growth for the to see loan growth momentum remaining relatively sluggish.
sector for 2016 should rebound by a strong 15%, driven Banks are aggressively classifying NPLs to buffer provision
largely by BMRI in the absence of high provisions and BBNI’s levels and coverage in 2015. Credit costs are also expected to
kitchen sinking year in 2015. Excluding these two banks, remain elevated until 2Q16 before improving towards the end
earnings growth would be a dismal 7%. of 2016.
Indonesian banks: Earnings growth trends Indonesian banks: Credit cost trends
Individual banks% Total % 8.0% 2.5%
2.2%
120.0% 50.0%
7.0% 2.0%
100.0% 1.7% 2.0%
40.0% 6.0%
1.5%
80.0% 5.0% 1.5%
30.0%
4.0% 1.0% 1.0% 1.1%
60.0% 0.9% 0.9%
3.0% 0.7% 1.0%
20.0%
40.0%
2.0%
10.0% 0.5%
20.0% 1.0%
0.0% 0.0% 0.0%

0.0%
2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F
2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F
-20.0% -10.0% BBCA BDMN BMRI BBNI BBRI
BBCA BDMN BMRI BBNI BBRI
BBTN BTPN PNBN Total BBTN BTPN PNBN Total
Source: Companies, DBS Bank Source: Companies, DBS Bank
Indonesian banks: ROE trends Indonesian banks: Loan loss coverage trends
ROE (Banks) ROE (Average) Loan loss coverage (Banks) Loan loss coverage (Average)
500.0% 250.0%
40.0% 25.0%
450.0%
35.0% 20.0%
400.0% 200.0%
30.0% 350.0%
15.0%
25.0% 300.0% 150.0%
10.0%
20.0% 250.0%
5.0% 200.0% 100.0%
15.0%
0.0% 150.0%
10.0%
100.0% 50.0%
5.0% (5.0%)
50.0%
0.0% (10.0%) 0.0% 0.0%
2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F
BBCA BDMN BMRI BBNI BBRI BBCA BDMN BMRI BBNI BBRI
BBTN BTPN PNBN Average
Source: Companies, DBS Bank Source: Companies, DBS Bank
Page 3
Industry Focus
Indonesian banks: NPL ratio and absolute NPL trend Indonesian banks: Loan growth vs GDP
120,000 3.0% 35% 7%
2.7% 31.8% 6.2%
6.2%
2.5% 6.0%
2.4% 30% 6.0% 5.6% 6%
100,000 2.3% 2.5% 5.2%
2.1% 2.1% 5.0%
25% 4.6% 23.8% 23.5% 4.7% 5%
2.0% 22.6%
1.9% 21.2%
80,000 1.9% 1.8% 2.0%
1.8%
20% 4%
15.0%
60,000 1.5% 15% 3%
11.7%
10.6%
9.1%
10% 2%
40,000 1.0%
5% 1%
20,000 0.5%
0% 0%
2008 2009 2010 2011 2012 2013 2014 2015F 2016F
0 0.0%
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Industry loan growth GDP growth
Absolute NPL NPL ratio

Source: BI, OJK, DBS Bank,
Source: BI, OJK, DBS Bank
GDP prospects to improve but not substantially. Private
consumption growth has been on a steady decline for the past
The worst is not over for NPLs in our view. NPLs further
6 quarters. Investment is likely to grow by only 3.6% in 2015,
escalated in 3Q15; there is likely a respite in 4Q15 as banks
its slowest pace in 10 years. Weak sentiment on the economy
typically write off NPLs in the final quarter of the financial year.
and anticipation of further rupiah weakness are likely to keep
But we believe the worst is not over. A seasonally slow 1Q16
private sector’s investment low. Public sector investment may
will see NPLs rising further, perhaps stabilising in 2Q16 before
help to stop the slide in overall growth, however, doubts
some improvement in 2H16. Commodities related sectors
remain over the government’s ability in implementing its
remain at risk while we are increasingly seeing a spillover effect
planned projects for the year. Disbursements of government
into the manufacturing sector.
expenditure reached 46% of the full year target as of July but
capex spending was only at 15% of its full year target. The
Indonesian banks: NPL ratio by sector
government is committed to hit 85% of its full-year
Construction
Social services, cultural, entertainment 4.5%
5.5%
expenditure budget by December. The government’s stimulus
Wholesale and Retail Trade
Mining 3.7%
4.1% measures will likely have only a limited short term impact. We
Transportation
Shophouse
3.7% expect GDP growth to come in at 4.7% and 5.2% in 2015 and
3.4%
Fishery 3.2% 2016 respectively. The acceleration in 2016 should arise from
International bodies and ohers 2.9%
Individual household services 2.7% better spending and investments. The earlier than expected roll
Housing 2.7%
Processing industry 2.6% out of infra projects poses as an upside risk to growth,
Real estate, Business and Ownership 2.5%
Accomodation, eating, drinking 2.3% although there appears to be more skeptics in the market than
Agriculture 2.1%
Health services and social activities 1.7% believers.
Electricity, Gas and Water 1.7%
Education services 1.5%
Other non industrial 1.4%
Vehicle 1.4% Inflationary risks may ease. Headline inflation figures have been
Other housing
Financial Intermediaries 0.7%
1.4%
distorted by changes in oil prices and, in Indonesia’s case, the
Government administration 0.1%
government’s decision to raise subsidized fuel prices in late-
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%
2014. Core inflation has remained relatively steady so far. Even
Source: BI, OJK, DBS Bank if core inflation falls below 5%, underlying inflationary pressure
may remain prevalent going into 2016. Rupiah weakness is the
Loan growth at 9% for 2015; slight uptick expected in 2016. major factor behind this difference. Food prices also present
Our 2015 loan growth forecast is only at 9%, which is the risks. We expect CPI inflation to average 6.4% and 6.2% in
slowest since 2009. Given the lackluster macro sentiment, we 2015 and 2016 respectively.
expect loan growth to only inch up to 11% in 2016 assuming
that partial disbursements for infra loans will materialise in Interest rates direction is anyone’s guess at this juncture. A rate
2H16. We see growth momentum stagnating for at least cut could also prompt further rupiah weakness, which has
another 6 months ahead. been a drag on domestic demand. If anything, the risk is now
Page 4
Industry Focus
tilted towards a hike more than a cut. Since August, Bank continue to expect NIM to remain relatively stable in 2015
Indonesia (BI) has repeatedly indicated that the rupiah is while expenses will likely be 15% higher largely due to
undervalued. While BI is unlikely to go against the market, the continued investments to digitise products and services.
central bank has been active in preventing excessive weakness Branch/outlet expansion is expected to slow down this year.
of the rupiah. Whether or not BI will lower its interest rates in For 2016, we forecast that earnings will grow by 14.5%,
December remains anyone’s guess at this point. Vice President largely due to the absence of hefty provisions. While NPLs will
Kalla continues to insist that BI should lower rates to help likely remain high, the spike should be less severe in 1H16. We
boost GDP growth. But BI’s position on this front was made believe asset quality should start to stabilise in 2H16. We
clear in its November policy statement. There is a need to continue to expect NIM to remain largely stable unless
balance between downside risks to growth and potential regulations come into play forcing banks to lower lending
volatility in financial markets due to the US Fed rate lift-off. The rates, micro loans in particular. If policy rates were to shift
recent reduction in the Reserve Requirement Ratio (RRR) with down by 25bps, the impact to NIM will be marginally positive.
effect from 1 Dec from 8.0% to 7.5% is a signal of monetary
easing. From our checks with the banks, a handful of them Indonesian banks: Banks NIM
expect a small rate cut of 25bps in 2016. Should a rate cut NIM (Banks) NIM (Average/Industry)
16.0% 7.8%
happen, even as low as 25bps, it will be positive for smaller
14.0% 7.6%
banks such as BBTN and BTPN which are more sensitive to
12.0% 7.4%
funding cost movements because of their relatively low CASA
10.0% 7.2%
proportion to deposits. 8.0% 7.0%
6.0% 6.8%
Rupiah may stay volatile. The Rupiah has been on a 4.0% 6.6%
depreciating path after it peaked around 8500 against the USD 2.0% 6.4%
in Aug 2011. The path steepened after the Fed’s taper 0.0% 6.2%
2010 2011 2012 2013 2014 2015F 2016F 2017F
tantrums increased volatility in emerging markets in 2013. This BBCA BDMN BMRI BBNI BBRI
was represented by USD/IDR trading in an ascending price
channel, mostly in the lower half of the channel, after early Source: DBS Bank, Companies
2014. This changed in August this year when China’s
unanticipated devaluation pressured Asia ex Japan and Regulatory changes. This year, OJK implemented new
commodity currencies lower. USD/IDR rose to the middle of the regulations to stimulate the economy and keep asset quality in
price channel where it is expected to fluctuate. The IDR’s check. First of all, OJK reduced the loan-to-value (LTV) ratio
depreciation since 2011 coincided with the slide in Indonesia’s from 25-30% to 20-25% although it did not have much of an
real GDP growth from 6.0-6.4% in 2010-12 to 5.0-5.6% in impact due to the weakness in structural demand for auto
2013-14 to less than 5% this year. Export growth has been in loans and mortgages. In addition to that, OJK also reduced the
negative double-digit territory this year. The Jakarta Composite KUR rate to 12% (from 21%) while subsidising 7%, thus BBRI
Index has fallen more than 20% since April, which is also in effectively gets 19% to increase demand. OJK also allows the
line with global trends. The IDR remains vulnerable if the US early restructuring of loans and has eased the criteria to
goes ahead to lift interest rates. We expect IDR to come in at restructure loans to pre-emptively prevent NPLs. OJK is also
Rp14,070 per USD in 2015 and Rp15,200 per USD in 1H16. reducing the risk weighting for most types of loans to
Banks with higher exposure to USD loans may see some risk, stimulate growth. Despite all these measures, we still see
although we believe this would be limited as they tend to potential asset quality weakness and growth continuing to lag
hedge their positions. given the slow macroeconomic climate. We think that these
new regulations will not boost growth in the short-term and a
Earnings contraction in 2015; recovery in 2016 in the absence bigger impact would be the realisation of government
of high provisions. Our 2015 earnings projection points to a infrastructure projects and the trickle down impact to the
contraction, dragged mainly by significantly higher provisions, whole economy.
largely skewed by BBNI. Excluding the dent from BBNI in 2Q15,
overall earnings for the sector is expected to fall by 2%. We
Page 5
Industry Focus
Multifinance companies face subdued growth prospects any meaningful improvement in the near term as oil prices
remain low and coal demand from China is on a downtrend. As
Growth has been subdued. Financing growth has been weak this at 10M15, Komatsu sales were weak at 1,870 units (-42% y-o-y).
year, only growing by 2.0% y-o-y as of August 2015. The We expect FY15F Komatsu sales to come in at 2,350 units (-28%
multifinance association (APPI) has revised down growth forecast y-o-y). We also see a change in the product mix for Komatsu
from the initial 10% to 5% at best under the current economic with the shift away from coal mining tractors to non-mining
conditions. Consumer financing recorded very weak growth tractors for agriculture, construction and forestry. We believe
(8M15: +2.5% y-o-y) as weak consumption drags on. As of heavy equipment leasing will grow at an unexciting rate of 5% in
10M15, auto sales were very weak with 4W sales coming in at the long-run.
853,008 units (-18% y-o-y) and 2W at 5,424,073 units (-19% y-
o-y). The sustained low commodity prices continue to pressure Indonesia Multifinance: Komatsu sales volume
leasing (8M15: -0.3%) growth and the majority of the 9,000 80%
74%
multifinance companies have been intentionally reducing their 57% 60%
portfolios in this segment in order to maintain asset quality. 40%
6,000
Factoring (8M15: +19.9% y-o-y) still shows decent growth albeit 20%
at lower levels than the historical growth of more than 40%. The 10%
0%
factoring market is still very small, only contributing to 2.7% of 3,000 ‐10%
‐15%
‐20%
total financing. ‐28% ‐27%
‐32%
‐38% ‐40%
0 ‐60%
Indonesia Multifinance: Financing trends 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F
400,000 35%
32.3% Komatsu Growth (%)
350,000 31.0% 30%
300,000 26.4%
23.1%
25% Source: DBS Bank
250,000
20%
200,000
150,000
15.2% 15% Weak outlook in the auto sector. We believe that the auto
100,000 10% sector’s near term outlook will remain challenging with the slow
50,000 4.1% 5.2% 5% economy and low commodity prices which has a trickle down
2.0%
- 0% impact on the buying power of consumers in commodity driven
2008 2009 2010 2011 2012 2013 2014 Aug-15
regions such as Kalimantan and Sumatra. In addition, the
Consumer financing Leasing Factoring Financing Growth
volatility of the exchange rate also weakens consumer demand.
Source: OJK, DBS Bank We forecast 4W sales to fall by 9% y-o-y this year to 1.0m units
and 2W sales to fall by 18% to 6.4m units. The loosening of LTV
Indonesia Multifinance: Financing growth trends regulation of 20% for 2W and productive 4W and 25% for non-
80% productive 4W will unlikely have a material impact on demand in
70% the short term.
60%
50%
40% Indonesia Multifinance: 4W sales volume
30% 1,600,000 700,000
20%
1,400,000 600,000
10%
0% 1,200,000
500,000
‐10% 2009 2010 2011 2012 2013 2014 Aug‐15 1,000,000
400,000
‐20% 800,000
Consumer financing growth Leasing growth Factoring growth 300,000
600,000
200,000
400,000
Source: OJK, DBS Bank
200,000 100,000
Heavy equipment leasing continues to be under pressure. We ‐

2009 2010 2011 2012 2013 2014 2015F 2016F 2017F
‐
believe that heavy equipment leasing growth and asset quality Domestic 4W sales no LCGC (in units) LCGC sales (units)
will remain to be under pressure in the near term. Coal prices are Astra 4W sales (units)
still in the low US$50/ton and our coal analyst does not expect
Source: DBS Bank
Page 6
Industry Focus
Indonesia Multifinance: 2W sales volume Indonesia Multifinance: Asset quality

9,000,000 6,000,000 2.50% 2.27%
8,000,000 1.99% 2.03%
5,000,000 2.00%
7,000,000 1.62% 1.54%
6,000,000 4,000,000 1.50% 1.41%
5,000,000
3,000,000 1.00%
4,000,000
3,000,000 2,000,000 0.50%
2,000,000
1,000,000
1,000,000 0.00%
2010 2011 2012 2013 2014 Jul‐15
‐ ‐
2009 2010 2011 2012 2013 2014 2015F 2016F 2017F
2W sales (units) Astra 2W sales (units)
Positive: expect stable NIM. Multifinance companies indicated

Source: DBS Bank
that margins will largely stay stable as cost of funds trended
lower due to improved liquidity in the system. Historically,
Regulatory consolidation with banks. OJK has become stricter
multifinance companies always had the ability to pass on
in regulating the multifinance industry and is starting to
higher cost of funds to customers. Loan ticket sizes for
employ the same standards and metrics as the banks. As of
multifinance firms are generally relatively small and any
this year, OJK officially allowed multifinance companies to
increase in interest rates would only translate to a small
finance multipurpose loans, re-financing and also
nominal increase in payments. Lending rates will always be
infrastructure loans. OJK has also determined a minimum
variable in nature for multifinance companies. There may even
capital level of Rp100bn for multifinance companies and
be a slight upside to margins for some companies as lending
Rp50bn for cooperatives, and this capital requirement must be
yields for used 4W and 2W vehicles become more attractive in
fulfilled in the next 5 years. In addition to this, OJK will require
the current environment. Companies like BFIN will also
multifinance companies to fulfill an equity / asset ratio of 10%.
continue to focus on its direct financing business..
The classification of NPL ratios for multifinance companies will
also be the same as NPLs for the banks (past 90 days due). OJK
Indonesia Multifinance: NIM trends
will also require a maximum NPL ratio of 5%. In addition to
20.0% 18.0%
asset quality requirements, provisioning will also be regulated 16.5%
15.0%
exactly like the banks by using PSAK 50/55. OJK will also 13.7% 12.9%
15.0% 12.7% 12.1% 12.6%
14.0%
12.8%
impose a minimum financing to asset ratio of 40% and a 11.1% 10.7% 10.7%
10.0% 9.7% 9.7% 9.7%
maximum financing to equity ratio of 50%. OJK has not
publicly set a date of the enforcement of all these 5.0%
requirements but will likely start to implement some of these 0.0%

requirements towards the end of this year. 2009 2010 2011 2012 2013 2014 2015F 2016F
BFIN CFIN
Asset quality pressures. Our channel checks indicated that Source: Companies, DBS Bank
multifinance companies suffered asset quality pressures
throughout 2015. Although industry data only shows a Indonesia Multifinance: Market share
manageable NPF ratio of 1.54% as of July 2015, multifinance
2.0%
1.5%
companies indicated weakness in asset quality and also an 10.0%
increase in write-offs. We should also take into account the 2.2%
write off rates for the multifinance companies aside from the 11.0%
NPF ratios since there are no regulations on write-off policies 2.1%

yet and multifinance companies tend to write-off NPFs.
However, companies such as CFIN indicated an increase in NPF 71.2%
ratio and provisioning due to stricter regulations by OJK. The

majority of the asset quality weakness is still in the heavy BFIN CFIN ADMF Mandiri Tunas Finance FIF Group BCA Finance Others
equipment leasing and commodity related areas.

Page 7
Industry Focus
Valuation and recommendation normalised. Positively, its asset quality remains stable. PNBN
remains one of the most conservative banks in our coverage
In search for a catalyst. The Indonesian banks were on a nasty with M&A speculation holding up valuations. Multifinance
roller coaster ride in 2H15, falling as much as 25% in October companies are in for a challenging year ahead but these are
before recovering. YTD, the Indonesian banks have fallen by reflected in its current low valuations. We continue to prefer
15%. The recovery towards November was due to some relief BFIN over CFIN.
from the extremely negative expectations priced in pre-3Q15
results. That said, we see little reason to get excited as we BBCA is a top pick by default; upgrade to BUY with Rp15,500
move into 2016 and we continue to err on the side of TP. Our TP for BBCA is raised to Rp15,500 as we remove the
caution. News of infra projects approved may boost sentiment additional risk premium element in our valuations. BBCA’s
but a sustainable re-rating would only be visible once the financial metrics still stand out the best among peers. Its
projects are executed. Plus, asset quality may not have seen its strong deposit franchise and excellent asset quality indicators
worst. justifies a premium valuation. The bank has guided for a
bearish 2016, but we believe there will be room for upside
Trading close to -2SD of mean P/BV over the past 5 years. surprises. BBCA is our top pick by default.
Indonesian banks are trading at only 1.4x FY16F BV (simple
average), the lowest we have seen in the past 5 years. Even BDMN: Bottomed out valuations. Management’s impetus to
then, we think that it is difficult for the sector to see a strong rebuild the bank has been derailed by the overall macro
re-rating when ROEs are structurally on a declining trend and pressure. That said, progress is there but slow. While we had
the supernormal growth phase is now in the past. A near- initially expected deliveries as early as 2016, we believe a
term re-rating catalyst will be the successful roll out of the more realistic deadline would be 2017 to see a full impact. In
infra projects and asset quality improvement. the meantime, controlling costs is crucial to keep the
bottomline on track. However, at current 10-year low
Indonesian Banks: Rolling forward PBV band valuations, we believe market is disregarding any positives
PBV (X) coming out from the transition phase. We raise BDMN to a
2.9 BUY rating with and unchanged TP of Rp3,600 (0.9x FY16
2.7 BV). We believe the bank should start to re-rate once the
+2SD, 2.59
2.5 impact from the transformation plans start to bear fruit.
2.3 +1SD, 2.30
2.1
HOLD calls for other banks. All our other recommendations
Mean, 2.01 are HOLDs at this juncture. We believe there will be better
1.9
opportunities in 2H16 if the macro momentum improves.
1.7 -1SD, 1.72
1.5
-2SD, 1.43 BMRI: Riding a tidal wave before improving. BMRI is now
1.3
10 11 12 13 14 15
trading at its lowest PBV multiple over the past 5 years.
Plagued by asset quality issues in the past three quarters and
Source: Bloomberg Finance L.P., DBS Bank likely facing more headwinds in coming quarters, we believe
current valuations have pretty much priced in such concerns.
Bulls and bears in untested territory. BBCA and BMRI have There will be weaker loan growth across the board, in line
both guided for a bearish 1H16. BBRI painted a slightly with the extended slow economy. While the resolution of its
positive picture for 2016 but we believe downside risk lies on asset quality issues may re-rate the stock, the stock is likely to
lower KUR rates particularly in relation to the subsidy portion trade sideways in the meantime. A change in CEO should be
funded by the government. BBNI guided for positive traction, noted as Pak Budi’s contract nears its end in 2016. We have a
but we remain cautious on provisions and NPLs. BDMN is still HOLD rating on BMRI with a Rp9,400 TP (1.7x FY16 BV).
in the midst of restructuring and we believe results will only
start to surface from 2H16 with a full impact in 2017. Among BBRI: Micro loan growth still a main driver, risk lies in KUR.
the smaller banks, BBTN, the only bank with strong loan We expect loan growth to pick up for BBRI in 2016 but there
growth, is staying positive on its growth prospects but asset is downside risk to NIM as the 2016 KUR rates have yet to be
quality issues may continue to take a toll, limiting upside to finalised. If the subsidised KUR interest rate is raised to keep
valuations. While we like BTPN’s business model, growth has overall KUR lending yield at the same level as 2015, then NIM
Page 8
Industry Focus
should remain relatively stable. On a worst case scenario, NIM current sustained weakness in Indonesia’s macro outlook, it is
could fall by 40-50bps, which will push ROE lower by almost no surprise that PNBN will grow its loans at a much slower
2ppts closer to 18%. Our HOLD recommendation on BBRI is pace than the industry. We believe that its conservatism is at
premised on this risk which we believe the market has not the expense of growth, and hence our HOLD rating and
priced in. Our Rp10,200 TP is equivalent to 1.8x FY16 BV. Rp900TP. M&A euphoria could prove us wrong.
BBNI: Over-optimistic in our view. After a kitchen sinking BFIN: Watchful of growth and quality. BFIN’s unique
exercise in 2Q15, BBNI delivered a strong set of 3Q15 results. proposition remains one of its key attributes. But in a
Targets appear to be high and above industry averages. We challenging operating environment, even growth upside will
remain cautious on asset quality as its weak link still lies in the be limited. BFIN indicated that it is currently over-funded due
small commercial and medium loan segment and we noted to slow financing demand. BFIN remains tight on credit
that it has grown its medium segment loans quite rapidly control, focusing on early bucket collection. Our HOLD rating
YTD. Furthermore, the new management’s focus in the next with Rp2,900 TP is premised on a challenging outlook. But we
three years is on corporate loans and is targeting to raise this believe that a multifinance company such as BFIN can thrive
composition to 50% (9M15: 44%) through more when times are better as it serves the unbanked masses. BFIN,
infrastructure and SOE loans, which may mean lower lending being the one of the larger non-bank owned multifinance
yields over time. We remain cautious on BBNI and have a companies, is an attractive M&A target.
HOLD rating with a Rp5,000 TP (1.3x FY16 BV).
CFIN: Cautious on asset quality. While growth traction is
BBTN: Backed by government initiatives. The government’s largely intact albeit slower than the previous year, asset
housing programme would be the key impetus to BBTN’s quality will be under pressure this year because of the slow
growth in 2016. Among all the banks, BBTN is the most economy and sustained weak commodity prices. CFIN has a
bullish. While growth prospects are positive, we are still larger exposure to the commodities-related sectors. Cost-to-
concerned on its asset quality. The subsidised mortgage NPLs income ratio and gearing are better than peers, but asset
have improved and stabilised but what concerns us is the quality is a notch lower. This justifies our HOLD rating and
non-housing portfolio which is still accelerating and the non- Rp290 TP.
subsidised mortgages NPLs which are starting to increase. We
believe these would limit the share price movement hence our ADMF continues to struggle with growth; used car segment is
HOLD call and Rp1,080 TP. (0.8x FY16 BV). the silver lining. Adira’s new bookings have dropped by10%
as of 8M15 because of the weak economy. The only segment
BTPN: Moderating growth outlook. We still like the business still showing some growth is the used 4W. NPL ratio increased
model of BTPN. BTPN continues to thrive on growth in the 30bps y-o-y to 1.7% as of August and ADMF is confident that
micro and productive poor segment albeit at a slower rate as it can manage NPLs to below 2%. ADMF continues to focus
its portfolio becomes more seasoned. In this current on the used segment of its portfolio for growth. The
challenging operating environment, BTPN will exercise integration with Adira Quantum is also complete and ADMF
prudence and focus on asset quality over growth. The lower will look for other opportunities for re-financing such as
KUR rate could pose risks to BTPN’s micro loans business. Its multipurpose loans in the future. ADMF believes that next
saving grace is its Syariah business i.e. loans to the productive year, the multifinance industry will show a slight pickup but
poor. We have a HOLD rating with a Rp3,000 TP. BTPN’s growth will not be at historical double digit levels. We do not
share price is limited by its low liquidity. have a rating on ADMF, but it is an important subsidiary of
BDMN and part of its transformation plan.
PNBN: Conservatism caps growth. PNBN remains one of the
most conservative banks to date. Such cautiousness and
prudent credit policies are still followed today. Amid the
Page 9
Industry Focus
Indonesian Banks: Peer comparison

Banking Group Market Price Target Rating PE (x) CAGR PBV (x) ROE (%) Net div
cap Price (%)
(US$bn) (Rp/s) (Rp/s) FY14A FY15F FY16F ^ (%) FY14A FY15F FY16F FY15F FY15F
Bank Central Asia 23,757 13,300 15,500 BUY 19.9x 18.4x 17.0x 8.0 4.2x 3.6x 3.2x 21.2% 1.5%
Bank Danamon 2,062 2,970 3,600 BUY 10.9x 11.1x 8.9x 10.7 0.9x 0.8x 0.8x 7.6% 2.8%
Bank Mandiri 15,045 8,900 9,400 HOLD 10.5x 12.1x 9.6x 4.3 2.0x 1.9x 1.6x 16.0% 2.4%
Bank Negara Indonesia 6,735 4,985 5,000 HOLD 8.6x 11.0x 8.3x 2.2 1.6x 1.4x 1.3x 13.6% 3.5%
Bank Rakyat Indonesia 20,151 11,275 10,200 HOLD 11.5x 11.4x 11.0x 2.0 2.9x 2.3x 2.0x 22.4% 1.7%
Bank Tabungan Negara 981 1,280 1,080 HOLD 11.9x 8.6x 7.3x 27.6 1.1x 1.0x 0.9x 12.0% 2.5%
Bank Tabungan
1,090 2,575 3,000 HOLD 7.8x 7.6x 7.1x 4.7 1.2x 1.1x 0.9x 15.0% 0.0%
Pensiunan Nasional
Panin Bank 1,501 860 900 HOLD 8.8x 10.6x 9.7x -4.6 1.0x 0.9x 0.8x 8.9% 0.0%
Weighted average 13.7x 13.8x 12.3x 5.0 2.9x 2.5x 2.1x 18.9% 1.9%
Simple average 11.2x 11.4x 9.9x 6.9 1.9x 1.6x 1.4x 14.6% 1.8%
Weighted average (ex BBCA) 10.6x 11.4x 9.9x 3.5 2.2x 1.9x 1.6x 17.7% 2.2%
Simple average (ex BBCA) 10.0x 10.4x 8.8x 6.7 1.5x 1.3x 1.2x 13.7% 1.8%
^ Refers to 2-year EPS CAGR for FY14-16F
Source: Companies, Bloomberg Finance L.P., DBS Bank
Indonesian Multifinance Companies: Peer comparison

Banking Group Market Price Target Rating PE (x) CAGR PBV (x) ROE (%) Net div
cap Price (%)
(US$bn) (Rp/s) (Rp/s) FY14A FY15F FY16F ^ (%) FY14A FY15F FY16F FY15F FY15F
Adira Dinamika
680 3,545 NA NR 4.5x 8.2x 6.9x 14.4 0.9x 0.8x 0.7x 22.4% 17.5%
Multifinance
BFI Finance 281 2,475 2,900 HOLD 6.3x 6.6x 6.3x 0.8 1.0x 1.0x 0.9x 14.6% 6.4%
Clipan Finance 77 267 290 HOLD 2.5x 4.5x 3.6x 7.6 0.3x 0.3x 0.3x 12.3% 7.6%
Weighted average 4.8x 7.5x 6.5x 10.2 0.9x 0.8x 0.7x 19.6% 13.8%
Simple average 4.4x 6.5x 5.6x 7.6 0.7x 0.7x 0.6x 16.4% 10.5%
^ Refers to 2-year EPS CAGR for FY14-16F
Source: Companies, Bloomberg Finance L.P., DBS Bank
Page 10
Industry Focus
Company Guides
Page 11
Indonesia Company Guide
Bank Central Asia
Edition 1 Version 2 | Bloomberg: BBCA IJ | Reuters: BBCA.JK Refer to important disclosures at the end of this report
BUY Premium Valuation Justified

Last Traded Price: Rp13,300 (JCI : 4,545.86) Remains a transaction bank of choice, BUY. BBCA has the
Price Target : Rp15,500 (17% upside) (Prev Rp14,100) strongest CASA deposit franchise with CASA ratio consistently
above 75% in the past few years, and the lowest cost of funds
Potential Catalyst: Sustained earnings and balance sheet quality in the Indonesian banking universe. BBCA has created a
Where we differ: Below consensus earnings likely due to our lower transaction banking ecosystem and is constantly developing its
growth and more conservative cost of credit assumptions e-channels, creating a barrier to entry for competitors. Coupled
with digital initiatives to further strengthen its transaction
Analyst banking proposition, we believe this is the key reason for BBCA
LIM Sue Lin +65 6682 3711 suelinlim@dbs.com to be valued at a premium vs its peers. Upgrade to BUY with a
higher TP of Rp15,500.
Taking a bearish stance in 2016. While 4Q15 would likely be a
Price Relative relatively strong quarter, BBCA is guiding for extremely
Rp Relative Index conservative asset quality and loan growth conditions in 2016.
16,210.0 218 Asset quality has remained largely unscathed at this juncture,
14,210.0
198
but management is guiding cautiously for NPLs to spike up to
178
12,210.0 158
1.2-1.5% in 2016, and expecting industry NPLs to rise to as high
10,210.0
138 as 5%. Loan demand is projected to stay sluggish in the coming
8,210.0
118 few months in a still uncertain macro environment and as such,
98
BBCA is only guiding 7-8% loan growth in 2016. These
6,210.0 78
Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 assumptions are on the basis of a sustained slow
Bank Central Asia (LHS) Relative JCI INDEX (RHS) macroeconomic outlook for 2016.
Our assumptions are conservative but not overly bearish. We are
Forecasts and Valuation
FY Dec (Rp bn) 2014A 2015F 2016F 2017F keeping our FY15/16/17F loan growth forecast conservative at
Pre-prov. Profit 22,744 24,183 26,018 28,229 10/10/12%. NPL ratio would likely tick up in the next 6-9 months
Net Profit 16,512 17,782 19,263 21,224 because of the weak economy. While our provisions and NPL
Net Pft (Pre Ex.) 16,512 17,782 19,263 21,224 ratio forecasts are higher in FY16F (vs FY15F), we expect the
EPS (Rp) 669 721 781 860 situation to moderate in FY17F. We expect NIM to be flattish as
EPS Pre Ex. (Rp) 669 721 781 860 competitive loan yields will likely be offset by low cost of funds.
EPS Gth (%) 16 8 8 10
EPS Gth Pre Ex (%) 16 8 8 10
Valuation:
Diluted EPS (Rp) 669 721 781 860 We have a BUY recommendation for BBCA with a target price
PE Pre Ex. (X) 19.9 18.4 17.0 15.5 of Rp15,500 based on the Gordon Growth Model (22% ROE,
Net DPS (Rp) 125 201 216 234 11% growth and 14% cost of equity (lowered after removing
Div Yield (%) 0.9 1.5 1.6 1.8 50bps risk premium). BBCA is trading at a large premium to
ROAE Pre Ex. (%) 23.3 21.2 19.9 19.0 peers because of its solid balance sheet and liquidity position. Its
ROAE (%) 23.3 21.2 19.9 19.0 bearish stance going into 2016 could act to its advantage. Low-
ROA (%) 3.1 3.1 3.0 3.0 balling its potential in an uncertain environment could spring an
BV Per Share (Rp) 3,149 3,652 4,216 4,842
upside surprise to its deliveries.
P/Book Value (x) 4.2 3.6 3.2 2.7
Earnings Rev (%): (2) (1) (3)
Key Risks to Our View:
Consensus EPS (Rp): 729 813 918 Asset quality upset. A further downturn due to soft commodity
Other Broker Recs: B: 14 S: 7 H: 18
prices could pressure debtors and lift NPLs, although this is
unlikely to happen. The extended weak economic conditions
Source of all data: Company, DBS Bank, Bloomberg Finance L.P
would also pressure BBCA’s 2W portfolio.
At A Glance
Issued Capital (m shrs) 24,655
Mkt. Cap (Rpbn/US$m) 327,912 / 23,765
Major Shareholders
Farindo Invest Ltd (%) 51.2
Free Float (%) 48.8
3m Avg. Daily Val (US$m) 13.2
ICB Industry : Financials / Banks
ASIAN INSIGHTS VICKERS SECURITIES

ed: JS / sa: MA
Company Guide
Bank Central Asia
Margin Trends
Rp bn
CRITICAL DATA POINTS TO WATCH
40,000,000 8.0%
35,000,000
7.8%
Earnings Drivers: 30,000,000
7.6%
Sluggish loan growth expected in 2016. Management is 25,000,000
7.4%
20,000,000
guiding for extremely conservative asset quality and loan 15,000,000
7.2%
growth conditions in 2016. While asset quality has remained 10,000,000 7.0%
5,000,000 6.8%
largely unscathed at this juncture, management is guiding 0 6.6%
cautiously for an NPL spike up to 1.2-1.5% next year, and 2013A 2014A 2015F 2016F 2017F
expecting industry NPLs to rise to as high as 5%. Net Interest Income Net Interest Income Margin
Management expects loan demand to stay sluggish in a still

uncertain macro environment and is hence guiding only for 7- Gross Loan& Growth
8% loan growth in 2016. These assumptions are on the basis Rp bn
30%
of a sustained slow macroeconomic outlook for 2016. 450,000
400,000 25%
350,000
20%
NIM will likely be flat. BBCA has repriced its time deposit rates 300,000
250,000 15%
down this year, as easing liquidity in the industry has reduced 200,000
10%
cost of funds. However, lending rates in the retail and 150,000
100,000
5%
consumer segments will also be reduced, leaving NIM flat. 50,000
0 0%
BBCA guided for a possibility of raising time deposit rates 2013A 2014A 2015F 2016F 2017F
should the need arise.
Gross Loan (LHS) Gross Loan Growth (%) (YoY) (RHS)
Consistently strong fee-based income growth; opex intact. Customer Deposit & Growth
Rp bn
BBCA has been registering strong growth of fee based 600,000 20%
18%
income, leveraging its established transaction banking 500,000 16%
franchise. BBCA’s e-channel shows a strong growth trend 400,000
14%
12%
and the bank is seeing a shift from in-branch transactions to 300,000 10%
8%
using e-channels. BBCA offers the pre-paid Flazz Card which 200,000 6%
can be used to pay for tickets on buses and trains, parking 100,000
4%
2%
payments, highways, food and beverage outlets, and are 0 0%
2013A 2014A 2015F 2016F 2017F
acceptable by many other merchants. At the end of 2014,
Customer Deposits (LHS)
there were 6.5m Flazz Cards (+30% y-o-y) in circulation, and Customer Deposits Growth (%) (YoY) (RHS)
some are combined with a BCA credit card. BBCA also
launched its sakuku e-wallet for digital banking to compete Loan-to-Deposit Ratio Trend
with Mandiri e-money. Separately, operating expenses are 676,011 86%
under control. 626,011 84%
82%
576,011
80%
Provision expense to pickup. BBCA is likely to book more 526,011
78%
provisions towards the end of the year in anticipation of 476,011
76%
higher NPLs. BBCA’s current coverage level is extremely high 426,011
74%
at 293% but is expected to go down. We expect provisions 376,011 72%
to increase along with slight pressures in NPLs. OJK’s new 326,011 70%
276,011 68%
regulation to allow early restructuring of loans and the 2013A 2014A 2015F 2016F 2017F
proactive booking of provisions will also allow BBCA to Loans Deposit Loan-to-Deposit Ratio (RHS)
increase provisioning.
Cost & Income Structure
Testing waters with branchless banking. BBCA is one of four 60,000 0.5
0.49
pioneer banks to launch a branchless banking service this 50,000 0.48
year. BBCA uses a full OTC business model, where customers 40,000 0.47
0.46
would bring a card to a nearby agent to conduct transactions. 30,000 0.45
BBCA indicated that branchless banking is not a core business 20,000
0.44
0.43
focus and it does not expect significant near term 0.42
10,000
contribution to CASA and revenues. BBCA is targeting to 0.41
0 0.4
have 3,000 agents this year. 2013A 2014A 2015F 2016F 2017F
Net Interest Income Non-interest Income Cost-to-income Ratio
Source: Company, DBS Bank

Page 13
Company Guide
Bank Central Asia
Asset Quality
Balance Sheet: 2.0%
Ample buffer for liquidity. BBCA has ample liquidity and 1.8%
1.6%
loan-to-deposit ratio has been below 80%. BBCA has a 1.4%
strong funding franchise and more than 75% of its deposits 1.2%
1.0%
are made up of CASA. CASA growth had been slow at 0.8%
9.5% last year due to a slow economy, as CASA growth is 0.6%
strongly correlated with GDP growth. Historically, CASA 0.4%

0.2%
growth has been in the mid-teens. Looking ahead, CASA 0.0%
growth will improve along with the economy. The bank also 2013A 2014A 2015F 2016F 2017F
has a prudent policy for loans growth. Liquidity has never NPL Ratio Provision Charge-Off Rate
been an issue for BBCA.

Capitalisation (%)
Lowest NPL ratio; well capitalised. BBCA has the lowest NPL 20.0%
ratio in our Indonesian banking universe. The bank has 19.0%
always focused on asset quality rather than liquidity and 18.0%
growth, and maintained a conservative loan loss coverage 17.0%

ratio of c.300%. BBCA is also a well capitalised bank with
16.0%
core Tier-1 capital ratio making up the majority of capital.
15.0%
Share Price Drivers: 14.0%

2013A 2014A 2015F 2016F 2017F
Upside limited by macro uncertainty and management’s Tier-1 CAR Total CAR
extremely cautious stance. BBCA has proven to be resilient ROE (%)
throughout the various economic cycles, and deserves
premium valuation for its excellent asset quality and deposit 20.0%
franchise. BBCA has consistently delivered top line and
bottom line growth and is not showing signs of NIM 15.0%
pressure. However, near term upside may be capped due to

the overall uncertain environment and BBCA’s extremely 10.0%
cautious stance. 5.0%
Key Risks: 0.0%

2013A 2014A 2015F 2016F 2017F
Losing its trademark as a transaction bank. BBCA has been
garnering significant amounts of low cost deposits over the
years because of its transaction banking franchise. If it loses Forward PE Band (x)
(x)
this edge, funding costs will escalate and NIM would be
21.9
under pressure.
19.9
+2sd: 19.6x
Significant deterioration in asset quality. While 17.9 +1sd: 18x
management is taking a cautious stance where NPL ratios
Avg: 16.5x
could spike up to 1.2-1.5% in 2016, an extreme negative 15.9
‐1sd: 14.9x
spike beyond guidance could be negative and its loan loss 13.9
‐2sd: 13.4x
coverage would likely drop below 200%.
11.9
Nov-11 Nov-12 Nov-13 Nov-14
COMPANY BACKGROUND
Bank Central Asia (BBCA) is Indonesia's premium PB Band (x)
transactional bank given its legacy with the Salim group pre- (x)
Asian crisis. BBCA has successfully leveraged on this strength
5.4
to deliver sustainable earnings growth.
4.9 +2sd: 4.84x
4.4
+1sd: 4.5x
Avg: 4.16x
3.9
‐1sd: 3.82x
3.4 ‐2sd: 3.47x
2.9

Page 14
Company Guide
Bank Central Asia
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F Loan growth to be driven
by consumer and
Gross Loans Growth 21.6 11.7 10.0 10.0 12.0 corporate segments
Customer Deposits Growth 10.6 9.5 9.5 11.2 12.7
Yld. On Earnings Assets 9.0 10.1 9.7 9.6 9.6
Avg Cost Of Funds 2.0 2.7 2.3 2.3 2.2
Income Statement (Rp bn)

FY Dec 2013A 2014A 2015F 2016F 2017F
Net Interest Income 26,425 32,027 35,643 39,102 43,554

Non-Interest Income 7,301 9,024 9,321 10,914 12,306
Operating Income 33,726 41,051 44,965 50,017 55,859
Operating Expenses (14,631) (18,306) (20,782) (23,999) (27,631)
Pre-provision Profit 19,094 22,744 24,183 26,018 28,229
Provisions (2,016) (2,240) (2,109) (2,109) (1,889)
Associates 0 0 0 0 0
Exceptionals 0 0 0 0 0
Pre-tax Profit 17,816 20,741 22,336 24,197 26,661
Taxation (3,559) (4,229) (4,555) (4,934) (5,437)
Minority Interests 0 0 0 0 0
Preference Dividend 0 0 0 0 0
Net Profit 14,256 16,512 17,782 19,263 21,224
Net Profit bef Except 14,256 16,512 17,782 19,263 21,224
Growth (%)
Net Interest Income Gth 24.4 21.2 11.3 9.7 11.4
Net Profit Gth 21.7 15.8 7.7 8.3 10.2
NIM to remain in the mid 7%
Margins, Costs & Efficiency (%) level with a reduction in cost
Spread 7.0 7.4 7.4 7.4 7.4 of funds and lending rates
Net Interest Margin 6.9 7.4 7.4 7.4 7.4
Cost-to-Income Ratio 43.4 44.6 46.2 48.0 49.5
Business Mix (%)
Net Int. Inc / Opg Inc. 78.4 78.0 79.3 78.2 78.0
Non-Int. Inc / Opg inc. 21.6 22.0 20.7 21.8 22.0
Fee Inc / Opg Income 18.7 17.7 18.5 19.6 19.8
Oth Non-Int Inc/Opg Inc 2.9 4.2 2.2 2.2 2.2
Profitability (%)
ROAE Pre Ex. 24.6 23.3 21.2 19.9 19.0
ROAE 24.6 23.3 21.2 19.9 19.0
ROA Pre Ex. 3.0 3.1 3.1 3.0 3.0
ROA 3.0 3.1 3.1 3.0 3.0

Page 15
Company Guide
Bank Central Asia
Quarterly / Interim Income Statement (Rp bn)

FY Dec 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015

Pre-Provision Profit 6,246 8,897 5,219 6,154 7,002
Provisions (721) (3,694) (94) (480) (963)
Pretax Profit 5,473 5,350 5,125 5,674 6,039
Taxation (1,122) (1,051) (1,060) (1,186) (1,209)
Minority Interests (7) (9) (6) (5) (3)
Net Profit 4,344 4,290 4,058 4,483 4,828
Growth (%)
Net Profit Gth 3.7 (1.3) (5.4) 10.5 7.7
Balance Sheet (Rp bn)

FY Dec 2013A 2014A 2015F 2016F 2017F
Cash/Bank Balance 63,484 71,305 77,007 93,279 108,925

Government Securities 75,922 55,235 61,940 69,769 78,936
Inter Bank Assets 3,770 3,264 3,427 3,598 3,778
Total Net Loans & Advs. 306,679 341,971 376,025 412,915 463,211
Investment 14,754 44,772 49,727 55,178 61,174
Fixed Assets 7,440 8,845 8,319 7,776 7,216
Goodwill 0 0 0 0 0
Other Assets 24,254 27,032 30,411 34,209 38,840
Total Assets 496,305 552,424 606,856 676,724 762,081
Customer Deposits 409,486 448,203 490,591 545,719 615,284

Inter Bank Deposits 3,301 3,754 3,528 3,641 3,584
CASA growth will be muted
Debts/Borrowings 3,634 5,585 5,989 6,426 6,960 in a slow economy
Others 15,917 16,962 16,439 16,701 16,570
Minorities 101 238 238 238 238
Shareholders' Funds 63,866 77,683 90,071 104,000 119,445
Total Liab& S/H’s Funds 496,305 552,424 606,856 676,724 762,081

Page 16
Company Guide
Bank Central Asia
Financial Stability Measures (%)

FY Dec 2013A 2014A 2015F 2016F 2017F
Ample liquidity
Balance Sheet Structure
Loan-to-Deposit Ratio 76.3 77.8 78.2 77.3 76.8
Net Loans / Total Assets 61.8 61.9 62.0 61.0 60.8
Investment / Total Assets 3.0 8.1 8.2 8.2 8.0
Cust . Dep./Int. Bear. Liab. 99.1 98.8 98.8 98.8 98.9
Interbank Dep / Int. Bear. 0.8 0.8 0.7 0.7 0.6
Asset Quality
NPL / Total Gross Loans 0.4 0.6 0.8 1.0 0.7
NPL / Total Assets 0.3 0.4 0.5 0.6 0.4
Loan Loss Reserve Coverage 408.8 324.2 243.2 210.2 275.7 Asset quality will remain
Provision Charge-Off Rate 0.6 0.6 0.6 0.5 0.4 comparatively strong; it is the main
Capital Strength priority for the bank this year
Total CAR 16.0 17.2 18.5 18.8 19.1
Tier-1 CAR 15.0 16.2 17.3 17.6 17.9
Target Price & Ratings History

15735 Rp
Closing T arget
S.No. Dat e Rat ing
14735 Pric e Pric e
1 09 J an 15 12925.00 12500.00 HOLD
3 2 06 Mar 15 14600 12500 HOLD
4
13735 5 3 09 Mar 15 14375 14100 HOLD
11
10 4 17 Mar 15 14100 14100 HOLD
6 78 9
5 30 Apr 15 13475 14100 HOLD
12735
2 6 25 J un 15 13475 14100 HOLD
7 02 J ul 15 13600 14000 HOLD
12 13
11735 8 15 J ul 15 13500 14000 HOLD
9 06 Aug 15 13800 14000 HOLD
10 10 Aug 15 13850 14000 HOLD
10735
11 03 Sep 15 12300 14300 BUY
Nov-14 Mar-15 Jul-15 Nov-15
12 30 Sep 15 12275 14300 BUY
13 29 Oct 15 13150 14100 HOLD

Page 17
Bank Danamon
Edition 1 Version 2 | Bloomberg: BDMN IJ | Reuters: BDMN.JK Refer to important disclosures at the end of this report
BUY In Transition
Last Traded Price: Rp2,970 (JCI : 4,545.86) Valuations have bottomed, BUY. BDMN is currently only trading
Price Target : Rp3,600 (21% upside) at 0.8x FY16 BV at 10-year lows. Market appears to be
disregarding any potential upside to the transition phase the
Potential Catalyst: Transformation plans materialise under new CEO
bank is going through. Admittedly, BDMN’s turnaround strategy
has yet to unfold. A lot needs to be fixed in the bank. Initiatives
Where we differ: We are among the few brokers bullish on Danamon’s
to drive growth in the SME segment will be for the long haul
turnaround story; expect turnaround to be visible by FY17F
and there is a need to build a sustainable SME business model
with the aim to garner CASA and fees from cash management
Analyst
LIM Sue Lin +65 6682 3711 suelinlim@dbs.com and transaction banking. Micro business has become
increasingly competitive and there is a need to re-engineer the
DSP business model. Even Adira’s business (both auto and
insurance) needs to be relooked. We believe that the impact of
Price Relative restructuring should be fully reflected from 2017. Meantime,
Rp Relative Index controlling costs is crucial to keep the bottomline in the black.
6,925.5
6,425.5
207 New CEO at the helm; slow but steady progress. BDMN’s CEO,
5,925.5
187
167
Mr. Sng Seow Wah, who joined the bank at end Feb 2015, will
5,425.5
4,925.5
147 spearhead the bank’s transformation. He has a strong track
4,425.5 127
107
record in turning around banks with exposure to SME and
consumer segments. In his last posting, he successfully
3,925.5
3,425.5 87
2,925.5
2,425.5
67
47
improved the business and profitability of a Malaysian bank,
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 thus increasing its valuation. We believe BDMN should see
Bank Danamon (LHS) Relative JCI INDEX (RHS) similar success under his leadership but we are aware of the
differences between Malaysian and Indonesian bank operations.
Weak phase before picking up steam. We assume a
FY Dec (Rp bn) 2014A 2015F 2016F 2017F
conservative FY15F/16F/17F loan growth of 0%/4%/10% as
Pre-prov. Profit 8,049 8,412 9,343 10,954
Net Profit 2,604 2,550 3,190 4,191
management indicated that its focus will primarily be on
Net Pft (Pre Ex.) 2,604 2,550 3,190 4,191 efficiency and asset quality this year. Our NPL ratio is forecasted
EPS (Rp) 273 267 334 439 at to 3.2% this year which is expected to come with higher
EPS Pre Ex. (Rp) 273 267 334 439 provisions. Finally, we imputed a weaker performance from
EPS Gth (%) (36) (2) 25 31 Adira in our estimates. All in, we are expecting a mild earnings
EPS Gth Pre Ex (%) (36) (2) 25 31 contraction in FY15F before seeing a recovery in FY16F.
Diluted EPS (Rp) 273 267 334 439
Valuation:
PE Pre Ex. (X) 10.9 11.1 8.9 6.8
Net DPS (Rp) 127 82 80 100 We rate BDMN a BUY with a target price of Rp3,600. Our
Div Yield (%) 4.3 2.8 2.7 3.4 valuation is based on the Gordon Growth Model and implies
ROAE Pre Ex. (%) 8.1 7.6 8.9 10.8 0.8x FY16F BV. Valuations have bottomed out our view and is
ROAE (%) 8.1 7.6 8.9 10.8 disregarding any positive impact from the current transition
ROA (%) 1.4 1.3 1.5 1.8 phase. 2015 and 2016 are transition periods and impact from
BV Per Share (Rp) 3,435 3,630 3,884 4,223 the transformation program should be fully reflected in 2017.
P/Book Value (x) 0.9 0.8 0.8 0.7
Earnings Rev (%): 0 0 0 Ineffective transformation. Slower-than-expected changes to
Consensus EPS (Rp): 276 348 462 business processes could derail the turnaround story. Failure to
Other Broker Recs: B: 4 S: 10 H: 13 improve the deposit franchise could pressure NIM.
At A Glance
Mkt. Cap (Rpbn/US$m) 28,466 / 2,062
Major Shareholders
Asia Finance (%) 68.9
Morgan Stanly Sec (%) 5.0
Free Float (%) 26.1

ed: JS / sa: MA
Company Guide
Bank Danamon
Margin Trends
Rp bn
14,000,000 9.7%
12,000,000
9.2%
Improved efficiency by integrating ADMF and Adira 8,000,000 8.7%
Quantum. Adira Quantum and ADMF have been integrated 6,000,000 8.2%
to improve efficiency, optimise cross-selling synergies and 4,000,000
7.7%
2,000,000
leverage on ADMF’s existing network and clients. ADMF will
0 7.2%
also shift towards an agency model to mitigate high dealer 2013A 2014A 2015F 2016F 2017F
commissions as agents’ commissions are generally lower than Net Interest Income Net Interest Income Margin
dealer’s.
Re-engineering its micro business. BDMN’s micro business, Gross Loan& Growth
Rp bn
popularly known as the Dana Simpan Pinjam (DSP) has been 6,000
0%
-10%
contracting in the past few quarters/years. Nothing much has 5,000 -20%
been done to revive the business. Under the new 4,000
-30%
-40%
management, we understand that the entire DSP business 3,000 -50%
will be reengineered. Plans are still underway. 2,000
-60%
-70%
-80%
1,000
-90%
Build up SME loan and deposits. SME loans will grow through 0 -100%
competitive pricing and taking market share from smaller 2013A 2014A 2015F 2016F 2017F
banks which have higher cost of funds. SME will be a source Fees & Commissions
Fees & Commissions Growth (%) (YoY) (RHS)
of growth this year, while DSP and ADMF are still in
Customer Deposit & Growth
consolidation phase. BDMN will also focus on SMEs for CASA Rp bn
growth and is currently piloting the cross-selling of CASA 140,000

30%
products on ADMF’s network. Cross-selling initiatives would 120,000

25%
likely take a longer time to see traction. We believe this could 100,000 20%
take another 12-18 months before any deliveries are visible 80,000 15%
60,000
because of regulatory hurdles in customer data sharing. 10%
40,000
20,000 5%
NIM expected to be flat. NIM is expected to be flat this year 0 0%

despite the recent reduction in cost of funds. Management is 2013A 2014A 2015F 2016F 2017F
still cautious of the industry’s liquidity outlook and believes Customer Deposits (LHS)
Customer Deposits Growth (%) (YoY) (RHS)
that cost of funds will remain competitive going forward.
Lending rates should also ease due to the shift in asset mix to
Loan-to-Deposit Ratio Trend
larger ticket size loans. But positively, larger loans may be less
107%
risky and more efficient in terms of operational cost. 163,121
102%
153,121
Fee based income boosted by cross-selling. Fee based income 143,121 97%
suffered a setback in FY14 and 1H15 due to OJK’s 133,121 92%

requirement to amortise insurance revenue for the tenure of 123,121
87%
the insurance. Fee income will resume its growth in 2H15, 113,121
driven by synergies from cross-selling general insurance and 103,121
82%
bancassurance products between BDMN and ADMF. 93,121 77%

2013A 2014A 2015F 2016F 2017F
Loans Deposit Loan-to-Deposit Ratio (RHS)
Expect cost-to-income to improve. Productivity and efficiency
initiatives will reduce operating expenses in the future.
Automation of back office functions and the trimming under- Cost & Income Structure
25,000 0.57
utilised personnel will improve cost-to-income going forward. 0.56
20,000 0.55
Higher provisions due to NPL issues. Along with the soft 15,000
0.54
0.53
macroeconomic environment and high NPL in its mass market
0.52
portfolio, BDMN is conservatively maintaining high levels of 10,000
0.51
provisions throughout the year. We believe there could be 5,000 0.5
chance that additional provisions will be set aside this year to 0.49
0 0.48
clean up its books to prepare for growth going forward. 2013A 2014A 2015F 2016F 2017F

Page 19
Company Guide
Bank Danamon
Asset Quality
Balance Sheet: 5.0%
Liquidity still a challenge; enhancing funding franchise is key. 4.5%
Management indicated that liquidity will remain tight in the 4.0%
near future, but would remain manageable at bank level with 3.5%
3.0%
LDR expected to stay at 90-92%. Management will continue
2.5%
to grow its CASA funding franchise through SME customers. 2.0%
ADMF is now less dependent on BDMN’s joint financing 1.5%
scheme and will utilise other funding sources such as bank 1.0%
borrowings, bonds and MTN. 2013A 2014A 2015F 2016F 2017F
NPL Ratio Provision Charge-Off Rate
Focus on improving asset quality. BDMN has struggled with

coal mining and related loans. Mass market loans are also Capitalisation (%)
pressuring NPLs. SME loans are better managed and NPLs are 18.0%
below industry levels. BDMN will focus on improving NPLs

17.5%
with stricter approval of loans and change in business
process. Asset quality may still be under pressure this year 17.0%
due to the slower loan growth and tough macroeconomic
conditions. 16.5%

2013A 2014A 2015F 2016F 2017F
New CEO a hidden catalyst. The new CEO, Mr Sng Seow Tier-1 CAR Total CAR
Wah has a strong track record in turning around banks with ROE (%)
exposure to SME and consumer segments. He had
successfully improved the business and profitability of a 12.0%
Malaysian bank, thus increasing its valuation. He also initiated 10.0%
a high dividend payout ratio policy to share the bank’s 8.0%
success with shareholders. We believe BDMN should see 6.0%

similar success under his leadership but we would give a
4.0%
discount to the parameters after taking into account the
different operating environment in Indonesia. 2.0%
0.0%
2013A 2014A 2015F 2016F 2017F
Key Risks:
Ineffective transformation deliveries. This would be mainly
slower-than-expected changes in business processes and the Forward PE Band (x)
(x)
new business model being ineffective. But these changes
19.4
will take time and resources to implement. Failure of the +2sd: 18.5x
17.4
transformation program will not only impact operations and +1sd: 16.3x
profitability, but the opportunity cost would magnify the 15.4
Avg: 14.2x
impact. The other key risks for BDMN are failure to maintain 13.4
liquidity and weaker-than-expected deposit growth since its 11.4

‐1sd: 12x
loan-to-deposit ratio has always been high. ‐2sd: 9.9x

9.4
7.4
COMPANY BACKGROUND Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
Bank Danamon (BDMN) is the fifth biggest bank in Indonesia

by assets. The bank focuses on mass market loans with its PB Band (x)
Danamon Simpan Pinjam. BDMN is aided by its 95% owned (x)
2.6
multifinance arm Adira Finance for auto loans. 2.4
+2sd: 2.31x
2.2
2.0
+1sd: 1.91x
1.8
1.6
Avg: 1.51x
1.4
1.2
‐1sd: 1.11x
1.0
0.8
‐2sd: 0.71x
0.6
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15

Page 20
Company Guide
Bank Danamon
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F
Gross Loans Growth 13.7 3.6 3.0 6.0 10.0

Avg Cost Of Funds 4.6 5.9 5.3 5.2 5.1

FY Dec 2013A 2014A 2015F 2016F 2017F

Pre-provision Profit 8,953 8,049 8,412 9,343 10,954 Provisions to remain high
due to conservative
Provisions (3,348) (3,986) (4,509) (4,443) (4,517) credit cost assumptions
Pre-tax Profit 5,530 3,554 3,413 4,286 5,630
Taxation (1,371) (871) (836) (1,050) (1,380)
Net Profit 4,042 2,604 2,550 3,190 4,191
Growth (%)
Net Interest Income Gth 4.7 1.1 (4.9) 6.1 10.4
Net Profit Gth 0.7 (35.6) (2.1) 25.1 31.4
Margins, Costs & Efficiency (%)
Spread 8.8 8.1 7.4 7.6 7.8
Business Mix (%)
ROAE to gradually
Fee Inc / Opg Income 26.1 23.9 25.3 26.9 27.9 improve as
Oth Non-Int Inc/Opg Inc 3.4 1.9 4.0 4.0 4.1 transformation process
Profitability (%) pans out
ROAE Pre Ex. 13.5 8.1 7.6 8.9 10.8
ROAE 13.5 8.1 7.6 8.9 10.8
ROA Pre Ex. 2.4 1.4 1.3 1.5 1.8
ROA 2.4 1.4 1.3 1.5 1.8

Page 21
Company Guide
Bank Danamon

FY Dec 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015

Non-Interest Income 1,014 1,098 1,367 1,742 482
Provisions (1,055) (1,010) (1,132) (1,107) (1,322)
NIM compression arising from
Associates 0 0 0 0 0 a change in asset mix coupled
Exceptionals 0 0 0 0 0 with slow growth dampened
Pretax Profit 841 675 927 785 881 topline
Taxation (207) (161) (227) (203) (216)
Net Profit 617 498 687 565 644
Growth (%)
Net Interest Income Gth 2.5 1.4 (12.8) 16.7 (1.0)
Net Profit Gth 0.6 (19.2) 37.8 (17.7) 13.8

FY Dec 2013A 2014A 2015F 2016F 2017F

Investment 7,739 8,888 10,024 11,274 12,648 Loans to grow driven by
Associates 0 0 0 0 0 SME segments and
Fixed Assets 2,199 2,490 2,520 2,462 2,316 higher ticket mass
market loans
Goodwill 1,378 1,367 1,367 1,367 1,367
Other Assets 38,914 41,386 37,462 36,424 37,562
Total Assets 184,237 195,709 204,295 223,202 247,269

Debts/Borrowings 28,190 26,390 29,754 32,729 36,002
Others 13,638 17,380 15,258 16,242 15,750
Minorities 302 238 264 310 369

Page 22
Company Guide
Bank Danamon

FY Dec 2013A 2014A 2015F 2016F 2017F

Asset Quality Assumed deposit
NPL / Total Gross Loans 1.9 2.2 3.1 2.8 2.5 growth will pick up
NPL / Total Assets 1.1 1.2 1.7 1.5 1.3 with SME business
Loan Loss Reserve Coverage 116.6 117.3 106.5 109.0 110.3
Provision Charge-Off Rate 3.2 3.6 4.0 3.7 3.4
Capital Strength
Total CAR 17.9 17.9 17.6 17.7 17.6
Tier-1 CAR 17.3 17.3 16.9 17.0 16.9
Rp
Closing T arget
5060 2 S.No. Dat e Rat ing
Pric e Price
1 1: 18 Mar 15 4615 5600 BUY
2: 17 Apr 15 4880 5600 BUY
4560
4 3: 25 J un 15 4310 5200 BUY
6 4: 01 J ul 15 4225 5200 BUY
4060 3 7 5: 15 J ul 15 4165 5200 BUY
5 8 6: 28 J ul 15 4085 4800 BUY
7: 06 Aug 15 4330 4800 BUY
3560 8: 13 Aug 15 3700 4800 BUY
9: 03 Sep 15 3450 3600 HOLD
9
3060 10 10: 30 Sep 15 2895 3600 HOLD
11 11: 27 Oct 15 3210 3600 HOLD
2560
Dec-14 Apr-15 Aug-15 Dec-15
Not e : Share price and Target price are adjusted for corporate actions.

Page 23
Bank Mandiri
Edition 1 Version 2 | Bloomberg: BMRI IJ | Reuters: BMRI.JK Refer to important disclosures at the end of this report
HOLD Under Pressure

Last Traded Price: Rp8,900 (JCI : 4,545.86) Weaker growth prospects and deteriorating asset quality. We
Price Target : Rp9,400 (6% upside) have assumed a lower loan growth assumption to 10% for each
year and higher NPL ratio of 3.1%/2.9% as well as provision
Potential Catalyst: Visible traction from infrastructure loans, resolution
charge-off ratios of 2.0%/1.3%. There will be weaker loan
of Syariah operations
growth across the board, in line with the extended slow
Where we differ: Lower than consensus on slower growth and higher
economy. The pickup in mortgages at the beginning of the year
credit cost assumptions
was short-lived, and growth in the infrastructure segment
Analyst remains muted.
LIM Sue Lin +65 6682 3711 suelinlim@dbs.com
Asset quality is a priority this year. At the bank level, BMRI sees
an increase in NPLs especially in the commodities-related
Price Relative segments, and several SOEs. At the subsidiary level, Bank Syariah
Rp Relative Index
13,445.0 219
Mandiri (BSM) is seeing a pickup in NPLs in the corporate loan
12,445.0 199 portfolio, mainly from the oil servicing industry. BMRI continues
11,445.0
10,445.0
179
to employ aggressive restructuring and provisioning policies to
159
9,445.0
139 address its NPL woes.
8,445.0
119
7,445.0
6,445.0 99 Bearish outlook. Management is targeting 10% loan growth in
each of FY15F and FY16F on expectations the economy will not
5,445.0 79
Oct-11 Oct-12 Oct-13 Oct-14 Oct-15
Bank Mandiri (LHS) Relative JCI INDEX (RHS) recover next year. BMRI projects GDP growth will remain at 4.8%
level next year and the rupiah will continue to deteriorate to
FY Dec (Rp bn) 2014A 2015F 2016F 2017F Rp16,000 (moderate case), and possibly Rp18,000 (bear case).
Pre-prov. Profit 31,507 33,901 36,278 40,853 NPL ratio is expected to come in at c.3% this year (high end of
Net Profit 19,872 17,162 21,605 25,919 guidance) and cost of credit at c.2%. NPL ratio may still be
Net Pft (Pre Ex.) 19,872 17,162 21,605 25,919 pressured next year
EPS (Rp) 852 736 926 1,111
EPS Pre Ex. (Rp) 852 736 926 1,111
Valuation:
EPS Gth (%) 9 (14) 26 20
EPS Gth Pre Ex (%) 9 (14) 26 20 We downgrade BMRI to HOLD with a Rp9,400 TP, implying 1.7x
Diluted EPS (Rp) 852 736 926 1,111 FY16F BV. Our TP is derived from the Gordon Growth Model.
PE Pre Ex. (X) 10.5 12.1 9.6 8.0
Dragged by BSM, asset quality remains the main concern for the
Net DPS (Rp) 273 213 184 231
Div Yield (%) 3.1 2.4 2.1 2.6 bank; we see further downside risk. The public infrastructure
ROAE Pre Ex. (%) 20.9 16.0 18.0 18.7 projects will have a positive impact over the longer term.
ROAE (%) 20.9 16.0 18.0 18.7
ROA (%) 2.6 2.0 2.3 2.5
BV Per Share (Rp) 4,400 4,769 5,511 6,391 Key Risks to Our View:
P/Book Value (x) 2.0 1.9 1.6 1.4 Further reduction in growth and asset quality. Slower than
Earnings Rev (%): 0 0 0 expected impact from infrastructure projects and an extended
Consensus EPS (Rp): 844 939 1,111
weak economy remain the key risks to growth and asset quality.
Source of all data: Company, DBS Bank, Bloomberg Finance L.P.
At A Glance
Mkt. Cap (Rpbn/US$m) 207,667 / 15,050
Major Shareholders
Govt. of Indonesia (%) 60.0
Free Float (%) 40.0

ed: SGC / sa: MA
Company Guide
Bank Mandiri
Margin Trends
Rp bn
50,000,000 6.8%
40,000,000 6.6%
Earnings Drivers:
6.4%
Focus on higher-yielding retail loans. BMRI has been mostly a 30,000,000
6.2%
corporate bank. But now, they are focusing on retail loans 20,000,000
6.0%
which are yielding 200-250bps more than their corporate 10,000,000 5.8%
book. Retail loans are defined as micro, SME and consumer 0 5.6%
loans. BMRI’s long-term goal is to increase retail loan mix to 2013A 2014A 2015F 2016F 2017F
45% of total loans by 2020. This shift in asset mix should lift Net Interest Income Net Interest Income Margin
NIM.
Gross Loan& Growth
Improvements at Syariah Unit. Bank Syariah Mandiri (BSM) Rp bn
30%
has been struggling with asset quality issues and has not kept 700,000
600,000 25%
the same standard of risk management as BMRI. Since then,
500,000 20%
BMRI has changed senior management of the unit and 400,000
15%
tightened risk management standards in BSM. The 300,000
10%
improvement in BSM’s asset quality will reduce provisioning 200,000
5%
expense at BMRI and boost earnings. 100,000
0 0%
2013A 2014A 2015F 2016F 2017F
Subdued loan growth in a tough environment. The
management has revised down the loan growth target to
10% for this year because of sustained weakness in the Customer Deposit & Growth
Rp bn
Indonesian economy. Loan growth will be driven by the micro 900,000 20%
800,000 19%
segment and realisation of government infrastructure 700,000 18%
projects. The management believes loan growth will remain 600,000 17%
16%
500,000
weak until next year. 400,000
15%
14%
300,000 13%
200,000
Strong fee-based income growth; operating expenses to 100,000
12%
11%
grow at historical levels. BMRI has always registered the 0 10%
2013A 2014A 2015F 2016F 2017F
highest proportion of fee-based income to total income
among the big banks. Fee based income will be driven by Customer Deposits Growth (%) (YoY) (RHS)
tapping into the value chain of existing customers and cross-

selling existing insurance, loan and deposit products. Loan-to-Deposit Ratio Trend
Operating expenses will grow at historical levels as expansion 1,005,571
92%
will be stable in the future. 905,571
87%
805,571
High provision expense because of deteriorating asset quality.
The weak economy and slower loan growth will pressure 705,571 82%
BMRI’s asset quality this year. The management indicated that 605,571
cost of credit could increase to 2% this year as they 505,571

77%
cautiously take into account a potential deterioration in asset

405,571 72%
quality. The bank will maintain its cautious stance and book 2013A 2014A 2015F 2016F 2017F
high levels of provisions this year. Loans Deposit Loan-to-Deposit Ratio (RHS)

90,000 0.49
80,000 0.48
70,000 0.47
60,000 0.46
50,000 0.45
40,000 0.44
30,000 0.43
20,000 0.42
10,000 0.41
0 0.4
2013A 2014A 2015F 2016F 2017F

Page 25
Company Guide
Bank Mandiri
Asset Quality
Balance Sheet: 4.0%
Liquidity is less of a problem. BMRI has indicated that it has 3.5%
gathered sufficient liquidity for 2015 through aggressive 3.0%
growth of time deposits in 2014. The easing liquidity 2.5%

2.0%
condition has allowed BMRI to re-price down and cut
1.5%
expensive time deposits to reduce cost of funds. The 1.0%
maturing low-yielding recap bonds will provide additional 0.5%
liquidity for growth. Up to Rp61tr will mature in 2020. 0.0%
2013A 2014A 2015F 2016F 2017F
Long-term target to focus on CASA. BMRI is targeting 70% NPL Ratio Provision Charge-Off Rate
CASA ratio by 2020; this is the most challenging target for

them. They will focus on improving e-banking initiatives to Capitalisation (%)
improve transaction banking services. BMRI will also tap the 18.0%
value chain of existing customers to create a transaction 17.0%

banking ecosystem, to grow the number of operating
16.0%
accounts (current account deposits) in its portfolio. BMRI
launched the branchless banking initiative to gain a foothold 15.0%
in mass market funding, to add savings deposits over time. 14.0%
13.0%
Share Price Drivers:
12.0%
Improving momentum, resolution of NPLs. The share price 2013A 2014A 2015F 2016F 2017F
should rebound once there is improvement in the overall Tier-1 CAR Total CAR
economy and government infrastructure projects are rolled ROE (%)
out. But, there is timing risk in the realisation of these
projects. The resolution of NPLs especially at BSM will also be 20.0%
a key share price driver.

15.0%
Key Risks:
10.0%
Extended slow growth. The sustained macro weakness,
which would extend the period of slow loan growth, is a 5.0%
downside risk to our forecasts. If infrastructure projects do
not live up to expectations and mortgage demand does not 0.0%
pick up, BMRI may struggle to achieve its loan growth 2013A 2014A 2015F 2016F 2017F
target.
Forward PE Band (x)
Asset quality risk. We imputed higher credit costs in our (x)
17.1
projections, but the sustained macro weakness could cause
NPLs, and consequently, provisions, to inch up. Further 15.1 +2sd: 15.1x
deterioration at the Syariah unit could also drag BMRI’s 13.1 +1sd: 13.3x
overall asset quality.
Avg: 11.5x
11.1
COMPANY BACKGROUND 9.1

‐1sd: 9.8x
BMRI is Indonesia's largest bank by assets. Currently 60% ‐2sd: 8x

owned by the Government of Indonesia, BMRI went through 7.1
Oct-11 Oct-12 Oct-13 Oct-14
a transformation process that started in 2003, and has
successfully positioned itself into what it is today.
PB Band (x)
(x)
3.4
+2sd: 3.01x
2.9
+1sd: 2.74x
2.4
Avg: 2.47x
‐1sd: 2.21x
1.9 ‐2sd: 1.94x
1.4

Page 26
Company Guide
Bank Mandiri
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F

Avg Cost Of Funds 3.9 4.8 3.4 3.4 3.3

FY Dec 2013A 2014A 2015F 2016F 2017F

Provisions (4,856) (5,529) (11,356) (8,063) (7,120)
Pre-tax Profit 24,062 26,008 22,576 28,249 33,772
Taxation (5,232) (5,353) (4,553) (5,697) (6,811)
Minority Interests (626) (783) (861) (947) (1,042)
Net Profit 18,204 19,872 17,162 21,605 25,919
Growth (%)
Net Profit Gth 17.4 9.2 (13.6) 25.9 20.0
Margins, Costs & Efficiency (%) Margins to improve in
Spread 6.0 6.1 5.8 5.9 6.1 the future
Business Mix (%)
Oth Non-Int Inc/Opg Inc 11.6 10.1 12.4 12.4 12.5 Fee income mix the
Profitability (%) highest among big
ROAE Pre Ex. banks
22.5 20.9 16.0 18.0 18.7
ROAE 22.5 20.9 16.0 18.0 18.7
ROA Pre Ex. 2.8 2.6 2.0 2.3 2.5
ROA 2.8 2.6 2.0 2.3 2.5

Page 27
Company Guide
Bank Mandiri

FY Dec 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015

Provisions (909) (1,779) (1,549) (2,447) (4,495)
Pretax Profit 6,434 7,018 6,795 6,291 5,805
Taxation (1,566) (1,599) (1,656) (1,506) (1,146)
Net Profit 4,868 5,419 5,138 4,786 4,659
Growth (%) 1H15 remains sluggish with

the delay in government
Net Interest Income Gth 2.8 24.3 (11.9) 6.5 2.9 infrastructure spending
Net Profit Gth 4.5 11.3 (5.2) (6.9) (2.7)

FY Dec 2013A 2014A 2015F 2016F 2017F

Investment 26,807 40,521 46,103 52,797 60,831
Loans will continue to be
Fixed Assets 7,646 8,929 8,929 8,929 8,929 driven by retail segment
Goodwill 0 0 0 0 0 until there is visible
Other Assets 39,940 52,892 47,815 50,341 48,998 demand for
infrastructure loans
Total Assets 733,100 855,040 922,436 1,019,286 1,152,980

Others 53,054 66,105 59,579 62,842 61,211
Minorities 1,371 2,187 3,048 3,995 5,037
Total Liab& S/H’s Funds 733,100 855,040 922,436 1,019,286 1,152,980

Page 28
Company Guide
Bank Mandiri

FY Dec 2013A 2014A 2015F 2016F 2017F

Asset Quality
NPL / Total Assets 1.2 1.3 1.9 1.8 1.4
Provision Charge-Off Rate 1.0 1.1 2.0 1.3 1.0 Asset quality pressured
by sustained macro
Capital Strength weakness in 2015
Total CAR 14.6 16.1 17.7 17.6 17.6
Tier-1 CAR 13.0 14.8 16.1 16.1 16.2
Rp
Closing Target
12148 6 S.No. Date Rating
Price Price
4 7 8
1: 24 Oct 14 10100 10600 HOLD
11148 2: 28 Nov 14 10525 12200 BUY
2
3: 01 Dec 14 10625 12200 BUY
5 10 12 4: 09 Jan 15 11125 12200 BUY
10148 3
5: 19 Jan 15 10725 12200 BUY
1 11 6: 12 Feb 15 11775 13000 BUY
9148 9 13 14 7: 17 Mar 15 11975 13200 BUY
8: 27 Apr 15 11250 13200 BUY
8148 9: 11 Jun 15 9675 11100 BUY
10: 25 Jun 15 10000 11100 BUY
11: 30 Jun 15 10050 11100 BUY
7148 12: 15 Jul 15 10050 11100 BUY
Oct-14 Feb-15 Jun-15 Oct-15 13: 10 Aug 15 9525 11100 BUY
14: 03 Sep 15 8800 10500 BUY
Note : Share price and Target price are adjusted for corporate actions.

Page 29
Bank Negara Indonesia
Edition 1 Version 2 | Bloomberg: BBNI IJ | Reuters: BBNI.JK Refer to important disclosures at the end of this report
HOLD Waiting For the Tide To Pass

Last Traded Price: Rp4,985 (JCI : 4,545.86) Cautious outlook ahead. BBNI recorded a decent 9M15
Price Target : Rp5,000 (0%) earnings bouncing back strongly following the negative
earnings after kitchen sinking in 2Q15. BBNI’s new
Potential Catalyst: Board of Directors have experience in MSME loans, management has been prudent in classifying NPLs and
improving fee-based traction aggressively set aside higher provisions to raise loan loss
Where we differ: Earnings below consensus because of slower loan coverage ratio to 140% in 9M15 (9M14:129%). Management
growth and higher credit cost assumptions expects provision booking to continue to taper off for the rest
of this year. We remain cautious on asset quality deterioration
Analyst especially after growing its medium loan book rapidly this year.
LIM Sue Lin +65 6682 3711 suelinlim@dbs.com Special mentioned loans remains high in the consumer
segment. Weak recoveries in the current soft economic
environment also pose a downside risk to earnings.
Price Relative New management to focus on corporate loans. BBNI’s new
Rp Relative Index
management has indicated that BBNI’s focus in the next three
7,560.0
7,060.0
213
years will still be on corporate loans and is targeting to raise this
193
6,560.0
173
composition to 50% (9M15: 44%) through more infrastructure
6,060.0
5,560.0 153 and SOE loans. But this may mean lower lending yields over
5,060.0
4,560.0
133 time. Management has thoroughly reviewed the borrower
4,060.0
113
93
profiles in the medium loan segment and changed the
3,560.0
3,060.0 73
origination process for the small commercial segments to
Oct-11 Oct-12 Oct-13 Oct-14 Oct-15
improve asset quality.
Bank Negara Indonesia (LHS) Relative JCI INDEX (RHS)
Focus on asset quality now, growth later. 2015 is a
Forecasts and Valuation consolidation year for BBNI, focusing on asset quality issues as
FY Dec (Rp bn) 2014A 2015F 2016F 2017F well as underwriting and collection processes especially for the
Pre-prov. Profit 15,132 15,431 16,812 19,178 small and medium segment. Our 2015 loan growth forecast of
Net Profit 10,783 8,415 11,264 13,456 11% is below management guidance of 12-15%, and is driven
Net Pft (Pre Ex.) 10,783 8,415 11,264 13,456 mainly by corporate and medium. NIM will likely be maintained
EPS (Rp) 578 451 604 722 above 6% as there is room for funding costs to improve. We
EPS Pre Ex. (Rp) 578 451 604 722 expect NPL ratio to stay at the 2.6%. Management is however
EPS Gth (%) 19 (22) 34 19 positive on infrastructure loan growth for BBNI once it resolves
EPS Gth Pre Ex (%) 19 (22) 34 19 its asset quality issues.
Diluted EPS (Rp) 578 451 604 722
PE Pre Ex. (X) 8.6 11.0 8.3 6.9
Valuation:
Net DPS (Rp) 146 173 135 181 We have a HOLD rating for BBNI with Rp5,000 TP. 2015 is a
Div Yield (%) 2.9 3.5 2.7 3.6 consolidation year for BBNI after booking aggressive NPL and
ROAE Pre Ex. (%) 20.2 13.6 16.4 17.2 provisions in 2Q15. Involvement in government infrastructure
ROAE (%) 20.2 13.6 16.4 17.2 projects will be growth drivers in the future.
ROA (%) 2.7 1.9 2.3 2.4 Key Risks to Our View:
BV Per Share (Rp) 3,168 3,445 3,914 4,454
Further asset quality deterioration; faster realisation of
P/Book Value (x) 1.6 1.4 1.3 1.1
infrastructure projects poses upside risk to earnings. Further
Earnings Rev (%): 0 0 0 asset quality deterioration especially in the small and medium
Consensus EPS (Rp): 464 594 696 segments remains a concern. Quicker-than-expected realisation
Other Broker Recs: B: 24 S: 3 H: 6 of infrastructure projects offers upside risk to FY16F growth.
Source of all data: Company, DBS Bank, Bloomberg Finance L.P At A Glance
Mkt. Cap (Rpbn/US$m) 92,964 / 6,737
Major Shareholders
Republic of Indonesia (%) 60.0
Free Float (%) 40.0

ed: JS / sa: MA
Company Guide
Margin Trends
Rp bn
CRITICAL DATA POINTS TO WATCH 7.1%
25,000,000
6.9%
20,000,000
Earnings Drivers: 6.7%
Loan growth driven by corporate banking. Loan growth will 15,000,000 6.5%
mainly be driven by corporate banking as BBNI’s new 10,000,000

6.3%
management focuses on the core corporate loan book. 5,000,000

6.1%
5.9%
Corporate loan composition will be increased to 50% of total
0 5.7%
loans through dealing with more government infrastructure 2013A 2014A 2015F 2016F 2017F
loans and other SOE loans. We forecast loan growth of 11% Net Interest Income Net Interest Income Margin
this year.
NIM expected to remain stable. BBNI will also maintain its Gross Loan& Growth
Rp bn
NIM at c.6% for the year. Cost of funds should trend down 400,000 30%
since BBNI and all the large Indonesian banks are trimming 350,000
300,000 25%
down time deposit rates. Asset yield will decrease with the 250,000
lower consumer and retail rates as well as the shift to lower- 200,000 20%
yielding corporate loans. 150,000
100,000 15%
50,000
Prudent growth on mass market loans. In the past, BBNI had 0 10%
struggled with asset quality issues in the small and medium 2013A 2014A 2015F 2016F 2017F
loan book. The new management has vast experience in the Gross Loan (LHS) Gross Loan Growth (%) (YoY) (RHS)
mass-market segment (BBNI’s new CEO was prevoiusly from
BBRI). As such, there will be a concerted effort to focus on Rp bn
business process improvements and prudent growth for small 450,000 20%
18%
and medium loans. The new management requires the 400,000
350,000
16%
compliance division to be involved in the credit origination 300,000
14%
12%
process for small commercial loans. Each of the debtors in the 250,000
200,000
10%
8%
medium segment have also been reviewed, leading to an 150,000 6%
improvement in asset quality. BBNI currently runs its micro 100,000 4%
50,000 2%
lending business via its Shariah unit, BNI Syariah, which is still 0 0%
comparatively small (c.4% of assets/less than 1% of 2013A 2014A 2015F 2016F 2017F
earnings). Customer Deposits Growth (%) (YoY) (RHS)
Recoveries may drag non-interest income. Weaker recoveries

due to the soft market will continue to drag non-interest
income this year. Fee-based income is expected to continue 97%
469,382
to grow strongly as insurance premiums from the BNI Life-
92%
Sumitomo tie-up are starting to gain traction, while recurring 419,382
ATM and credit card fees are also showing good growth. 369,382 87%
319,382
Majority of provisions booked in 2Q15. BBNI indicated that 82%
c.75% of its provisions have been booked as at 1H15. After 269,382
the aggressive provisioning in 2Q15, there is sufficient buffer 219,382 77%

for loan loss coverage to meet headwinds in 2015/16. The 2013A 2014A 2015F 2016F 2017F
bank remains cautious due to the weak commodity prices
and soft economy. We expect a cost of credit of 2.3% this
year.
45,000 0.56
40,000 0.55
Cost-to-income ratio to remain stable; capex for overseas 35,000
0.54
expansion. Cost-to-income ratio should remain stable but 30,000
25,000 0.53
there will be capex for office buildings and overseas branches
20,000 0.52
in Korea and Myanmar. Opex is mainly made up of personnel 15,000
0.51
and G&A expenses. Cost-to-income will be at the 55% level 10,000
0.5
this year. 5,000
0 0.49
2013A 2014A 2015F 2016F 2017F

Page 31
Company Guide
Asset Quality
Balance Sheet: 3.0%
2.5%
Ample liquidity; aiming to maintain CASA composition.
2.0%
Liquidity is not an issue for BBNI and LDR is expected to be at
the 85-90% range this year. Maintaining CASA ratio at the 1.5%
63-65% level will also be a core target for the management 1.0%
this year. 0.5%
0.0%
Asset quality may deteriorate further. Asset quality may 2013A 2014A 2015F 2016F 2017F
deteriorate further this year, especially from its small and NPL Ratio Provision Charge-Off Rate
medium loan books. NPL ratios will be under pressure in the

slow macroeconomic environment. Capitalisation (%)
17.0%
Safe level of capitalisation. BBNI is very well capitalised with 16.5%
CAR at above the 15% level over the years. The majority of 16.0%
15.5%
capital is Tier-1 core capital. BNI Syariah has issued Rp750bn
15.0%
of Sukuk bonds to support growth. 14.5%
14.0%
13.0%
2013A 2014A 2015F 2016F 2017F
Improved earnings quality could re-rate the stock. Loan
Tier-1 CAR Total CAR
growth supported by its core corporate loans as well as
ROE (%)
improvements and prudent growth strategy on small and 20.0%
medium loans could boost growth and improve asset quality.

Fee income growth remains an important contributor to 15.0%
revenue.
10.0%
Key Risks:
5.0%
Sustained high levels of NPL ratio. High levels of consumer

and medium segment NPLs and special mention loans are a 0.0%
2013A 2014A 2015F 2016F 2017F
concern. Rapid expansion in the medium segment may also
trigger further NPL formations. Recoveries may be slow in
the current soft market. Forward PE Band (x)
(x)
Inability to protect NIM. NIM may be pressured if BBNI has to 15.0
reduce lending rates to achieve its loan growth targets. 13.0

+2sd: 13.6x
Failure to maintain CASA ratio is also a key risk to NIM. +1sd: 11.6x

11.0
Avg: 9.6x
COMPANY BACKGROUND 9.0
Bank Negara Indonesia (BBNI) is a state-owned bank that ‐1sd: 7.7x

7.0
conducts commercial and consumer banking services. BBNI
‐2sd: 5.7x
ranks fourth in the Indonesian banking sector based on 5.0
assets, lending and third-party deposits. BBNI offers
integrated financial services to its customers, supported by
PB Band (x)
its subsidiaries: Bank BNI Syariah, BNI Multi Finance, BNI (x)
2.6
Securities and BNI Life Insurance.
2.4
2.2 +2sd: 2.19x
2.0 +1sd: 1.99x
1.8 Avg: 1.79x
1.6 ‐1sd: 1.59x
1.4 ‐2sd: 1.39x
1.2
1.0

Page 32
Company Guide
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F

Avg Cost Of Funds 2.5 3.4 3.3 3.3 3.2

FY Dec 2013A 2014A 2015F 2016F 2017F

Provisions (570) (1,786) (5,024) (2,844) (2,477)
Pre-tax Profit 11,278 13,524 10,589 14,165 16,921
Taxation (2,220) (2,695) (2,118) (2,833) (3,384)
Net Profit 9,054 10,783 8,415 11,264 13,456
Growth (%)
Net Profit Gth 28.5 19.1 (22.0) 33.9 19.5
Margins, Costs & Efficiency (%) Consolidation year with early
Spread 6.0 6.2 5.9 5.8 5.9 recognition of provisions and
Net Interest Margin 6.1 6.5 6.1 6.0 6.0 NPL which results in negative
Cost-to-Income Ratio 55.3 51.6 52.9 53.8 53.8 growth
Business Mix (%)
Fee income contribution will
Oth Non-Int Inc/Opg Inc 12.5 12.3 13.9 14.4 14.6 increase, driven by insurance and
Profitability (%) debit/credit card fees
ROAE Pre Ex. 19.9 20.2 13.6 16.4 17.2
ROAE 19.9 20.2 13.6 16.4 17.2
ROA Pre Ex. 2.5 2.7 1.9 2.3 2.4
ROA 2.5 2.7 1.9 2.3 2.4

Page 33
Company Guide

FY Dec 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015

Provisions (1,104) (334) (1,241) (4,758) (404)
Pretax Profit 3,384 3,932 3,561 (461) 4,496
Taxation (710) (760) (744) 74 (928)
High provisions taken in
2Q15 post change in
Net Profit 2,674 3,172 2,817 (387) 3,568 management
Growth (%)
Net Profit Gth 5.2 18.6 (11.2) nm nm

FY Dec 2013A 2014A 2015F 2016F 2017F

Investment 12,005 12,776 13,959 15,282 16,738
Focus loans on core corporate
Fixed Assets 5,514 6,222 6,668 7,073 7,437 segments and improve small
Goodwill 0 0 0 0 0 and medium loan processes
Other Assets 21,256 21,801 22,791 24,494 26,089
Total Assets 386,655 416,574 461,742 519,533 589,957

Others 18,909 21,112 19,690 20,242 19,966
Minorities 83 1,950 2,006 2,073 2,154

Page 34
Company Guide

FY Dec 2013A 2014A 2015F 2016F 2017F
Management is comfortable
Balance Sheet Structure with LDR of 85-90%
Asset Quality
NPL / Total Assets 1.4 1.3 1.7 1.5 1.4
Loan Loss Reserve Coverage 126.9 128.2 140.5 151.4 140.9 Asset quality deterioration
Provision Charge-Off Rate 0.2 0.6 1.6 0.8 0.6 in small and medium
Capital Strength portfolio, NPL is expected
to improve in 4Q15
Total CAR 14.9 16.3 17.0 16.6 16.3
Tier-1 CAR 13.8 15.2 15.8 15.4 15.1
Rp
7243 Cl o s i n g Ta rg e t
4 S.No . Da te R a ti n g
Pri c e Pri c e
6743 1: 09 Jan 15 6150 6400 HOLD
3 2: 30 Jan 15 6250 6400 HOLD
2
6243 3: 17 Mar 15 6900 6400 HOLD
4: 24 Apr 15 6950 6400 HOLD
1 5: 15 Jul 15 5075 6200 BUY
5743
6: 10 Aug 15 4890 4300 HOLD
5243
6
4743 5
4243
3743
Oct-14 Feb-15 Jun-15 Oct-15

Page 35
Bank Rakyat Indonesia
Edition 1 Version 2 | Bloomberg: BBRI IJ | Reuters: BBRI.JK Refer to important disclosures at the end of this report
HOLD On the Watch

Last Traded Price: Rp11,275 (JCI : 4,545.86) NIM under pressure; HOLD. While we continue to favour BBRI’s
Price Target : Rp10,200 (-10% downside) micro lending business, headwinds with regards to lower
lending rates for the Kredit Usaha Rakyat (KUR) loans could add
Potential Catalyst: Continued growth of higher yielding micro segment, pressure to BBRI’s NIM. From Aug 15, KUR loans were priced
branchless banking and satellite initiatives down to 19% (12% plus 7% subsidised by the government)
Where we differ: Earnings forecast are below consensus likely due to from 22%. As the quantum of these loans disbursed for 2015 is
slower loan growth and higher credit cost assumptions relatively small, there was minimal impact to BBRI’s NIM.
Newsflow has it that the government is likely to impose a lower
Analyst rate at 9% in 2016. What is left uncertain is the amount that
LIM Sue Lin +65 6682 3711 suelinlim@dbs.com the government will subsidise. Assuming a same rate of 7%,
the effective lending rate for a KUR loan next year would be
only 16% and assuming BBRI retains its 65-70% market share
(of an estimated Rp100trn of KUR loans in 2016), BBRI could
Price Relative see NIM fall by another 40-50bps, pushing NIM to below 8%.
Rp
We have only imputed a 20bps decline in NIM in FY16F, hence
Relative Index
13,725.0
12,725.0
213
193
an unfavourable KUR subsidy rate will pose risk to earnings.
11,725.0
10,725.0
173 Loan growth to slightly pick up in 2016. We expect BBRI to only
9,725.0 153
grow loans by 8% in FY15F (9M15: 5%) although management
8,725.0 133
7,725.0
113
is targeting 11-13%. For 2016, BBRI is targeting a 13-14% loan
6,725.0
5,725.0
93 growth but we have however stayed conservative and only
4,725.0
73
Nov-15
assumed 10%. Micro loans will be the growth driver but other
segments are sluggish.
Bank Rakyat Indonesia (LHS) Relative JCI INDEX (RHS)
NPLs appear to have eased. BBRI’s NPLs appear to have eased in
Forecasts and Valuation 3Q15 and may be in for a decent 4Q15. BBRI stepped up write-
FY Dec (Rp bn) 2014A 2015F 2016F 2017F off efforts since 2Q15. However, a blip is expected in 1Q16 as
Pre-prov. Profit 34,081 36,194 36,526 39,648 1Q is typically a slow quarter and NPLs tends to rise. BBRI is
Net Profit 24,237 24,304 25,232 27,546 nevertheless guiding for a conservative 2.5% NPL ratio in 2016
Net Pft (Pre Ex.) 24,237 24,304 25,232 27,546 but we have forecasted 2.4%. Management conservatively
EPS (Rp) 982 985 1,023 1,117
assumes that under these tough conditions, 15% of special-
EPS Pre Ex. (Rp) 982 985 1,023 1,117
EPS Gth (%) 14 0 4 9 mention loans will be downgraded to NPLs. The majority of the
EPS Gth Pre Ex (%) 14 0 4 9 NPLs still stem from the small commercial and medium loan
Diluted EPS (Rp) 982 985 1,023 1,117 segments. BBRI has approximately 6% of its loans exposed to
PE Pre Ex. (X) 11.5 11.4 11.0 10.1 the commodities segment, of which only 0.25% of total loans
Net DPS (Rp) 196 197 205 223 are coal-related and 30% of that portfolio has already be
Div Yield (%) 1.7 1.7 1.8 2.0 classified as NPL.
ROAE Pre Ex. (%) 27.4 22.4 19.5 18.3
ROAE (%) 27.4 22.4 19.5 18.3 Valuation:
ROA (%) 3.4 2.9 2.7 2.6 BBRI is currently rated a HOLD with a TP of Rp10,200. Micro
BV Per Share (Rp) 3,955 4,824 5,650 6,562 loans will continue to drive growth but new KUR lending rates
P/Book Value (x) 2.9 2.3 2.0 1.7 may cap NIM upside from here while growth has yet to pick up.
Earnings Rev (%): 0 0 0 Key Risks to Our View:
Consensus EPS (Rp): 978 1,068 1,200 KUR lending rate is a key risk. Further KUR rate declines and
Other Broker Recs: B: 28 S: 5 H: 6 unfavorable KUR subsidy scheme may pose a downside risk to
Source of all data: Company, DBS Bank, Bloomberg Finance L.P BBRI’s NIM.
At A Glance
Mkt. Cap (Rpbn/US$m) 278,145 / 20,158
Major Shareholders
Govt of Indonesia (%) 59.0
Free Float (%) 41.0

ed: JS / sa: MA
Company Guide
Margin Trends
Rp bn
CRITICAL DATA POINTS TO WATCH 70,000,000 9.7%
60,000,000
9.2%
8.7%
Sluggish pick-up in loan demand. BBRI has not see any pick- 40,000,000
30,000,000
up in loan demand YTD and the realisation of government 8.2%
20,000,000
spending is still slow. BBRI indicated that it has signed several 7.7%
10,000,000
loan agreements for infrastructure projects such as ports and 0 7.2%
airports after 1Q15 but the drawdown can take up to 6-12 2013A 2014A 2015F 2016F 2017F
months. So far, none of its big SOE corporate clients are Net Interest Income Net Interest Income Margin
drawing down their loans yet. Micro loans continue to be

resilient while BBRI will be more prudent in disbursing SME Gross Loan& Growth
loans. We expect loans to grow 8% this year, below Rp bn
30%
management's guidance of 11-13%.
600,000 25%
NIM may be under pressure. BBRI started to trim down 500,000

20%
400,000
expensive time deposits early this year as liquidity in the 15%
300,000
market has eased. At the same time, retail loan yields are 200,000
10%
slightly reduced to attract demand. BBRI expects NIM to be at 100,000 5%
the 7.9-8.2% level. The government decided to cut KUR rate 0 0%

2013A 2014A 2015F 2016F 2017F
to 12% in Aug 2015. In the new scheme, the government
will subsidise 7% on top of the 12% interest rate, implying Gross Loan (LHS) Gross Loan Growth (%) (YoY) (RHS)
total yield booked at BBRI would be 19% (lower than the Customer Deposit & Growth
previous 21%). The increased portion of KUR loans next year, Rp bn
900,000 30%
further reduction in KUR rate and unfavorable subsidy 800,000
scheme poses downside risks to margins. 700,000 25%
600,000
500,000
Looking to boost fee income. BBRI wants to grow its fee- 400,000
20%
based income by 20-25% this year. Approximately 50% of 300,000

200,000 15%
BBRI’s fee-based income is from loan and deposit fees. BBRI 100,000
plans to grow its e-channel initiatives, mainly ATMs. It also 0 10%
2013A 2014A 2015F 2016F 2017F
needs to improve its credit card services but it is hard for
micro customers to adopt credit cards. BBRI is looking to Customer Deposits Growth (%) (YoY) (RHS)
acquire an insurance company this year to further boost its

fee-based income. Loan-to-Deposit Ratio Trend
Rolling out branchless banking initiative. BBRI is riding on its 989,634
94%
experience and existing infrastructure in micro mass market 889,634
loans to expand its branchless banking operations. BBRI is 789,634

89%
targeting 50,000 agents this year that will offer a basic 84%
689,634
savings account product and transaction banking services,
589,634 79%
and refer customers to a BRI unit for lending products.
Branchless banking will help boost its fee-based income 489,634 74%
through transaction fees and the bank is aiming for Rp75bn 389,634 69%
2013A 2014A 2015F 2016F 2017F
revenues this year. It will also add to CASA in the long term. Loans Deposit Loan-to-Deposit Ratio (RHS)
Asset quality appears to have eased. BBRI struggled with NPLs

in 1H16 due to the slower loan growth and weakness in the Cost & Income Structure
90,000 0.6
economy. BBRI's stress test indicate that with the assumption 80,000
of a 4.5% GDP growth and IDR/USD rate at the Rp15,000 70,000
0.5
level, NPL can go up to 2.7-2.8%. We expect NPLs to come in 60,000 0.4

50,000
at 2.7% this year and cost of credit to remain high at 1.4%. 0.3
40,000
However, by 3Q15, we noted that NPLs have started to ease 30,000 0.2
although bulk of it was addressed by write-offs. While the 20,000
0.1
NPL ratio may see some improvement in 4Q15, it will falter in 10,000
0 0
1Q16 before improving in 2H16. 2013A 2014A 2015F 2016F 2017F

Page 37
Company Guide
Asset Quality
Balance Sheet: 3.0%
Testing out bond issuance; improving CASA ratio. BBRI wants 2.5%
to diversify its funding composition and match the maturity of
2.0%
its asset and liability and it issued bonds worth Rp3tn this
1.5%
year. BBRI also wants to improve its CASA ratio to 60% by
optimising CASA marketing agents and improving its services 1.0%
by adding branches and rolling out branchless banking 0.5%
agents. As loan growth has been sluggish in 2015, there was 0.0%
little pressure to aggresively gather deposits. The situation 2013A 2014A 2015F 2016F 2017F
may change in 2016 if loan growth picks up. NPL Ratio Provision Charge-Off Rate
Improvements in business process to improve asset quality. Capitalisation (%)

BBRI will improve underwriting processes to improve asset 21.0%
quality. The bank will create a special task force to tackle NPL 20.0%
and special mentioned. It will also limit loans to small and 19.0%
medium players, focusing on certain quality debtors and 18.0%

industries. BBRI will also place experienced personnel from its
17.0%
head office to regional offices to improve its business
16.0%
processes. The majority of the problems in its NPL stems from
the small commercial and medium segments. 15.0%
2013A 2014A 2015F 2016F 2017F
Tier-1 CAR Total CAR

Strong capital position. BBRI’s CAR remains healthy at over ROE (%)
18%. We see little risk in any capital raising exercises as BBRI
has refinanced its maturing Rp2tn subordinated debt at the 25.0%
end of last year.

20.0%
Sustained growth in micro loans; improvement in the 10.0%

economy. BBRI’s bread-and-butter micro loans still show
5.0%
decent growth and is expected to grow at mid to high teens
this year. NPL ratio is also manageable in this segment. An 0.0%
2013A 2014A 2015F 2016F 2017F
improvement in the economy and the realisation of
government infrastructure projects will boost BBRI’s growth
and place less pressure on debtors, thus reducing NPLs. Forward PE Band (x)
(x)
13.8
Key Risks:
12.8
+2sd: 12.6x
Slowdown in mass-market lending. The delayed economic 11.8
could suppress growth in the MSME segment. Slower 10.8
+1sd: 11.1x
realisation of government projects could also hamper the 9.8 Avg: 9.6x

growth of BBRI’s corporate loans. 8.8
7.8
‐1sd: 8.1x
Asset quality issues. BBRI has exposure to more sensitive 6.8 ‐2sd: 6.6x
5.8
small and medium commercial loans. BBRI also has the Nov-11 Nov-12 Nov-13 Nov-14
highest level of special-mention loans among big banks.

PB Band (x)
COMPANY BACKGROUND (x)
BBRI is Indonesia's leading micro lender, mainly to retail
3.6
clients largely in the rural areas. It also has a comparatively +2sd: 3.43x
small but growing corporate business. It is currently a 60% 3.1 +1sd: 3.12x
government-owned operating company. Avg: 2.8x
2.6
‐1sd: 2.48x
2.1 ‐2sd: 2.16x
1.6

Page 38
Company Guide
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F

Avg Cost Of Funds 3.1 4.0 3.9 3.9 3.9

FY Dec 2013A 2014A 2015F 2016F 2017F

Provisions (3,946) (5,724) (7,291) (6,219) (6,374)
Pre-tax Profit 27,910 30,854 30,940 32,121 35,067
Taxation (6,556) (6,605) (6,624) (6,877) (7,507)
Net Profit 21,344 24,237 24,304 25,232 27,546
Net Profit bef Except 21,344 24,237 24,304 25,232 27,546 Slow earnings growth this
Growth (%) year and next year due to
Net Interest Income Gth 20.9 16.6 12.9 8.3 13.1 economic environment
Net Profit Gth 14.3 13.6 0.3 3.8 9.2
Margins, Costs & Efficiency (%) We expect NIM to be
Spread 8.8 7.8 7.5 7.3 7.2 pressured down to 7.8%
Net Interest Margin 8.8 8.1 7.8 7.6 7.5 because of reduction in
lending rates
Business Mix (%)
Profitability (%)
ROAE Pre Ex. 29.7 27.4 22.4 19.5 18.3
ROAE 29.7 27.4 22.4 19.5 18.3
ROA Pre Ex. 3.6 3.4 2.9 2.7 2.6
ROA 3.6 3.4 2.9 2.7 2.6

Page 39
Company Guide

FY Dec 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015

Provisions (1,846) (779) (1,565) (2,303) (3,024)
Pretax Profit 7,754 8,304 7,632 7,040 7,757
Taxation (1,314) (2,214) (1,485) (1,326) (1,333)
Net Profit 6,440 6,090 6,147 5,714 6,424
Growth (%)
Net Interest Income Gth 12.6 0.0 (0.1) (1.0) 9.8
Net Profit Gth 11.3 (5.4) 0.9 (7.0) 12.4

FY Dec 2013A 2014A 2015F 2016F 2017F
Cash/Bank Balance 93,036 134,808 154,055 191,812 210,881 Slow loan growth this year. Loan
Government Securities 18,951 43,307 45,688 48,209 50,880 growth to pick up when
government projects are realised
Investment 42,897 84,420 98,754 115,952 136,587
Fixed Assets 3,973 5,917 7,679 9,246 10,620
Goodwill 0 0 0 0 0
Other Assets 21,803 27,507 25,795 26,968 26,886
Total Assets 626,183 801,955 878,074 992,749 1,127,162

Deposit growth to be
Debts/Borrowings 17,205 33,322 25,826 20,579 16,906 driven more by CASA
Others 21,678 39,918 30,798 35,358 33,078 this year
Minorities 164 177 189 202 216
Total Liab& S/H’s Funds 626,183 801,955 878,074 992,749 1,127,162

,

Page 40
Company Guide

FY Dec 2013A 2014A 2015F 2016F 2017F

Asset Quality
NPL / Total Assets 1.1 1.0 1.7 1.5 1.2
NPL to increase due to
Capital Strength lower loan growth and
Total CAR 17.0 18.1 19.7 20.2 20.2 economic pressure
Tier-1 CAR 15.8 17.1 18.7 19.1 19.2

13885
Rp
12885 Closing T arget

S.No. Dat e Rat ing
4 5 Pric e Pric e
1 09 J an 15 12025.00 12600.00 HOLD
11885
2 27 J an 15 11925 12600 BUY
2 3
6 3 17 Mar 15 12925 12600 HOLD
10885 4 02 Apr 15 13000 12600 HOLD
9 5 04 May 15 11625 12600 HOLD
11
9885 6 11 J un 15 10125 11500 HOLD
7 8 10 12
7 25 J un 15 10200 11500 HOLD
8 03 J ul 15 10825 11500 HOLD
8885
9 15 J ul 15 10125 11500 HOLD
10 10 Aug 15 10575 11500 BUY
7885
11 03 Sep 15 10150 11100 HOLD
12 23 Oct 15 11200 10200 HOLD

Page 41
Bank Tabungan Negara
Edition 1 Version 2 | Bloomberg: BBTN IJ | Reuters: BBTN.JK Refer to important disclosures at the end of this report
HOLD Back To Basics

Last Traded Price: Rp1,280 (JCI : 4,545.86) Government-backed growth but asset quality remains its weak
Price Target : Rp1,080 (-16% downside) link. BBTN is in a favourable position as the government is
targeting to build 1m low-cost houses for the year, for which
Potential Catalyst: Improving NPLs, government policies spur growth in BBTN will be a major financier. Although the Rp5.1tn funding
housing loans for the subsidised mortgage programme (Fasilitas Likuiditas
Where we differ: Earnings slightly below consensus likely due to higher Pembiayaan Perumahan, FLPP) was used up by Aug 2015, BBTN
credit cost and NPL assumptions is currently in negotiations with the government for a possible
interest rate subsidy for the rest of the year. The FLPP scheme
Analyst will be renegotiated in 2016. There is an inherent risk to NIM
LIM Sue Lin +65 6682 3711 suelinlim@dbs.com which is dependent on the lending yield and funding cost for
the FLPP, negotiated on an annual basis with the Minister of
Housing. While BBTN’s growth traction remains positive, we
remain cautious on its asset quality of its non-housing segment.
Price Relative Government initiative to support growth. Of the 1m houses the
government targets to build, BBTN will be involved in financing
Rp Relative Index
1,756.0 207 460k houses under the FLPP, while another 400k houses will be
offered under the non-subsidised mortgage. BBTN is reverting
187
1,556.0 167
1,356.0
147 to its roots to focus back on the subsidised mortgages thanks to
1,156.0
127
107
the government’s initiatives. We maintain a loan growth target
956.0
87 of 17% for FY15-16F as we believe it may be challenging for
756.0 47
67
the new subsidised scheme to take off in a big way over the
Nov-11 Nov-12 Nov-13 Nov-14 Nov-15
next year due to the limited funding available from the
Bank Tabungan Negara (LHS) Relative JCI INDEX (RHS) government’s stretched budget.
Fund raising for growth and capital. BBTN is planning to use
FY Dec (Rp bn) 2014A 2015F 2016F 2017F
various fundraising methods including the issue of asset-backed
securities (Rp1.5tn), NCDs (Rp1tn) and bonds (Rp3tn), to grow
Pre-prov. Profit 2,318 2,806 3,311 3,989
Net Profit 1,116 1,534 1,816 2,207 its non-subsidised mortgage segment. Management recently
Net Pft (Pre Ex.) 1,116 1,534 1,816 2,207 indicated that the issuance of asset backed securities may be
EPS (Rp) 108 148 175 213 delayed due to the weak market. BBTN also plans to issue 5-year
EPS Pre Ex. (Rp) 108 148 175 213 subordinated debt of US$200-300m to boost capital
EPS Gth (%) (29) 38 18 22 Valuation:
EPS Gth Pre Ex (%) (29) 38 18 22 We have a HOLD rating with TP of 1,080, based on the Gordon
Diluted EPS (Rp) 108 148 175 213 Growth Model and this implies 0.8x FY16F BV. Concerns on asset
PE Pre Ex. (X) 11.9 8.6 7.3 6.0
Net DPS (Rp) 45 32 44 53
quality and earnings prospects have been an overhang. Its ability
Div Yield (%) 3.5 2.5 3.5 4.1 to maintain strong growth and better NIM would be a catalyst.
ROAE Pre Ex. (%) 9.4 12.0 12.9 14.2 Key Risks to Our View:
ROAE (%) 9.4 12.0 12.9 14.2 Regulatory risks and delays. Administrative delays in the
ROA (%) 0.8 1.0 1.0 1.1 government's housing programme and insufficient housing
BV Per Share (Rp) 1,179 1,295 1,426 1,586 units for financing may be a risk to BBTN’s growth. Changes in
P/Book Value (x) 1.1 1.0 0.9 0.8 the FLPP scheme which may be unfavourable to BBTN is an
Earnings Rev (%): 0 0 0 earnings risk.
Consensus EPS (Rp): 147 177 210 Upside risk from better-than-expected NPL improvement.
Other Broker Recs: B: 13 S: 1 H: 6 While we still remain cautious on NPL indicators, a quicker-
Source of all data: Company, DBS Bank, Bloomberg Finance L.P than-expected resolution of its non-housing segment’s NPLs
poses an upside risk to our forecasts.
At A Glance
Mkt. Cap (Rpbn/US$m) 13,545 / 982
Major Shareholders
Government of Indonesia (%) 60.1
Free Float (%) 39.9
ICB Industry : Financials / Financial Services

ed: JS / sa: MA
Company Guide
Margin Trends
Rp bn
CRITICAL DATA POINTS TO WATCH 9,000,000
5.5%
8,000,000
7,000,000 5.3%
Earnings Drivers: 6,000,000 5.1%
5,000,000 4.9%
4,000,000
Strong loan growth supported by government programme. 3,000,000
4.7%
BBTN targets loans to grow by17-19% this year, supported 2,000,000

4.5%
4.3%
by the government's 1m-unit housing programme. Of the 1,000,000
0 4.1%
1m units, 460k units will be financed by the FLPP scheme 2013A 2014A 2015F 2016F 2017F
and 400k units by non-subsidised mortgage loans, while the Net Interest Income Net Interest Income Margin
rest will be fully-subsidised by the government. BBTN will be
involved in financing both the non-subsidised and subsidised
Gross Loan& Growth
mortgage segments (in 2014, BBTN had 95% market share Rp bn
of subsidised mortgage loans). While we believe BBTN will 180,000 30%
likely benefit from the above, the impact may be offset by 160,000
140,000 25%
lower lending yields under the revised FLPP scheme. We have 120,000
assumed the lower end of management’s guidance for loan 100,000
20%
80,000
growth at 17% for FY15F. 60,000
40,000 15%
20,000
FLPP rate cut to boost growth but hurts NIM. In April 2015, 0 10%
the government cut the subsidised mortgage (FLPP) rate to 2013A 2014A 2015F 2016F 2017F
5% (from 7.25%). But the government increased its funding Gross Loan (LHS) Gross Loan Growth (%) (YoY) (RHS)
portion to 90% (from 75%) and reduced cost of funds to

0.3% (from 0.5%). BBTN has indicated that NIM can still Rp bn
decline by 20-30bps as a result, but hopes that the lost 160,000

30%
income will be offset by higher loan volumes. Currently, the 140,000

25%
FLPP budget of Rp5.1tn has been used up in August and 120,000
100,000
BBTN is in talks with the government for a possible interest 80,000
20%
rate subsidy for the subsidised mortgage program until the 60,000
40,000 15%
end of the year. Next year’s FLPP scheme may pose as a risk 20,000
to NIM if the government’s funding proportion is reduced. 0 10%
2013A 2014A 2015F 2016F 2017F

Strong deposit growth. BBTN expects deposits to grow by Customer Deposits Growth (%) (YoY) (RHS)
19-20% and will focus on improving CASA. CASA-to-total
deposits is still low vs larger bank peers. BBTN will do this by
optimising existing branches, growing priority banking
services and continue to work together with Post Office 186,835
118%
Indonesia as a point of sales. Additionally, BBTN will work on 113%

transaction banking by partnering with Pertamina for 166,835
payments and offer attractive savings products with a 146,835 108%
reward system such as eBataraPos. Loan-to-deposit ratio will 126,835 103%

likely stay above 100% but the new rule on loan-to-funding
ratio would be 90-95%. 106,835 98%
86,835 93%
Maintain cost-to-income ratio; focus on operational 2013A
Loans
2014A
Deposit
2015F 2016F 2017F
Loan-to-Deposit Ratio (RHS)
efficiency. BBTN hopes to maintain its cost-to-income ratio
this year by boosting fee-based income as well as improving
the operational efficiency of existing branches instead of
12,000 0.64
opening new ones. Fee-based income will be boosted by the
10,000 0.63
sales of bancassurance, mutual funds and wealth
management products. 8,000 0.62
6,000 0.61
Provisions should taper off. We expect provision charge-off 4,000 0.6

rates to taper off to 50bps in FY15F (FY14: 67bps), as we 2,000 0.59
note that BBTN was faced with distressed loans for the
0 0.58
subsidised mortgage scheme in FY13-14. 2013A 2014A 2015F 2016F 2017F

Page 43
Company Guide
Asset Quality
Balance Sheet: 5.0%
Aggressive NPL targets. BBTN is targeting for its NPL ratio to 4.5%
4.0%
be at the 3% range by end-FY15F, driven by improvements in 3.5%
its screening and collection processes. However, we retain 3.0%
our cautious stance on BBTN’s asset quality position (FY15F 2.5%
NPL ratio assumption: 3.4%). While NPLs have improved for 2.0%
1.5%
its housing segments (especially the subsidised mortgage 1.0%
portfolio), NPLs are still high for the commercial loan segment 0.5%
and other housing and construction loans. And with the 0.0%
2013A 2014A 2015F 2016F 2017F
challenging operating environment expected in 2015, NPL Ratio Provision Charge-Off Rate
significant improvements in NPLs for these segments may be
hampered.
Capitalisation (%)
Fund-raising for growth and capital. BBTN expects to use 16.0%
various means of fund-raising including the issuance of asset- 15.5%
backed securities (Rp1.5tn), NCDs (Rp1tn) and bonds (Rp3tn), 15.0%

14.5%
particularly to fund its non-subsidised mortgage growth.
14.0%
Management indicated that issuance of asset backed
13.5%
securities may be delayed due to the weak market conditions.
13.0%
As loan growth is expected to remain high, thanks to
12.5%
government-driven initiatives, BBTN plans to raise capital by
12.0%
issuing sub-debt at the end of this year to support growth. 2013A 2014A 2015F 2016F 2017F
Note that as BBTN’s loan-to-deposit ratio stays above 100%, Tier-1 CAR Total CAR
it needs to maintain a mininum CAR of 14%. The ROE (%)
government indicated that it has no plans for a capital 14.0%
injection to BBTN in the near future. 12.0%
10.0%
8.0%
Strong growth and reduction in cost of funds. Strong loan
6.0%
growth supported by the government's 1m-unit housing
programme will boost earnings. The reduction in cost of 4.0%
funds will also improve margins as well as provide better 2.0%
opportunities for BBTN to raise funds by issuing asset-backed 0.0%

2013A 2014A 2015F 2016F 2017F
securities, NCDs and bonds.
Key Risks: Forward PE Band (x)

(x)
Capital raising risk. As BBTN’s loan-to-deposit ratio stays
13.1
above 100%, it needs to maintain a minimum CAR of 14%.
12.1
There is not much buffer between this and BBTN’s current +2sd: 11.4x
11.1
CAR level. We believe there is capital raising risk in the future.
10.1 +1sd: 10x
9.1
Further NPL deterioration. NPL levels remains high in the Avg: 8.7x
8.1
commercial loans segment while increasing in the non- ‐1sd: 7.4x
7.1
subsidised housing segment. Deterioriation in these segments
6.1 ‐2sd: 6x
remains a key risk especially as the majority of the non-
5.1
subsidised housing book will be converted to a floating Nov-11 Nov-12 Nov-13 Nov-14 Nov-15
interest rate scheme this year.

PB Band (x)
COMPANY BACKGROUND (x)
Bank Tabungan Negara (BBTN) provides commercial banking 2.1
services. 88% of its loan book is related to property loans. 1.9

+2sd: 1.79x
BBTN specialises in subsidised mortgage loans and has the 1.7
1.5
largest market share in this segment. +1sd: 1.48x
1.3
Avg: 1.18x
1.1
0.9 ‐1sd: 0.87x
0.7
‐2sd: 0.56x
0.5

Page 44
Company Guide
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F

Loan growth higher than
Avg Cost Of Funds 5.0 6.3 5.4 5.2 5.0 industry supported by
government initiative
FY Dec 2013A 2014A 2015F 2016F 2017F

Non-Interest Income 764 895 925 1,097 1,301
Provisions (432) (772) (679) (794) (929)
Pre-tax Profit 2,141 1,548 2,129 2,520 3,063
Taxation (579) (433) (595) (704) (856)
Net Profit 1,562 1,116 1,534 1,816 2,207
Growth (%)
Net Interest Income Gth 19.6 (3.3) 22.2 16.4 18.5
Net Profit Gth 14.5 (28.6) 37.5 18.4 21.6
Margins, Costs & Efficiency (%) NIM will slightly expand due to
Spread 4.8 4.0 4.3 4.4 4.6 reduction on cost of funds. FLPP
Net Interest Margin 5.1 4.4 4.7 4.7 4.8 rate cut is a setback to NIM
expansion
Business Mix (%)
Profitability (%)
ROAE Pre Ex. 14.3 9.4 12.0 12.9 14.2
ROAE 14.3 9.4 12.0 12.9 14.2
ROA Pre Ex. 1.3 0.8 1.0 1.0 1.1
ROA 1.3 0.8 1.0 1.0 1.1

Page 45
Company Guide

FY Dec 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015

Non-Interest Income 202 334 245 282 258
Operating Income 1,509 1,831 1,799 1,915 2,029 Reduction in provision
Operating Expenses (1,027) (1,063) (1,052) (1,241) (1,073) expense on a y-o-y basis
due to better NPL ratios
Pre-Provision Profit 482 768 747 674 956
Provisions (175) (272) (189) (81) (388)
Pretax Profit 308 497 563 600 571
Taxation (92) (136) (161) (171) (180)
Net Profit 216 361 402 429 391
Growth (%)
Net Profit Gth 9.1 67.1 11.4 6.7 (8.9)

FY Dec 2013A 2014A 2015F 2016F 2017F

Investment 4,202 5,437 4,883 4,628 4,386
Fixed Assets 1,523 1,488 1,323 1,142 947
Goodwill 0 0 0 0 0
Other Assets 1,707 2,191 1,949 2,070 2,010
Total Assets 131,170 144,576 164,833 191,729 222,447

Inter Bank Deposits 275 1,179 727 953 840
Others 7,220 9,202 8,058 8,554 8,306
Minorities 0 0 0 0 0 To increase from bonds,
NCD issuance

Page 46
Company Guide

FY Dec 2013A 2014A 2015F 2016F 2017F

Asset Quality
NPL / Total Assets 3.1 3.2 2.8 2.5 2.2
Provision Charge-Off Rate 0.4 0.7 0.5 0.5 0.5 NPL ratio to improve
Capital Strength after improvements in
screening and collection
Total CAR 15.6 14.6 14.7 14.0 13.5 processes
Tier-1 CAR 14.9 14.1 13.9 13.2 12.6

1297 Rp

S.No. Dat e Rat ing
Price Price
1197 1 09 J an 15 1220.00 940.00 FULLY V ALUED
2
8 9 2 27 Feb 15 1070 940 HOLD
1147
7 3 03 Mar 15 1115 1130 HOLD
1097 5 4 17 Mar 15 1130 1130 HOLD
4 6
5 28 Apr 15 1120 1130 HOLD
1047 6 06 J ul 15 1170 1130 HOLD
3
7 28 J ul 15 1200 1240 HOLD
997 10
8 10 Aug 15 1195 1240 HOLD
11
947 9 03 Sep 15 1025 1080 HOLD
10 30 Sep 15 995 1080 HOLD
897
11 27 Oct 15 1210 1080 HOLD

Page 47
Bank Tabungan Pensiunan Nasional
Edition 1 Version 1 | Bloomberg: BTPN IJ | Reuters: BTPN.JK Refer to important disclosures at the end of this report
HOLD Moderating Growth

Last Traded Price: Rp2,575 (JCI : 4,545.86)
Price Target : Rp3,000 (17% upside) Slower growth prospects; possible risk to margins. BTPN
continues to thrive growth in the micro and productive poor
segment albeit at a slower rate as its portfolio becomes more
Potential Catalyst: Lower fundng cost, sustainable growth
seasoned. In this current challenging operating environment,
Where we differ: Earnings forecast below consensus
BTPN will exercise prudence and focus on asset quality over
growth. We forecast 11%/12%/15% loan growth as
Analyst
management indicated that the economy is only expected to
pick up marginally next year. Our provision charge-off rates
assumption are also at the higher end at 1.4% for FY15F. We
Price Relative see possible risk to margins as the price war on lending rates is
Rp Relative Index likely to continue with smaller banks competing on pricing for
6,353.5 216 growth.
New iSME initiative launched. BTPN has broken down its micro
5,853.5 196
5,353.5 176
4,853.5 156 segment further to pure micro and iSME. The iSME consists of
4,353.5
3,853.5
136
116
loans with ticket sizes of between Rp1-10bn, with an average
3,353.5 96 of Rp3.5bn. iSME loans yield 12.5-14% and all loans are fully
2,853.5 76 secured. The added value of the new iSME product will be
services such as information sharing, training and mentoring
2,353.5 56
Bank Tabungan Pensiunan Nasional (LHS)
Relative JCI INDEX (RHS)
for its clients. This platform will be rolled out via existing
distribution channels and the bulk of the expenditure is in IT
Forecasts and Valuation and human capital. iSME will be the growth driver as micro
FY Dec (Rp bn) 2014A 2015F 2016F 2017F loan growth is stabilising due to competition.
Pre-prov. Profit 3,279 3,424 3,565 3,890
Net Profit 1,869 1,921 2,048 2,201
More initiatives to grow CASA. BTPN said that liquidity is no
Net Pft (Pre Ex.) 1,869 1,921 2,048 2,201 longer an issue as it has access to structured funding and has
EPS (Rp) 330 339 362 389 ample liquid assets. BTPN WOW has started to report positive
EPS Pre Ex. (Rp) 330 339 362 389 growth. It has already acquired 6,000 agents and 200,000
EPS Gth (%) (12) 3 7 7 customers as of today and this will boost CASA in the long-
EPS Gth Pre Ex (%) (12) 3 7 7 term. BTPN will also launch a new digital banking initiative in
Diluted EPS (Rp) 330 339 362 389 1Q16 to improve CASA. It is currently still investing in IT
PE Pre Ex. (X) 7.8 7.6 7.1 6.6 systems for this new initiative.
Net DPS (Rp) 0 0 0 0
Div Yield (%) 0.0 0.0 0.0 0.0 Valuation:
ROAE Pre Ex. (%) 17.2 15.0 13.9 13.0 We have a HOLD rating and a target price to Rp3,000 on
ROAE (%) 17.2 15.0 13.9 13.0 lower growth prospects as management remains cautious for
ROA (%) 2.6 2.4 2.3 2.2 FY15F/16F. Slower growth prospects may limit share price
BV Per Share (Rp) 2,085 2,426 2,788 3,176 upside in the meantime.
P/Book Value (x) 1.2 1.1 0.9 0.8
Earnings Rev (%): 0 0 0
Change in strategy. While management has given assurances
Consensus EPS (Rp): 345 391 444
that there will be no change in business strategy post SMBC
entry, this nevertheless remains a key risk to our stock call.
At A Glance
Mkt. Cap (Rpbn/US$m) (Rpbn/US$m) 15,039 / 1,090
Major Shareholders
TPG Nusantara (%) 59.7
Sumitomo Mitsui Financial Group (%) 40.0
Summit Global Capital (%) 20.0
Free Float (%) 40.0

ed: JS / sa: MA
Company Guide
Margin Trends
Rp bn
8,000,000
12.9%
7,000,000
Earnings Drivers: 6,000,000 12.4%
NIM dynamics are changing. While BTPN’s NIM is likely to 5,000,000
11.9%
stay above 10% in the near term, it will be lower than 4,000,000
3,000,000 11.4%
previous years. This is due to the change in its loan mix and 2,000,000
10.9%
competitive pressures. Micro borrowers tend to eventually 1,000,000
0 10.4%
migrate to the informal SME loan segment, which carries 2013A 2014A 2015F 2016F 2017F
lower yields. While BTPN will continue to do well in its micro Net Interest Income Net Interest Income Margin
business, and coupled with loans to the productive poor as
the informal SME segment expands, loan yields will trend
lower over time. We are also cognisant of competition in the Gross Loan& Growth
Rp bn
micro loan business, and this would add further pressure on 30%
70,000
BTPN’s loan yields. Separately, with liquidity is no longer an 60,000
25%
issue as BTPN has access to cheaper structured funding 50,000
facilities (with cost of funds at 8.7-8.8%) and ample liquid 40,000 20%
assets, it is able to reduce time deposits to lower cost of 30,000
20,000
funds. This should partially alleviate pressure on NIM. 15%
10,000
Loan growth to support top line. BTPN is targeting 12-13% 0 10%
2013A 2014A 2015F 2016F 2017F
loan growth in 2016, driven by the micro and productive
poor segments. BTPN indicated that a sizeable number of Gross Loan (LHS) Gross Loan Growth (%) (YoY) (RHS)
micro customers could be upgraded to the informal SME Customer Deposit & Growth
segment which carries a lower yield. BTPN is aware of the Rp bn
20%
challenges faced by the micro loan segment and it will be 60,000 18%
quite a feat to compete if micro lending rates (kredit usaha 50,000
16%
14%
rakyat (KUR) scheme sees lower rates in 2016. Hence, there 40,000 12%
would be downside risk to BTPN’s micro loan growth. 30,000

10%
8%
Separately, bulk of BTPN’s loans will still be pension loans, 20,000 6%
4%
but this market is mature and is projected to grow at a steady 10,000
2%
10-12% a year. 0
2013A 2014A 2015F 2016F 2017F
0%
Higher expenses due to new initiatives. As we have seen in Customer Deposits (LHS)
the past, BTPN tend to invest in times of crisis to reap the Customer Deposits Growth (%) (YoY) (RHS)
benefits in the future. For example, BTPN completed the

majority of its capex in IT infrastructure and human resources Loan-to-Deposit Ratio Trend
in 2009 which led to a strong micro and productive poor 125%
business model up till now. BTPN recently spent Rp200bn 76,601 120%
115%
recently to roll out its branchless banking initiative. BTPN has 71,601
110%
plans to launch a digital banking initiative for the mass 66,601
105%
market in 1Q16 and it will invest $20-$30m (Rp250-400bn) 61,601
100%
in IT over the next 2 years. 56,601
95%
51,601
Branchless banking initiative. BTPN is one of the first four 90%
46,601 85%
banks to receive approval from the OJK to launch a 41,601 80%
branchless banking product, which the bank has named BTPN 2013A 2014A 2015F 2016F 2017F
WOW. The business model is simple – customers will use Loans Deposit Loan-to-Deposit Ratio (RHS)
mobile applications to perform transactions. Agents can be

recruited from its best micro or productive poor customers. Cost & Income Structure
Once BTPN gets sufficient branchless banking customers and 12,000 0.64
0.62
becomes a transaction bank for the mass market, it will 10,000
0.6
monetise this by potentially selling products such as micro 8,000
0.58
loans and micro insurance. CASA levels will also be higher. 6,000 0.56
Provision expenses to grow moderately. Provision expense has 4,000

0.54
never been an issue for BTPN due to its low NPL ratio. We 0.52
2,000
expect credit charge-off rates to remain at c.1.4% and there 0.5
is no pressure on asset quality as of now. 0

2013A 2014A 2015F 2016F 2017F
0.48

Page 49
Company Guide
Asset Quality
Balance Sheet: 2.0%
NPL is not an issue. NPL ratio has never been an issue for 1.8%
1.6%
BTPN and this has historically been below 1%. There were 1.4%
increases in the NPL ratio recently for its productive poor 1.2%
1.0%
segment which is now becoming more seasoned and 0.8%
entering into a more mature phase. BTPN’s micro loans went 0.6%
through a similar phase before it was seasoned. Management 0.4%

0.2%
indicated that its risk management strategies have been 0.0%
successful in keeping NPLs at low levels even during the 2013A 2014A 2015F 2016F 2017F
current tough economic environment. NPL Ratio Provision Charge-Off Rate
Solid capital base. BTPN has always been overcapitalised, with Capitalisation (%)
capital ratios at above 20% over the past 5 years. BTPN has 24.0%
never paid out dividends and has not indicated any change in 23.0%
this policy. Retained profits generated have been reinvested
22.0%
for growth.
21.0%

20.0%
NIM may be capped and limit valuation upside. Although
funding cost pressures are easing, the generally higher levels 19.0%
2013A 2014A 2015F 2016F 2017F
of funding cost compared to historical levels coupled with Tier-1 CAR Total CAR
competitive loan yields could cap any upside to NIM. Margin ROE (%)
improvements from reduction of cost of funds will boost
earnings. Management indicated that it will aggressively cut 20.0%
time deposit rates to reduce cost of funds. BTPN is also
hoping that the BI will cut its reference rate. BTPN is the most 15.0%
interest rate sensitive company under our coverage due to its

10.0%
high reliance on time deposits for funding.
5.0%
Key Risks:
Reduction in lending yields. In 1H15, BTPN saw stiff price 0.0%
2013A 2014A 2015F 2016F 2017F
competition in pricing in all of its loan segments and it had to
reduce lending rates to maintain demand. With more and
more banks going into the micro and pension segments, Forward PE Band (x)
(x)
further reduction in lending rates may be a risk.
16.5
Cost of funds pressure. BTPN's NIM is very sensitive to 14.5

+2sd: 15.3x
changes in cost of funds since the bulk of its customer +1sd: 13.6x

12.5
deposits are in the form of time deposits. Another time Avg: 11.9x
deposit rate price war will negatively impact earnings. 10.5
‐1sd: 10.1x
8.5 ‐2sd: 8.4x
COMPANY BACKGROUND
6.5
BTPN specialises in pension loans and is currently on a strong Nov-11 Nov-12 Nov-13 Nov-14 Nov-15
growth path for micro loans and loans to the productive

poor. Funding profile largely hinges on time deposits and PB Band (x)
bonds (wholesale funding). (x)
4.4
+2sd: 4.25x
3.9
3.4 +1sd: 3.45x
2.9
Avg: 2.65x
2.4
1.9 ‐1sd: 1.85x
1.4
‐2sd: 1.05x
0.9

Page 50
Company Guide
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F Low-double digit growth
driven by micro and
Gross Loans Growth 18.6 12.6 11.0 12.0 15.0 productive poor segments;
expect a pick up in iSME
Customer Deposits Growth 15.8 2.2 7.3 7.4 7.6 segment in coming years
Avg Cost Of Funds 7.1 8.7 8.6 8.6 8.6

FY Dec 2013A 2014A 2015F 2016F 2017F

Provisions (591) (744) (817) (785) (902)
Pre-tax Profit 2,869 2,523 2,593 2,765 2,971
Taxation (738) (653) (672) (716) (770)
Net Profit 2,131 1,869 1,921 2,048 2,201
Growth (%)
Net Profit Gth 7.7 (12.3) 2.8 6.6 7.5
Spread 12.0 10.4 10.5 10.5 10.6
Business Mix (%)
Profitability (%)
ROAE Pre Ex. 24.2 17.2 15.0 13.9 13.0
ROAE 24.2 17.2 15.0 13.9 13.0
ROE to be lower than
ROA Pre Ex. 3.3 2.6 2.4 2.3 2.2 historical levels because of
ROA 3.3 2.6 2.4 2.3 2.2 higher cost of funds and tight
price competition

Page 51
Company Guide

FY Dec 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015

Provisions (226) (144) (162) (272) (228)
Pretax Profit 576 597 656 622 625
Taxation (148) (155) (169) (163) (164)
Net Profit 419 436 481 448 446
Growth (%)
Net Interest Income Gth (5.6) 6.6 1.9 2.4 4.0
Net Profit Gth (16.9) 4.3 10.1 (6.8) (0.4)

FY Dec 2013A 2014A 2015F 2016F 2017F

Investment 2,913 4,734 5,182 5,674 6,215
Fixed Assets 755 730 682 630 574
Goodwill 0 0 0 0 0
Mainly consist of time deposits,
Other Assets 1,908 2,489 2,201 2,345 2,273 CASA increase from branchless
Total Assets 69,665 75,015 83,489 94,530 108,809 banking and digital banking will be
seen in the long term
Inter Bank Deposits 16 0 8 4 6
Others 885 1,028 699 772 735
Strong growth in
Minorities 0 249 249 249 249
debts/borrowings due to
Shareholders' Funds 9,908 11,811 13,739 15,787 17,989 structured funding

Page 52
Company Guide

FY Dec 2013A 2014A 2015F 2016F 2017F

Asset Quality
NPL / Total Assets 0.4 0.5 0.6 0.5 0.5
Provision Charge-Off Rate 1.3 1.4 1.4 1.2 1.2 NPL will remain low at
Capital Strength below 1%
Total CAR 23.1 23.3 20.9 21.5 21.5
Tier-1 CAR 22.1 22.4 19.6 20.3 20.3

4484 Rp
Closing T arget
3 S.No. Dat e Rat ing
4 5 Price Price
3984
1 09 J an 15 3985.00 4600.00 HOLD
2 6 2 23 Feb 15 4280 4600 HOLD
7
3 05 Mar 15 4220 4400 HOLD
3484 8 4 17 Mar 15 4220 4400 HOLD
5 30 Apr 15 3950 4400 HOLD
6 27 May 15 3855 4400 HOLD
9 10
2984 7 25 J un 15 3630 4000 HOLD
8 15 J ul 15 3280 4000 BUY
11
9 10 Aug 15 3255 3900 BUY
10 03 Sep 15 2950 3200 HOLD
2484
11 30 Sep 15 2910 3200 HOLD

Page 53
Panin Bank
Edition 1 Version 2 | Bloomberg: PNBN IJ | Reuters: PNBN.JK Refer to important disclosures at the end of this report
HOLD Conservatism Caps Growth

Last Traded Price: Rp860 (JCI : 4,545.86) Conservatism limits growth; HOLD. Panin Bank (PNBN) stands
Price Target : Rp900 (5% upside) proud as one of Indonesia’s banks that came out unscathed from
the Asian Financial Crisis, thanks to its cautiousness and prudent
Potential Catalyst: Potential M&A target
credit policies. Such practices are still followed today. Amid the
current sustained weakness in Indonesia’s macro outlook, it is no
Where we differ: Below consensus on lower than expected growth
surprise that PNBN will grow its loans at a slower pace than the
prospects, higher NPL ratios, and more conservative credit cost
industry. We believe that its conservatism is at the expense of
assumptions
growth, and hence our HOLD rating. But an M&A euphoria could
prove us wrong.
Analyst
LIM Sue Lin +65 6682 3711 suelinlim@dbs.com Slower growth and further asset quality weakness. Our
FY15/16/17F loan growth forecasts are at a conservative
5%/7%/10% on the back of the sustained weakness in economy
and management’s conservative stance. NPLs are expected to
Price Relative continue to creep up across the board which would push
Rp
provisioning higher in 2H15. Our FY15F/16F NPL forecasts are
Relative Index
1,486.0 209
high at 2.5%/2.3% while our credit cost assumptions
accordingly. The easing liquidity conditions allowed PNBN to trim
189
1,286.0
169
1,086.0 149 its time deposit rates in 2Q15, hence NIM should stay at the 4%
886.0 129 level this year.
109
686.0
89 M&A update. Recent news suggests that ANZ is keen to sell its
486.0
69
Nov-15
39% stake in PNBN especially when its parent company needs to
inject US$2.3bn of capital to comply with capital requirements in
Panin Bank (LHS) Relative JCI INDEX (RHS)
Australia. Bloomberg noted that M&A interest continues to stem
Forecasts and Valuation from Japan’s Mizuho Financial Group, Taiwan’s Fubon Financial
FY Dec (Rp bn) 2014A 2015F 2016F 2017F Holdings, and Spanish lender Banco Bilbao Vizcaya Argentaria
Pre-prov. Profit 3,796 3,912 4,011 4,138 SA. There could potentially be an M&A deal by the year end.
Net Profit 2,356 1,955 2,143 2,453 Valuation:
Net Pft (Pre Ex.) 2,356 1,955 2,143 2,453
We have a HOLD rating for PNBN with TP at Rp900 based on the
EPS (Rp) 98 81 89 102
EPS Pre Ex. (Rp) 98 81 89 102 Gordon Growth Model (12% ROE, 9% growth; 13% cost of
EPS Gth (%) 4 (17) 10 14 equity), which implies 0.8x FY16F BV. Our TP does not include a
EPS Gth Pre Ex (%) 4 (17) 10 14 premium for any potential M&A deal, which could value the
Diluted EPS (Rp) 98 81 89 102 bank as high as 1.4-1.5x BV.
PE Pre Ex. (X) 8.8 10.6 9.7 8.4 Key Risks to Our View:
Net DPS (Rp) 0 0 0 0
M&A with no tender offer attached. PNBN’s share price has risen
Div Yield (%) 0.0 0.0 0.0 0.0
ROAE Pre Ex. (%) 11.9 8.9 9.0 9.4 substantially only because of M&A rumours despite little change
ROAE (%) 11.9 8.9 9.0 9.4 in its fundamentals. And M&A euphoria tends to be short-lived.
ROA (%) 1.5 1.2 1.1 1.2 In the past, BTPN saw its share price jump c.20% within a month
BV Per Share (Rp) 871 945 1,034 1,136 after announcing the SMBC M&A but retreated in the
P/Book Value (x) 1.0 0.9 0.8 0.8 subsequent month as there was no tender offer made to
Earnings Rev (%): 0 0 0 minorities. PNBN could be caught in a similar situation if no
Consensus EPS (Rp): 102 119 114 tender offer is made to minorities.
At A Glance
Source of all data: Company, DBS Bank, Bloomberg Finance L.P Issued Capital (m shrs) 24,088
Mkt. Cap (Rpbn/US$m) 20,715 / 1,501
Major Shareholders
Panin Financial Tbk (%) 46.0
ANZ Banking Group LTD (%) 38.8
Free Float (%) 15.2

ed: JS / sa: MA
Company Guide
Panin Bank
Margin Trends
Rp bn
6,000,000
4.3%
Loans targeting SME niche market. PNBN has always focused 4,000,000 4.1%
on the SME and the commercial segment, particularly traders. 3,000,000

3.9%
2,000,000
PNBN is also funding mortgages through agents in the 3.7%
1,000,000
secondary market. We expect loan growth of only 5% this 0 3.5%
year due to the slow economic environment. 2013A 2014A 2015F 2016F 2017F
Net Interest Income Net Interest Income Margin
NIM to stay stable. PNBN expects NIM to stay flat this year.
Cost of funds reductions will be felt after trimming down Gross Loan& Growth
time deposit rates. Lending rates will also be adjusted Rp bn
140,000 20%
accordingly since PNBN uses a cost-plus pricing model to 18%
120,000
price its loans. We expect NIM to stay flat at c.4%. 100,000
16%
14%
80,000 12%
10%
Maintain liquidity, CASA ratio lower than historical levels. 60,000 8%
PNBN will keep its loan-to-deposit at the 85-90% level for 40,000 6%
4%
2015. Liquidity has been easing this year and PNBN has 20,000
2%
0 0%
already trimmed its deposit rates to reduce cost of funds. 2013A 2014A 2015F 2016F 2017F
However, PNBN believes that it will be challenging for CASA
ratio to revert to the low 60% level and it will remain at the
current (low 50%) levels due to tight competition. Customer Deposit & Growth
Rp bn
180,000 20%
18%
Stable growth in fee-based income. Growth in fee-based 160,000
16%
140,000
income will be stable this year, similar to historical levels 120,000
14%
12%
(15%). A large chunk of PNBN’s non-interest income comes 100,000
80,000
10%
8%
from NPL recoveries and management indicated that there 60,000 6%
40,000
will not be much recoveries this year because of weak market 20,000
4%
2%
conditions. Unlike other banks, PNBN does not want to jump 0 0%
2013A 2014A 2015F 2016F 2017F
onto the e-banking bandwagon and will focus on its brick-
and-mortar banking business. Fee income from its insurance Customer Deposits Growth (%) (YoY) (RHS)
tie-up with Dai-Ichi will make a slow and gradual impact.

No significant increase in operating expenses. PNBN has been
98%
conservative in expanding the number of branches this year 192,765
due to the slow economic environment. Opex should grow at 93%
172,765
similar rates in the past while cost-to-income should remain 88%
stable in the low 50% level. 152,765

83%
132,765 78%
Increased levels of provisions. PNBN has historically booked 112,765 73%
lower provisions due to its good asset quality management.
92,765 68%
However, pre-implementation of PSAK 50/55, PNBN was 2013A 2014A 2015F 2016F 2017F
conservative with provisions and booked high provision Loans Deposit Loan-to-Deposit Ratio (RHS)
charge off rates at the 1% level. Post-PSAK 50/55 (from

2011), provision charge off rates dropped to the 0.4-0.5% Cost & Income Structure
12,000 0.7
level. However, we expect provision charge off rates to come
0.6
in at a high 1% this year because of higher NPLs and 10,000
0.5
conservative booking of provisions in the current slow 8,000
0.4
environment. We expect coverage ratio to increase slightly to 6,000
0.3
95% this year. 4,000
0.2
2,000 0.1
0 0
2013A 2014A 2015F 2016F 2017F

Page 55
Company Guide
Panin Bank
Asset Quality
Balance Sheet: 3.0%
Asset quality pressures. A prudent growth strategy has always 2.5%

been PNBN’s priority and the majority of its SME and
2.0%
commercial loans are fully collateralised. As a result, PNBN
1.5%
has always maintained an NPL ratio of below 2% and
provision expenses have been low. However, PNBN is seeing 1.0%
asset quality pressures in its loan book across the board due 0.5%
to sustained weakness in the economy. We conservatively 0.0%

expect NPL ratio to increase to 2.5% this year, thus 2013A 2014A 2015F 2016F 2017F
significantly increasing the amount of provisions. NPL Ratio Provision Charge-Off Rate
Strong capitalisation. Capitalisation has been strong due to its Capitalisation (%)
conservative growth and high quality loan book, as well as 22.0%
21.0%
strong capital boost from retained earnings due to its zero 20.0%
dividend payout policy. 19.0%
18.0%
17.0%
High quality growth; potential M&A target. PNBN has always 15.0%
14.0%
focused on a conservative but high quality growth strategy 13.0%
with all loans fully collateralised. Asset quality has always 12.0%
2013A 2014A 2015F 2016F 2017F
been at manageable levels. PNBN is also a potential M&A Tier-1 CAR Total CAR
target because of its attractive valuation. a potential ROE (%)
divestment of ANZ's 39% stake in PNBN may be a share price
12.0%
catalyst.
10.0%
Key Risks: 8.0%
Asset quality pressures. We expect NPL ratio to be c. 2.5%, 6.0%

in line with management's worst case guidance.
4.0%
Macroeconomic headwinds may further pressure NPLs as the
bulk of PNBN’s loan book consists of SME loans in the trade 2.0%
industry. SMEs are also part of the value chain of bigger 0.0%
2013A 2014A 2015F 2016F 2017F
corporates and mayl be negatively impacted by the weak
performance of these corporates.
Forward PE Band (x)
(x)
Thin liquidity .The thin liquidity of the shares is a big 18.0
constraint for many investors. 16.0
+2sd: 14.6x
14.0
Delays in M&A. Potential delays or even the cancellation of
12.0 +1sd: 12.1x
an M&A announcement can pose downside risk to share
10.0
price. Avg: 9.5x
8.0
‐1sd: 7x
6.0
COMPANY BACKGROUND ‐2sd: 4.5x
4.0
Panin Bank (PNBN) is one of the largest privately owned local Nov-11 Nov-12 Nov-13 Nov-14 Nov-15
banks in Indonesia, behind BCA and Permata. PNBN focuses

on disbursing loans to SMEs in the growing trade industry. PB Band (x)
1.8
(x)
1.6
+2sd: 1.48x
1.4
+1sd: 1.3x
1.2
Avg: 1.12x
1.0
‐1sd: 0.94x
0.8
‐2sd: 0.76x
0.6

Page 56
Company Guide
Panin Bank
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F

Avg Cost Of Funds 5.1 6.5 5.7 5.5 5.4
Income Statement (Rp bn) Lower cost of funds due

FY Dec 2013A 2014A 2015F 2016F 2017F to cut to deposit rates

Steep increase of provisions,
Operating Income 7,215 8,085 8,565 9,315 10,069 in line with asset quality
Operating Expenses (3,472) (4,289) (4,652) (5,303) (5,930) deterioration and
Pre-provision Profit 3,742 3,796 3,912 4,011 4,138 management’s cautious
stance
Provisions (539) (439) (1,196) (1,024) (704)
Pre-tax Profit 3,252 3,477 2,858 3,132 3,586
Taxation (798) (894) (715) (783) (897)
Net Profit 2,260 2,356 1,955 2,143 2,453
Growth (%)
Net Profit Gth 7.2 4.2 (17.0) 9.6 14.5
NIM to remain flat
Spread 4.0 3.1 3.8 3.9 4.0
Business Mix (%)
Profitability (%)
ROAE Pre Ex. 12.9 11.9 8.9 9.0 9.4
ROAE 12.9 11.9 8.9 9.0 9.4
ROA Pre Ex. 1.6 1.5 1.2 1.1 1.2
ROA 1.6 1.5 1.2 1.1 1.2

Page 57
Company Guide
Panin Bank

FY Dec 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015

Pre-Provision Profit 1,117 593 933 802 762
Provisions (283) (36) (88) (219) (540)
Pretax Profit 880 574 869 609 260
Taxation (222) (213) (221) (165) (64)
Minority Interests 0 2 (60) (45) (35)
Net Profit 658 363 588 400 161
Growth (%)
Net Interest Income Gth 2.9 11.1 (4.7) 7.6 6.6
Net Profit Gth (24.1) (44.9) 62.2 (32.0) (59.8)

FY Dec 2013A 2014A 2015F 2016F 2017F
Cash/Bank Balance 19,462 13,910 27,699 39,086 51,244 The majority of loans are to
Government Securities 13,189 14,156 15,000 15,900 16,859 SMEs in the trade industry
Investment 6,137 13,772 14,255 14,763 15,297
Fixed Assets 2,441 2,502 2,275 2,028 1,761
Goodwill 0 0 0 0 0
Other Assets 11,843 12,944 13,598 15,107 16,993
Total Assets 164,056 172,582 193,475 215,788 244,137

Others 6,347 7,414 7,364 7,807 8,126
Minorities 1,408 2,253 2,441 2,648 2,884

,

Page 58
Company Guide
Panin Bank

FY Dec 2013A 2014A 2015F 2016F 2017F

Investment / Total Assets 3.7 8.0 7.4 6.8 6.3 LDR to be maintained
Cust . Dep./Int. Bear. Liab. 85.7 86.9 87.5 87.6 87.9 at 85-90%
Asset Quality
NPL / Total Assets 1.3 1.3 1.5 1.4 1.2
NPL to increase to 2.5%
Capital Strength in the current weak
Total CAR 19.3 21.6 17.6 15.9 14.6 environment
Tier-1 CAR 14.7 17.3 14.7 13.6 12.7

1483
Rp

S.No. Dat e Rat ing
Price Price
1283 4 1 09 J an 15 1040.00 1230.00 HOLD
5 2 10 Feb 15 1025 1230 BUY
1183 3 17 Mar 15 1340 1060 HOLD
4 30 Apr 15 1300 1060 FULLY V ALUED
1083 5 07 J ul 15 995 970 HOLD
8 6 15 J ul 15 995 970 HOLD

983 2 3 9 10 7 31 J ul 15 1065 950 HOLD
67
8 10 Aug 15 1040 950 HOLD
883
9 03 Sep 15 1025 1000 HOLD
11 10 30 Sep 15 885 1000 HOLD
783
11 30 Oct 15 930 900 HOLD

Page 59
BFI Finance Ind
Edition 1 Version 1 | Bloomberg: BFIN IJ | Reuters: BFIN.JK Refer to important disclosures at the end of this report
HOLD Watchful On Growth And Quality

Last Traded Price: Rp2,475 (JCI : 4,545.86)
Slower growth outlook. BFIN indicated that 2H15 will be slower
Price Target : Rp2,900 (17% upside)
compared to 1H15 as it plans to scale back on growth to focus
on asset quality. Post 3Q15 earnings, we revised down our
Potential Catalyst: Strong growth of used 4W segment, potential M&A
FY15F/16F/17F receivables growth assumption by 100bps to
target
9%/11%/15%. We have also imputed higher cost of credit
Where we differ: Below consensus due to lower growth and higher
since management remains conservative. Our FY15F forecasts
credit cost assumptions
points to earnings contraction before a slight improvement in
FY16F although the overall macro outlook remains challenging.
Analyst
Unique business model remains its a key asset. We remain
cautious on the multifinance sector due to slower growth and
Price Relative higher NPLs. However, we prefer BFIN over CFIN (our other
Rp Relative Index multifinance company coverage) due to its unique direct
financing model and earlier adoption of write-off policy and NPL
3,575.0 221
201
3,075.0
181
classifications to PSAK 50/55. BFIN’s diversified portfolio and
161
141 unique direct financing business will continue to deliver
2,575.0
121
101
sustainable earnings in the long term. BFIN is also an attractive
2,075.0 81 M&A target given its cheap valuation, and also as it is one of
few sizeable multifinance companies that is not directly backed
61
1,575.0 41
by a bank.
BFI Finance Ind (LHS) Relative JCI INDEX (RHS)
Forecasts and Valuation Staying cautious; NIM to remain stable. BFIN expects NIM to
FY Dec (Rp bn) 2014A 2015F 2016F 2017F remain flat this year and funding is not an issue. BFIN indicated
Pre-prov. Profit 945 1,000 1,015 1,083 that they are currently over-funded due to slow financing
Net Profit 597 575 607 690 demand. BFIN remains tight on credit control focusing on early
Net Pft (Pre Ex.) 597 575 607 690 bucket collection. BFIN is currently developing a credit scoring
EPS (Rp) 393 378 399 454 system for 4W financing, in addition to the existing system in
EPS Pre Ex. (Rp) 393 378 399 454
EPS Gth (%) 17 (4) 5 14
2W financing.
EPS Gth Pre Ex (%) 17 (4) 5 14
Diluted EPS (Rp) 393 378 399 454 Valuation:
PE Pre Ex. (X) 6.3 6.5 6.2 5.5 We have a HOLD recommendation on BFIN with a target price
Net DPS (Rp) 268 151 160 181 of Rp2,900. BFIN will be cautious given the current macro
Div Yield (%) 10.8 6.1 6.4 7.3 headwinds. Over the longer term, its unique business model will
ROAE Pre Ex. (%) 17.0 15.2 14.6 15.2
ROAE (%) 17.0 15.2 14.6 15.2 remain an asset. News of M&A could boost valuation.
ROA (%) 6.6 5.7 5.4 5.5
BV Per Share (Rp) 2,377 2,604 2,843 3,115 Key Risks to Our View:
P/Book Value (x) 1.0 1.0 0.9 0.8 Tax review expenses. The government is currently conducting a
Earnings Rev (%): (8) 0 0 tax audit on all the banks/multifinance companies. Additional
Consensus EPS (Rp): 383 432 507 tax expenses is a risk to earnings.
Source of all data: Company, DBS Bank, Bloomberg Finance L.P At A Glance
Mkt. Cap (Rpbn/US$m) 3,876 / 281
Major Shareholders
Trinugraha Capital & Co (%) 44.0
The NT TST Co S A Equinox (%) 8.0
Credit Suisse (%) 14.0
Free Float (%) 48.0
ICB Industry : Financials / General Financial

ed: JS / sa: MA
Company Guide
BFI Finance Ind
Margin Trends
Rp bn
CRITICAL DATA POINTS TO WATCH 1,800,000
14.0%
1,600,000
1,400,000 13.5%
Financing growth driven by consumer financing and 1,000,000 13.0%
800,000
commercial vehicle leasing. BFIN’s financing growth is 600,000
12.5%
comparatively resilient because of its diverse product 400,000 12.0%

200,000
portfolio. It offers a unique direct financing service through 0 11.5%
independent outlets. BFIN has guided for 10%-15% 2013A 2014A 2015F 2016F 2017F
financing growth this year, driven by consumer financing and Net Interest Income Net Interest Income Margin
commercial vehicle leasing. We expect financing receivables

to conservatively grow by 9% this year. Gross Loan& Growth
Rp bn
30%
Diverse products. BFIN offers a variety of products including 12,000
25%
new/used 2W and 4W financing, as well as commercial 10,000
20%
vehicle and heavy equipment leasing. There is also direct 8,000
6,000 15%
(non-dealer) financing and traditional dealer financing. Non-
4,000 10%
dealer 4W and used/new dealer 4W financing make up the
2,000 5%
bulk of its portfolio. Used 4W/2W financing commands
0 0%
higher margins than new 4W/2W financing, because of 2013A 2014A 2015F 2016F 2017F
higher risks. Non-dealer financing also commands higher
margins than dealer financing but expansion is more difficult
in this segment. Loan-to-Deposit Ratio Trend
175%
12,000
170%
Margins to be stable. BFIN hopes to keep margins at last 10,000 165%
year’s levels. Cost of funds for the new bond issuance may 8,000 160%
trend down with easing liquidity conditions in the market but 155%
6,000
the impact on overall cost of funds may be limited. 150%
4,000
Additionally, BFIN is under pressure to reduce lending rates to 145%
stay competitive and boost loan demand this year. 2,000 140%
135%
2013A 2014A 2015F 2016F 2017F
Non-interest income supported by financing growth. About Loans Deposit Loan-to-Deposit Ratio (RHS)
60% of BFIN’s non-interest income is upfront fees worth 2-

3% of loan size, while 40% are other fees such as late and Cost & Income Structure
transaction penalty charges. 3,000 0.6
2,500 0.5
Provision expenses to be higher this year. The management 2,000 0.4
has warned of rising NPLs and cost of credit because of the
1,500 0.3
weakness in the economy. Asset quality is expected to
1,000 0.2
deteriorate as a result of slower financing growth and
economic pressure on debtors. We expect NPLs to end the 500 0.1
year at 2% and cost of credit at 2.2%. This compares to 0 0

2013A 2014A 2015F 2016F 2017F
1.3% and 1.1% respectively on average over the past 5
years. Write offs are also expected to be higher in 2015.
Operating expense growth will drive up cost-to-income. BFIN Source: Company, DBS Bank
has been more aggressive in expanding its network, adding
around 20 outlets per year. However, this year, the company
only expects to open around 10 outlets due to the economic
slowdown.

Page 61
Company Guide
BFI Finance Ind
Asset Quality
Balance Sheet: 4.0%
Funding is not an issue. Funding is not an issue this year as 3.5%

BFIN continues to utilise bond issuance and bank borrowings.
3.0%
BFIN is currently over-funded because of the slow demand for
2.5%
financing. It is not feasible at present to get fully hedged USD
loans due to the high swap cost. 2.0%
1.5%
NPLs may creep up. Management indicated that NPLs will 1.0%
creep up this year due to the weakness in the economy. We 2013A 2014A 2015F 2016F 2017F
expect NPLs and cost of credit to peak this year and improve in NPL Ratio Provision Charge-Off Rate
subsequent quarters as the economy recovers. The main driver

of NPL is still in the heavy equipment and commodity related ROE (%)
sectors. 16.0%
14.0%
Gearing ratio remains low. The company’s gearing ratio has 12.0%
been low at 1.4-1.5x historically. BFIN is well-capitalised and 10.0%
carries low solvency risk. Going forward, management expects 8.0%
gearing ratio to be 1.5-2.0x. 6.0%
4.0%
2.0%
0.0%
Near-term resilience will support valuation; M&A will boost 2013A 2014A 2015F 2016F 2017F
multiples over the long term. BFIN’s diversified portfolio and

unique direct financing business will continue to deliver
Forward PE Band (x)
sustainable earnings in the long term. BFIN is also an attractive (x)
M&A target given its cheap valuation, and also as it is one of 11.3
few sizeable multifinance companies that is not directly backed 10.3
by a bank. 9.3
8.3 +2sd: 8.2x
Key Risks: 7.3 +1sd: 7.4x
Low commodity prices and stock liquidity. Commodity prices 6.3

Avg: 6.5x
have not recovered, which could be a risk to asset quality for 5.3
‐1sd: 5.7x
mining and related loans. Low trading liquidity may also be an 4.3
‐2sd: 4.8x
issue. Nov-11 Nov-12 Nov-13 Nov-14
Slower-than-expected growth; asset quality pressure. Slower PB Band (x)

growth of consumer financing would be a downside risk to 2.4
(x)
our forecast. Further asset quality pressure throughout the 2.2
year would also increase provision expenses and hurt earnings. 2.0
1.8
1.6 +2sd: 1.61x
COMPANY BACKGROUND 1.4 +1sd: 1.38x
BFI Finance (BFIN) is a financing company that focuses on 1.2
Avg: 1.15x
consumer financing, both dealer generated and direct lending. 1.0
‐1sd: 0.92x
The major shareholder with 44.95% stake is a consortium 0.8
‐2sd: 0.68x
comprising TPG Capital, Northstar Equity Partners and Boy 0.6
Garibaldi Thohir.

Page 62
Company Guide
BFI Finance Ind
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F

Customer Deposits Growth N/A N/A N/A N/A N/A
Avg Cost Of Funds 10.4 9.9 10.5 10.2 10.2

FY Dec 2013A 2014A 2015F 2016F 2017F

Operating Expenses (693) (851) (997) (1,197) (1,440)
Pre-provision Profit 775 945 1,000 1,015 1,083
Provisions (107) (198) (281) (257) (220)
Pre-tax Profit 667 748 719 758 862
Taxation (159) (151) (144) (152) (172)
Net Profit 509 597 575 607 690
Net Profit bef Except 509 597 575 607 690
Negative earnings growth due
Growth (%)
to rising provisions and weak
Net Interest Income Gth 20.9 17.2 14.5 10.6 13.9 financing demand
Net Profit Gth 3.7 17.4 (3.7) 5.5 13.7
Spread 7.2 7.0 7.4 7.9 8.1
Business Mix (%)
Profitability (%)
ROAE Pre Ex. 16.3 17.0 15.2 14.6 15.2
ROAE 16.3 17.0 15.2 14.6 15.2
ROA Pre Ex. 6.8 6.6 5.7 5.4 5.5
ROA 6.8 6.6 5.7 5.4 5.5

Page 63
Company Guide
BFI Finance Ind

FY Dec 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015
Net Interest Income 327 336 349 360 366

Operating Income 448 482 506 527 528
Operating Expenses (204) (259) (251) (265) (277)
Provisions (47) (50) (72) (75) (57)
Pretax Profit 198 172 184 187 194 Booking higher
provisions during times
Taxation (49) (16) (36) (37) (37)
of uncertainty
Net Profit 149 157 147 150 157
Growth (%)
Net Profit Gth 15.7 5.1 (5.8) 1.7 4.9

FY Dec 2013A 2014A 2015F 2016F 2017F
Cash/Bank Balance 225 290 431 610 699

Government Securities 0 0 0 0 0
Inter Bank Assets 0 0 0 0 0
Investment 0 0 0 0 0
Associates 0 0 0 0 0 Loan growth supported
Fixed Assets 414 447 450 450 449 by diversified portfolio
Goodwill 0 0 0 0 0
Other Assets 415 376 376 376 376
Total Assets 8,293 9,671 10,583 11,747 13,361
Customer Deposits 0 0 0 0 0
Others 270 502 469 469 469
Minorities 0 0 0 0 0

Page 64
Company Guide
BFI Finance Ind

FY Dec 2013A 2014A 2015F 2016F 2017F

Asset Quality
NPL / Total Assets 1.6 1.7 2.4 2.0 1.9
Loan Loss Reserve Coverage 79.1 101.0 118.2 166.9 173.2 NPL to tick up this year
Capital Strength
Total CAR 0.0 0.0 0.0 0.0 0.0
Tier-1 CAR 0.0 0.0 0.0 0.0 0.0

3005 Rp
Closing T arget
2505 S.No. Dat e Rat ing
3 Price Price
4
2 1 09 J an 15 2400.00 3100.00 BUY
2005 2 04 May 15 2700 3100 BUY
3 08 J ul 15 2600 3100 BUY
1505 4 03 Nov 15 2600 2900 HOLD
1005
505
5
Nov-14 Mar-15 Jul-15

Page 65
Clipan Finance
Edition 1 Version 2 | Bloomberg: CFIN IJ | Reuters: CFIN.JK Refer to important disclosures at the end of this report
HOLD Cautious On Asset Quality

Last Traded Price: Rp267 JCI : 4,545.86 Cautious on asset quality; downgrade to HOLD. Asset quality
Price Target : Rp 290 (9% upside)
will be under pressure this year because of the slow economy
and sustained weak commodity prices. Provision expense will
also increase after OJK imposed provisioning regulations on
Potential Catalyst: Prudent growth in receivables and stable margins
multifinance companies. We cut FY15F/16F earnings by
Where we differ: We are the only broker covering the stock and sector
12%/4% after raising credit cost and NPL assumptions. We
Analyst expect NPL to come in at 2.1% this year (previously 1.1%). Our
TP is reduced to Rp290 and we downgrade CFIN to HOLD.
LIM Sue Lin +65 6682 3711
suelinlim@dbs.com
Growth traction intact. The management expects financing
receivables to grow by 10-15% in 2015, mainly driven by
consumer financing, of which 90% is derived from used cars.
Price Relative CFIN still sees strong growth in used 4W financing, and the five
Rp Relative Index new branches will also help to achieve its growth target. The
625.0 leasing business will be driven by commercial vehicles and
204
575.0
184 shipping, offsetting heavy equipment leasing which is expected
525.0
475.0
164
to remain muted as long as commodity prices are weak.
144
425.0
124 Factoring will remain slow because of limited utilisation in the
375.0
325.0
104
current economic condition. Positively, CFIN’s gearing ratio
84
275.0 64 remains low at 1.0x. CFIN indicated that funding is not an issue
225.0
44
Oct-15
and it still has unutilised loan facilities at several banks.
Clipan Finance (LHS) Relative JCI INDEX (RHS)
Stable NIM. CFIN expects to reduce cost of funds by c.50bps
this year because of easing liquidity conditions. CFIN has
Forecasts and Valuation historically been selective in choosing the lowest funding rates
FY Dec (Rp bn) 2014A 2015F 2016F 2017F to minimise cost of funds. Lending rate will also be re-priced
Pre-prov. Profit 577 640 735 842 accordingly, thus, leaving NIM largely unchanged.
Net Profit 398 368 460 539
Net Pft (Pre Ex.) 398 368 460 539 Valuation:
EPS (Rp) 105 97 122 143 We have a HOLD recommendation and Rp290 TP for CFIN. Our
EPS Pre Ex. (Rp) 105 97 122 143 TP is based on the Gordon Growth Model and implies 0.3x
EPS Gth (%) 2 (8) 25 17 FY16F BV. Cost-to-income ratio and gearing are better than at
EPS Gth Pre Ex (%) 2 (8) 25 17 BFI Finance, but asset quality is a notch lower. Its low gearing
Diluted EPS (Rp) 105 97 122 143 ratio provides opportunity for growth.
PE Pre Ex. (X) 2.5 2.7 2.2 1.9
Net DPS (Rp) 0 16 20 24 Key Risks to Our View:
Div Yield (%) 0.0 6.1 7.6 9.0 Slow growth and deteriorating asset quality. A key risk to our
ROAE Pre Ex. (%) 13.2 10.8 12.3 12.9 view would be slower-than-expected receivables growth and
ROAE (%) 13.2 10.8 12.3 12.9 further deterioration of asset quality. Low commodity prices
ROA (%) 6.3 5.3 5.8 6.0 and slow realisation of government infrastructure projects will
BV Per Share (Rp) 863 944 1,045 1,164 also soften demand and increase NPL ratios for CFIN’s leasing
P/Book Value (x) 0.3 0.3 0.3 0.2
segment.
Earnings Rev (%): 0 0 0
Consensus EPS (Rp): 97 122 143
Other Broker Recs: B: 2 S: 0 H: 0 At A Glance
Source of all data: Company, DBS Bank, Bloomberg Finance L.P. Issued Capital (m shrs) 3,985
Mkt. Cap (Rpbn/US$m) 1,064 / 77.1
Major Shareholders
Bank Pan Indonesia TBK (%) 54.4
Mackenzie Financial Corporation 13.8
Free Float (%) 31.9
ICB Industry : Financials / General Financial

ed: SGC / sa: MA
Company Guide
Clipan Finance
Margin Trends
Rp bn
CRITICAL DATA POINTS TO WATCH 11.7%
800,000
700,000 11.2%
Earnings Drivers: 600,000
10.7%
Decent financing growth momentum in a challenging 500,000
400,000
environment. The management has been conservative 300,000
10.2%
because they had anticipated the weak macroeconomic 200,000 9.7%

100,000
condition. As such, they expect financing receivables to grow 0 9.2%
10-15% this year, still driven by consumer financing and 2013A 2014A 2015F 2016F 2017F
leasing. About 90% of its consumer financing loan book is Net Interest Income Net Interest Income Margin
derived from used 4Ws, which has shown resilient demand.

Leasing is driven by non-heavy equipment leasing such as Gross Loan& Growth
automotive (commercial vehicles) and shipping. Factoring will Rp bn
40%
continue to struggle in the current environment because of 9,000
8,000 35%
slow offers and repayment of loans. CFIN is venturing into re- 7,000
30%
financing (currently 2-3% of its loan book) after OJK 6,000
5,000 25%
regulation officially allowed multifinance companies to enter 4,000
20%
into other businesses. We expect overall receivables to grow 3,000
2,000
15%
by 12% in FY15. 1,000
0 10%
2013A 2014A 2015F 2016F 2017F
NIM to remain intact. CFIN expects cost of fund to trend
down around 50bps this year due to the improvement in the
liquidity condition in the market. The impact to NIM will not Funding profile
12,000 30%
be immediate since it will only impact the new financing.
10,000 25%
CFIN will also adjust lending rates accordingly to boost
demand and maintain margins. We expect margins to be flat 8,000 20%
this year. 6,000 15%
4,000 10%
Asset quality pressure and regulatory changes will result in 2,000 5%
higher provisions. Provisions is expected to increase this year - 0%
along with a higher NPL ratio to above 2% mainly due to the 2013A 2014A 2015F 2016F 2017F
heavy equipment leasing business resulting from the slow Fund Borrowing Bonds/MTN
economic condition and weak commodity prices. Total Shareholders' Equity Total Funding Growth (%) (YoY)
Management indicated that OJK is regulating multifinance
provisions and write-off policies to be more similar to the Loan-to-Deposit Ratio Trend
10,000 226%
banks. This will cause provisions to rise. We believe that
provision charge off rates will be come in at 2.4% this year 8,000 216%
(historical average: 0.5%) and NPL ratio rise to 2.1% (FY14: 206%
6,000
1.1%). 196%
4,000
186%
Non-interest income is mainly admin fees. Non-interest
2,000
income will continue to grow along with financing, mainly 176%
driven by administration and penalty fees. 166%

2013A 2014A 2015F 2016F 2017F
Keeping cost-to-income ratios low. Cost-to-income ratio has

been historically low at 18-20%, and we expect it to hover at Cost & Income Structure
21% in the near future. CFIN is more conservative with 1,200 0.21
growth and is only looking to expand by 4-5 branches a year. 1,000

0.205
It currently has 45 branches/outlets. 800

0.2
0.195
600 0.19
0.185
400
0.18
200
0.175
0 0.17
2013A 2014A 2015F 2016F 2017F

Page 67
Company Guide
Clipan Finance
Asset Quality
Balance Sheet: 3.0%
Low gearing. CFIN has room to grow because its gearing ratio 2.5%
is only 1x. We expect gearing ratio to remain at current levels.
2.0%
CFIN will utilise medium-term notes and bank borrowings for
1.5%
funding this year. Unlike its competitors, CFIN does not seem
keen to reduce cost of funds through cheaper offshore 1.0%
financing and prefers to stick with safer domestic borrowings 0.5%
without having to deal with exchange rate risks. CFIN plans to 0.0%
increase its share of joint-financing with Panin Bank. 2013A 2014A 2015F 2016F 2017F
NPL Ratio Provision Charge-Off Rate
Close watch on asset quality. Although asset quality is

historically low at around 1%, CFIN has struggled with NPLs Gearing Ratio
1.5
this year because of the slow economy and weak commodity
prices. CFIN will prioritise asset quality over growth this year 1.3
and will remain conservative in booking provisions and
1.1
underwriting loans. As mentioned earlier, we expect NPLs to
increase to 2.1% this year as asset quality will deteriorate in 0.9
its heavy equipment leasing book, coupled with the
0.7
enforcement of write-off policies and NPL recognition by the
OJK. CFIN remains confident of recovering 70% of its loan 0.5
2013A 2014A 2015F 2016F 2017F
loss provision.
Share Price Drivers: ROE (%)

Consistent quality growth. Stable growth and low opex 14.0%
should boost earnings. CFIN is confident of achieving its 12.0%
financing receivables growth target of 10-15% across all 10.0%

business lines as consumer financing and vehicle leasing 8.0%
remains strong. 6.0%
4.0%
Thin liquidity. The thin trading liquidity is a major constraint
2.0%
for many investors, and could cap share price upside.
0.0%
2013A 2014A 2015F 2016F 2017F
Key Risks:
Forward PE Band (x)
Asset quality risk. The extended weak global economy could (x)
6.9
suppress commodity prices. This could continue to affect
6.4
asset quality in its leasing business. The weak economy may 5.9
also pressure asset quality in the consumer financing and 5.4 +2sd: 5.3x
factoring segments. 4.9
+1sd: 4.7x
4.4
Avg: 4.1x
3.9
Further slowdown in factoring. Since factoring is a niche 3.4 ‐1sd: 3.5x
market, demand may be capped, or continue to slow down 2.9 ‐2sd: 2.9x

2.4
like in recent quarters.
1.9
COMPANY BACKGROUND
Clipan Finance (CFIN) provides consumer financing, leasing PB Band (x)
and factoring services. The multi-finance company was 1.1
(x)
established in 1982 and is part of Panin Group; currently, 1.0
54.4% owned by Panin Bank. Its leasing business targets the 0.9
+2sd: 0.85x
transportation, mining and plantation sectors, and consumer 0.8
+1sd: 0.72x
financing focuses on new and used cars. 0.7
0.6 Avg: 0.59x
0.5
‐1sd: 0.46x
0.4
0.3 ‐2sd: 0.33x
0.2

Page 68
Company Guide
Clipan Finance
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F

Customer Deposits Growth N/A N/A N/A N/A N/A
Avg Cost Of Funds 10.0 10.3 9.5 9.1 8.8
Lower cost of funds because
Income Statement (Rp bn) of improving liquidity
FY Dec 2013A 2014A 2015F 2016F 2017F

Operating Income 704 722 805 924 1,059
Pre-provision Profit 575 577 640 735 842
Provisions (61) (50) (150) (122) (123)
Pre-tax Profit 514 527 490 614 719
Taxation (124) (129) (123) (153) (180)
Net Profit 390 398 368 460 539
Net Profit bef Except 390 398 368 460 539
Growth (%)
Net Profit Gth 13.4 1.9 (7.5) 25.2 17.2
Margins, Costs & Efficiency (%) NIM to remain flat this
Spread year
5.7 4.5 4.8 5.0 5.3
Business Mix (%)
Profitability (%)
ROAE Pre Ex. 15.0 13.2 10.8 12.3 12.9
ROAE 15.0 13.2 10.8 12.3 12.9
ROA Pre Ex. 7.1 6.3 5.3 5.8 6.0
ROA 7.1 6.3 5.3 5.8 6.0

Page 69
Company Guide
Clipan Finance

FY Dec 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015

Operating Income 177 188 170 198 193
Provisions (5) (21) (8) (34) (70)
Pretax Profit 137 121 127 122 85
Taxation (33) (32) (32) (30) (22)
Uptick in provisions in
Net Profit 104 90 95 92 63 1H15 due to slow
economic environment
Growth (%) and changes in
Net Interest Income Gth 5.1 (0.9) (10.7) 21.8 2.6 regulation
Net Profit Gth (1.9) (13.5) 5.8 (3.7) (31.3)

FY Dec 2013A 2014A 2015F 2016F 2017F
Cash/Bank Balance 96 36 55 281 471

Government Securities 51 21 0 0 0
Inter Bank Assets 0 0 0 0 0
Investment 0 0 0 0 0
Driven by growth in
consumer financing and
Fixed Assets 42 54 52 49 45 leasing along with new
Goodwill 0 0 0 0 0 re-financing business
Other Assets 61 94 94 94 94
Total Assets 6,074 6,641 7,315 8,425 9,700
Customer Deposits 0 0 0 0 0
Others 163 230 227 238 246
Minorities 0 0 0 0 0

Page 70
Company Guide
Clipan Finance

FY Dec 2013A 2014A 2015F 2016F 2017F

Asset Quality
NPL / Total Assets 1.1 1.1 2.0 1.7 1.3
Provision Charge-Off Rate 1.0 0.8 2.1 1.5 1.3 NPL ratio under pressure
Capital Strength especially in the leasing
Total CAR 0.0 0.0 0.0 0.0 0.0 segments, because of the
slow economy and weak
Tier-1 CAR 0.0 0.0 0.0 0.0 0.0 commodity prices
Rp
Cl o s i n g Ta rg e t
2 S.No . Da te R a ti n g
437 Pri c e Pri c e
1 4 1: 06 Nov 14 445 490 HOLD
3 2: 09 Jan 15 430 490 HOLD
387 3: 10 Feb 15 420 490 HOLD
5
4: 24 Feb 15 412 480 BUY
6 5: 30 Apr 15 400 480 BUY
6: 14 Jul 15 345 480 BUY
337
7: 10 Aug 15 338 410 BUY
7
287
237
Oct-14 Feb-15 Jun-15 Oct-15

Page 71
Industry Focus
DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte
Ltd, its respective connected and associated corporations and affiliates (collectively, the “DBS Vickers Group”) only and no part of this document
may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to
change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard
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persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have
positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and
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Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it
may not contain all material information concerning the company (or companies) referred to in this report.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
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The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
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analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended
in this report (“interest” includes direct or indirect ownership of securities).
COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd., DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), their subsidiaries and/or other affiliates do not have
proprietary positions in the securities recommended in this report as of 31 Oct 2015.
2. DBS Bank Ltd does not market make in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.
3. Compensation for investment banking services:
DBS Bank Ltd., DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12
months for investment banking services from Bank Central Asia, Bank Danamon, Bank Tabungan Negara and Bank Rakyat
Indonesia as of 31 October 2015.
DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of
Page 12
Industry Focus
securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons
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32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an
Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the
contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS
Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.
Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are
only intended for institutional clients only and no other person may act upon it.
United This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the
Kingdom meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research
distributed in the UK is intended only for institutional clients.
Dubai This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC
rd
Branch) having its office at PO Box 506538, 3 Floor, Building 3, East Wing, Gate Precinct, Dubai International
Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial
Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and
no other person may act upon it.
United States This report was prepared by DBS Bank Limited. DBSVUSA did not participate in its preparation. The research
analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of
DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation,
communications with a subject company, public appearances and trading securities held by a research analyst. This
report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report
may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other
institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who
wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.
Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for
jurisdictions qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such
jurisdictions.
DBS Bank Ltd.

12 Marina Boulevard, Marina Bay Financial Centre Tower 3
Singapore 018982
Tel. 65-6878 8888
Company Regn. No. 196800306E
Page 13

Insights On Indonesian Banks - DBS

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Insights On Indonesian Banks - DBS

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Indonesia Industry Focus

Indonesian Banks and Multifinance

DBS Group Research . Equity 4 Dec 2015

A Year of Two Halves JCI : 4,545.86

transition phase. Our other ratings for the banks remain

would be best to stay on the sidelines for now.

Outlook for banks remain challenging in 2016 3

Multifinance companies face subdued growth 6

Valuation and recommendation 8

Bank Negara Indonesia 30

Bank Rakyat Indonesia 36

Bank Tabungan Negara 42

Bank Tabungan Pensiunan Nasional 48

0.0% 0.0% 0.0%

Source: Companies, DBS Bank Source: Companies, DBS Bank

Source: Companies, DBS Bank Source: Companies, DBS Bank

Absolute NPL NPL ratio

Heavy equipment leasing continues to be under pressure. We ‐

Indonesia Multifinance: 2W sales volume Indonesia Multifinance: Asset quality

Positive: expect stable NIM. Multifinance companies indicated

requirements but will likely start to implement some of these 0.0%

NPF ratios since there are no regulations on write-off policies 2.1%

ratio and provisioning due to stricter regulations by OJK. The

equipment leasing and commodity related areas.

Indonesian Banks: Peer comparison

Indonesian Multifinance Companies: Peer comparison

DBS Group Research . Equity 4 Dec 2015

BUY Premium Valuation Justified

ASIAN INSIGHTS VICKERS SECURITIES

Management expects loan demand to stay sluggish in a still

Net Interest Income Non-interest Income Cost-to-income Ratio

Source: Company, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES

strongly correlated with GDP growth. Historically, CASA 0.4%

been an issue for BBCA.

ratio in our Indonesian banking universe. The bank has 19.0%

always focused on asset quality rather than liquidity and 18.0%

growth, and maintained a conservative loan loss coverage 17.0%

Share Price Drivers: 14.0%

pressure. However, near term upside may be capped due to

cautious stance. 5.0%

Key Risks: 0.0%

Source: Company, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES

Income Statement (Rp bn)

Net Interest Income 26,425 32,027 35,643 39,102 43,554

Source: Company, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES

Quarterly / Interim Income Statement (Rp bn)

Net Interest Income 8,153 8,469 8,500 8,685 9,089

Balance Sheet (Rp bn)

Cash/Bank Balance 63,484 71,305 77,007 93,279 108,925

Customer Deposits 409,486 448,203 490,591 545,719 615,284

Source: Company, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES

Financial Stability Measures (%)

Source: Company, DBS Bank

Target Price & Ratings History

Source: Company, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES

DBS Group Research . Equity 4 Dec 2015

ASIAN INSIGHTS VICKERS SECURITIES