Bank Mandiri needs higher NPL buf­fer

The Pak Banker - - COMPANIES/BOSS -

Bank Mandiri's FY15 net profit of IDR20.3t (+2.3 per­cent YoY) meets May­bank Kim Eng's pre­vi­ous fore­cast of IDR19.8t.

As­set qual­ity im­proved af­ter ag­gres­sive loan re­struc­tur­ing in 2Q-3Q15. But risks of higher NPLs re­main. The govern­ment is also call­ing for lower lend­ing rates to speed up In­done­sia's eco­nomic re­cov­ery.

Loans grew 12.2 per­cent YoY, with cor­po­rate lend­ing now at 33 per­cent of its port­fo­lio. Com­bined with ris­ing CASA on the back of its whole­sale de­posits and re­cov­ery in a sin­gle ac­count, NIM inched up to 5.9 per­cent from 5.6 per­cent in 3Q15. Ag­gres­sive re­struc­tur­ing in 2Q-3Q15 brought down NPLs to 2.6 per­cent by end- 2015 from its 2.8 per­cent peak at end-3Q15. This was fol­lowed by ris­ing cov­er­age to 145 per­cent from 136 per­cent as BMRI main­tains con­ser­va­tive pro­vi­sion­ing.

We think the higher NPL buf­fer is nec­es­sary as BMRI still faces as­set qual­ity risks, es­pe­cially in its com­mer­cial seg­ment. NPLs here rose de­spite strong 12 per­cent YoY growth and huge write-offs in 2015. Hence, we main­tain our 3 per­cent NPL as­sump­tion for end-2016, at the up­per end of man­age­ment's fore­cast range. Our 4 per­cent YoY EPS-growth fore­cast is un­changed.

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