27
EQUITY RESEARCH CIPTADANA SEKURITAS ASIA Please see analyst certification and other important disclosures at the back of this report 2 BTPS - Initiate Coverage - 17 May 2018 BUY BTPN Syariah TP: 2,170 (+43.2%) Seizing growth in niche mass market The only bank serves ‘productive poor’ Bank Tabungan Pensiunan Nasional Syariah (BTPS) is the only bank in Indonesia that serves mass market through ultra-micro financing (Rp2.1 mn/customer average size). The need of mass market financing in Indonesia represents a huge potential growth as it is estimated that there are 45 mn low-income people in productive age (17-65 ages) who have potential to run productive work. Most of them live in remote areas and lack of financial literacy. Therefore, BTPS taps this market by using a very distinctive approach by targeting only women borrowers in remote area and came with grouping and regular meetings system. Distinctive financing approach and higher than industry margin In addition to being uncollateralized, the financing offers many advantages that customer could not receive from other banks, most notably: accessibility, convenience lending process, trainings and health educations, free of charge saving deposit, and life insurance for borrowers and spouse. All of these advantages justify the thick asset yield. Hence BTPS could enjoy NIM as high as 35.7% in 2017, far higher than industry average of 5.3%. Meanwhile to facilitate transaction banking, BTPS has built branchless banking network through BTPN Wow iB. Thus all customers’ transactions are facilitated through branchless banking and meetings, reducing the requirement to set up branch offices or expand ATMs network. Strong balance sheet expansion, solid asset quality We believe that BTPS is still in its early cycle of balance sheet expansion. Total financing grew by CAGR of 34.3% in 2014-2017, and we expect it to grow further by 12-19% annually in 2018-2020F. More financing volume would come from larger customer acquisition, increase in loan size average (customers can upsize their plafond by 100% after timely payment), and operating area expansion (currently only operates in 23 provinces). In the asset quality side, non-performing financing (NPF) came at 1.7% of total financing as of 1Q18. We expect a higher formation of NPF going forward following the growing financing base, but overall asset quality should remain solid as BTPS maintains discipline approach under ‘shared liabilities’ scheme and meeting disciplines. Operational efficiency should increase as BTPS continues to leverage on more automation along with higher financing volume. Overall, we expect BTPS profitability to remain strong with annual earnings CAGR of 25% in 2017-2020F. Initiate with Buy recommendation and target price of Rp2,170/share We initiate our coverage on BTPS with Buy rating and target price of Rp2,170/share. BTPS currently trades at 2.3x 2019F PBV, at par with its micro financing regional peers of 2.3x 2019F PBV, and slightly higher than Indonesian banks average at 2.1x 2019F PBV. Our target price implies 3.3x 2019F PBV. We think our fair PBV multiples conservative considering BTPS could deliver 24.3-29.8% ROE in 2018-2020F, significantly higher compared to both micro financing and Indonesian banks peers. Key risks to our forecasts are: 1) the entrance new competitors in mass market segment, 2) lower-than-expected financing balance due to slow disbursement, and 3) worse-than-expected NPF on unfavorable economic condition or indiscipline disbursement practice. Sector Banking Bloomberg Ticker BTPS IJ Share Price Performance Last Price(Rp) 1,515 Avg. Daily T/O(Rpbn/USDmn) 47.1/3.4 3m 6m 12m Absolute (%) n/a n/a n/a Relative to JCI (%) n/a n/a n/a 52w High/Low price(Rp) 1,540/1,200 Outstanding Shrs (mn) 7,704 Mkt. Cap (Rpbn/USDmn) 11,633/830 Estimated Free Float (%) 10.0 Major Shareholders PT Bank Tabungan Pensiunan Nasional Tbk. 70.0% PT Triputra Persada Rahmat 20.0% Erni Marsella Siahaan, CFA +62 21 2557 4800 ext. 919 [email protected] http://www.ciptadana.com 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 200 400 600 800 1,000 1,200 1,400 1,600 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 BTPS 1yr Rel. to JCI (RHS) Exhibit 1 : Financial Highlights Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Net Interest Income (Rpbn) 1,936 2,560 3,129 3,675 4,168 Net Profit (Rpbn) 412 670 922 1,133 1,324 EPS (Rp) 59.5 96.7 119.7 147.1 171.9 EPS growth (%) 143.8 62.5 23.8 22.9 16.9 BVPS (Rp) 229.7 325.2 509.4 652.2 762.2 PER (x) 25.4 15.6 12.6 10.3 8.8 PBV (x) 6.6 4.6 3.0 2.3 2.0 ROA (%) 6.6 8.1 8.8 8.8 8.9 ROE (%) 29.9 34.8 29.8 25.3 24.3 Dividend Yield (%) 0.0 0.0 0.0 0.0 3.9 Source : BTPS, Ciptadana Estimates

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Page 1: EQUITY RESEAR CH - ciptadana-securities.comciptadana-securities.com/system/researches/files/000/000/491/... · Bank Tabungan Pensiunan Nasional, Tbk (70%),a bankthatfocuses in pensioners

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

Please see analyst certification and other important disclosures at the back of this report 2

BTPS - Initiate Coverage - 17 May 2018

BUY BTPN SyariahTP: 2,170 (+43.2%) Seizing growth in niche mass market

The only bank serves ‘productive poor’Bank Tabungan Pensiunan Nasional Syariah (BTPS) is the only bank in Indonesia thatserves mass market through ultra-micro financing (Rp2.1 mn/customer average size). Theneed of mass market financing in Indonesia represents a huge potential growth as it isestimated that there are 45 mn low-income people in productive age (17-65 ages) whohave potential to run productive work. Most of them live in remote areas and lack offinancial literacy. Therefore, BTPS taps this market by using a very distinctive approach bytargeting only women borrowers in remote area and came with grouping and regularmeetings system.

Distinctive financing approach and higher than industry marginIn addition to being uncollateralized, the financing offers many advantages that customercould not receive from other banks, most notably: accessibility, convenience lendingprocess, trainings and health educations, free of charge saving deposit, and life insurancefor borrowers and spouse. All of these advantages justify the thick asset yield. HenceBTPS could enjoy NIM as high as 35.7% in 2017, far higher than industry average of 5.3%.Meanwhile to facilitate transaction banking, BTPS has built branchless banking networkthrough BTPN Wow iB. Thus all customers’ transactions are facilitated through branchlessbanking and meetings, reducing the requirement to set up branch offices or expand ATMsnetwork.

Strong balance sheet expansion, solid asset qualityWe believe that BTPS is still in its early cycle of balance sheet expansion. Total financinggrew by CAGR of 34.3% in 2014-2017, and we expect it to grow further by 12-19% annuallyin 2018-2020F. More financing volume would come from larger customer acquisition,increase in loan size average (customers can upsize their plafond by 100% after timelypayment), and operating area expansion (currently only operates in 23 provinces). In theasset quality side, non-performing financing (NPF) came at 1.7% of total financing as of1Q18. We expect a higher formation of NPF going forward following the growing financingbase, but overall asset quality should remain solid as BTPS maintains discipline approachunder ‘shared liabilities’ scheme and meeting disciplines. Operational efficiency shouldincrease as BTPS continues to leverage on more automation along with higher financingvolume. Overall, we expect BTPS profitability to remain strong with annual earnings CAGRof 25% in 2017-2020F.

Initiate with Buy recommendation and target price of Rp2,170/shareWe initiate our coverage on BTPS with Buy rating and target price of Rp2,170/share. BTPScurrently trades at 2.3x 2019F PBV, at par with its micro financing regional peers of 2.3x2019F PBV, and slightly higher than Indonesian banks average at 2.1x 2019F PBV. Ourtarget price implies 3.3x 2019F PBV. We think our fair PBV multiples conservativeconsidering BTPS could deliver 24.3-29.8% ROE in 2018-2020F, significantly highercompared to both micro financing and Indonesian banks peers. Key risks to our forecastsare: 1) the entrance new competitors in mass market segment, 2) lower-than-expectedfinancing balance due to slow disbursement, and 3) worse-than-expected NPF onunfavorable economic condition or indiscipline disbursement practice.

Sector Banking

Bloomberg Ticker BTPS IJ

Share Price Performance

Last Price(Rp) 1,515

Avg. Daily T/O(Rpbn/USDmn) 47.1/3.4

3m 6m 12m

Absolute (%) n/a n/a n/a

Relative to JCI (%) n/a n/a n/a

52w High/Low price(Rp) 1,540/1,200

Outstanding Shrs (mn) 7,704

Mkt. Cap (Rpbn/USDmn) 11,633/830

Estimated Free Float (%) 10.0

Major Shareholders

PT Bank Tabungan PensiunanNasional Tbk.

70.0%

PT Triputra Persada Rahmat 20.0%

Erni Marsella Siahaan, CFA+62 21 2557 4800 ext. 919

[email protected]

http://www.ciptadana.com

0%10%20%30%40%50%60%70%80%90%100%

0

200

400

600

800

1,000

1,200

1,400

1,600

May

-17

Jun-

17Ju

l-17

Aug-

17Se

p-17

Oct

-17

Nov

-17

Dec

-17

Jan-

18Fe

b-18

Mar

-18

Apr-

18M

ay-1

8

BTPS 1yr Rel. to JCI (RHS)

Exhibit 1 : Financial Highlights

Year to 31 Dec 2016A 2017A 2018F 2019F 2020F

Net Interest Income (Rpbn) 1,936 2,560 3,129 3,675 4,168

Net Profit (Rpbn) 412 670 922 1,133 1,324

EPS (Rp) 59.5 96.7 119.7 147.1 171.9

EPS growth (%) 143.8 62.5 23.8 22.9 16.9

BVPS (Rp) 229.7 325.2 509.4 652.2 762.2

PER (x) 25.4 15.6 12.6 10.3 8.8

PBV (x) 6.6 4.6 3.0 2.3 2.0

ROA (%) 6.6 8.1 8.8 8.8 8.9

ROE (%) 29.9 34.8 29.8 25.3 24.3

Dividend Yield (%) 0.0 0.0 0.0 0.0 3.9

Source : BTPS, Ciptadana Estimates

Page 2: EQUITY RESEAR CH - ciptadana-securities.comciptadana-securities.com/system/researches/files/000/000/491/... · Bank Tabungan Pensiunan Nasional, Tbk (70%),a bankthatfocuses in pensioners

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

Please see analyst certification and other important disclosures at the back of this report 3

BTPS - Initiate Coverage - 17 May 2018

Company backgroundWe initiate our coverage on Bank Tabungan Pensiunan Nasional Syariah (BTPS) with Buyrecommendation and target price of Rp2,170/share. BTPS is the sixth largest sharia bank inIndonesia with total assets of Rp9.2tn as of Dec-17. The majority of shares are owned by PTBank Tabungan Pensiunan Nasional, Tbk (70%), a bank that focuses in pensioners and MSMEloan segment. BTPS vision is “To be the best Islamic Bank, for financial inclusion, making adifference in lives of millions of Indonesians”. BTPS was established in 1991 under the nameof PT Bank Purba Danarta. In 2009, the bank changed its name to PT Bank Sahabat PutraDanarta. In 2014, the bank merged with PT Bank Tabungan Pensiunan Nasional Syariah, aspin off from Sharia Unit of BTPN, to form new entity and was converted into sharia bank.After conversion into sharia bank, the bank started to expand into mass market aggressivelyand builds its financing portfolio to reach Rp6.2 tn as of 1Q18. On 8 May 2018, BTPS wentpublic and sold 10% of shares to public.

Exhibit 2: Indonesian sharia banks by total assets as of Dec-17

Source : Company and Ciptadana Sekuritas Asia

Exhibit 3: BTPS ownership as of May-2018

Source : Company and Ciptadana Sekuritas Asia

87.9

61.8

34.831.5

22.7

9.2 8.6 7.7 7.3 7.0 5.9

-

10

20

30

40

50

60

70

80

90

100

MandiriSyariah

Muamalat BNI Syariah BRI Syariah Bank Aceh BTPNSyariah

PaninSyariah

BukopinSyariah

BJB Syariah MegaSyariah

BCA Syariah

Rp tn

SMFGSumitomo

Corporation

SMBCSummit Global

Capital B.V.Public

BTPN

BTPN Syariah

PT Triputra PersadaRahmat

PT Sukses SaranaMakmur

PT TriputraInvestindo Arya

Public

70%

100% 100%

40%40% 20%

75% 25%

20% 10%

Page 3: EQUITY RESEAR CH - ciptadana-securities.comciptadana-securities.com/system/researches/files/000/000/491/... · Bank Tabungan Pensiunan Nasional, Tbk (70%),a bankthatfocuses in pensioners

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

Please see analyst certification and other important disclosures at the back of this report 4

BTPS - Initiate Coverage - 17 May 2018

The only player in ‘productive poor’ market

BTPS is the only bank in Indonesia that enters mass market financing and distributes loan inultra-micro size. Aside from BTPS, the bank with the most exposure to rural segment is BankRakyat Indonesia (BBRI). However BTPS taps a quite different market from BBRI with smallerloan size at only Rp2.1 mn/customer average ticket size, far lower than BBRI’s subsidizedmicro loan (KUR) at Rp25 mn/customer. This segment is mostly low-income families ortermed as ‘productive poor’ who have no banking access. No other banks enter the segmentat the moment due to its lack of collateral structure and large requirement of network andhuman capital to reach the segment. However the productive poor segment actually haseagerness to develop a productive business. Hence BTPS provides financing with verydistinctive approach in order to accomodate the financing needs. BTPS was inspired by thebusiness model of Grameen Bank which has sustainably provided financing for that segmentin Bangladesh since 1983.

Exhibit 4: Productive poor segments

Source : Company

BTPS entered the fifth year in providing financing to productive poor customers and currentlyserves 2.9 mn of borrowers in 23 provinces in Indonesia. Most of the portfolio (71%) is inJava area, mainly on West Java Province; while the second largest is in Sumatra (21%), andthe rest is in Bali/Nusa Tenggara, Borneo, and Sulawesi.

Exhibit 5: BTPS network in 23 provinces in Indonesia

Source : Company

Page 4: EQUITY RESEAR CH - ciptadana-securities.comciptadana-securities.com/system/researches/files/000/000/491/... · Bank Tabungan Pensiunan Nasional, Tbk (70%),a bankthatfocuses in pensioners

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

Please see analyst certification and other important disclosures at the back of this report 5

BTPS - Initiate Coverage - 17 May 2018

In the funding side, BTPS collects customer deposits from both mass market and affluentindividuals/institutions. BTPS offers a range of funding products consists of (i) Wadiahdemand deposits and saving deposits and (ii) the Mudharabah saving and time deposits. Onthe mass market segment, customer deposits are collected through basic saving account onbranchless banking product under BTPN Wow iB.

BTPS is also supported by solid management expertise in micro. Its CEO, Ms. RatihRachmawaty, has a respectable experience of at least 15 years experience in micro banking.She is one of the key founders of Bank Danamon’s Self-Employed Mass Market (SEMM) orDanamon Simpan Pinjam and has also previously handled the micro business in BTPN underMitra Usaha Rakyat (MUR). Not only leveraging on her past experience, Ms. Ratih has activelystudied micro banking best practices in various countries. Besides Ms. Ratih Rachmawaty,two other directors, Mr. Mulia Salim and Mr. Taras Siregar, have also strong experience inmicro banking. Acknowledging the need and the potential growth of mass market financingin Indonesia, we see that management will stay focused on its core productive poorfinancing.

Page 5: EQUITY RESEAR CH - ciptadana-securities.comciptadana-securities.com/system/researches/files/000/000/491/... · Bank Tabungan Pensiunan Nasional, Tbk (70%),a bankthatfocuses in pensioners

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

Please see analyst certification and other important disclosures at the back of this report 6

BTPS - Initiate Coverage - 17 May 2018

Industry review and outlook

Positive outlook in sharia bankingSharia banking industry in Indonesia experienced higher than average financing growth overthe last few years which boosted their market share from 5.4% in 2014 to 6.0% in 2017.Sharia banking in Indonesia is still underpenetrated in our view, as compared to 28% shariabanking market share in neighboring Malaysia. We believe sharia banking in Indonesia willhave positive outlook going forward, considering that non-performing financing (NPF) ratioalready peaked in the past at 4.34% in 2015 and improving to 3.87% in 2017.

Exhibit 6: Sharia banking in Indonesia expands its market share

Source : OJK and Ciptadana Sekuritas Asia

Exhibit 7: Sharia banking NPF continues improving

Source : OJK and Ciptadana Sekuritas Asia

However to understand the industry where BTPS operate at, we could not analyze by lookinginto the sharia banking industry only as the structure of its ultra micro financing is largelydifferent from banking products in general.

199213

248

286

218231

279

335

5.4% 5.2%5.7%

6.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

-

50

100

150

200

250

300

350

400

450

500

2014 2015 2016 2017

Rp tnTotal financing (LHS) Total customer deposit (LHS) Sharia financing market share (RHS)

4.33 4.34

4.16

3.87

3.00

3.20

3.40

3.60

3.80

4.00

4.20

4.40

4.60

2014 2015 2016 2017

%

Page 6: EQUITY RESEAR CH - ciptadana-securities.comciptadana-securities.com/system/researches/files/000/000/491/... · Bank Tabungan Pensiunan Nasional, Tbk (70%),a bankthatfocuses in pensioners

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

Please see analyst certification and other important disclosures at the back of this report 7

BTPS - Initiate Coverage - 17 May 2018

The need of financing in unbankable mass marketAround 10.1% of its Indonesia’s population lives below poverty line (spending less thanUSD0.95 per day). By using a higher standard of spending at USD3.10/day, the portion ofpeople living below poverty line increases to 35.1% of total citizen. BTPS estimates that thereare 45 mn people in productive age (17-65 years of age) whose daily spending less thanUSD2.50. This segment has the potential to run a more productive life but most of them isliving in remote areas and has no financial literacy (unbankable). They could only accessfinancing from small scale non-bank institution or ‘loan sharks’ that came with high interestrates. The lenders also do not provide training, education about entrepreneurship or anyinsurance.

This traditional scheme mostly failed to improve overall financial conditions of the borrowersdue to some reasons: 1) heavy burden on interest rate charge that could achieve as high as200% annually and 2) loan is often used for unproductive purposes given lack of knowledgeand discipline character of borrower. The practices often lead to high rate of payment failure,which lead to borrowers being trapped in a cycle of debt and even getting poorer. Thereforethe potential demand of formal and healthier financing to this segment is still huge and abasic necessity.

In term of banking access, Indonesia is also under penetrated in term of financial inclusion.According to World Bank, only 36% of Indonesians have a banking account and only 13%have experienced a formal borrowing. Thus, the room for financial inclusions products suchas branchless banking is actually still a basic necessity in Indonesia.

Exhibit 8: Percentage of people living below national poverty line in Indonesia

Source : BPS and Ciptadana Sekuritas Asia

In other countries, financing to non-financially literate market has been started a long timeago. The earliest practice was pioneered by Grameen Bank in Bangladesh in 1983. Thefounder, Mr. Mohammed Yunus, was driven by the conviction that the poor societies were notfundamentally unworthy of loan. Mr. Yunus reasoned that the poor were lacking in resourcesbut not in trustworthiness. He believed they would be able and inclined to honor loans, if onlygiven a reasonable interest rate. An important part of the Grameen Bank’s business model is‘solidarity group lending’ which serve as a guarantee that loans would be repaid on time.This method was essentially limited to women, as women are considered more reliable atfulfilling their obligations, responsible in family wellbeing, and better in cooperates with theirpeers. Many other countries tries to replicate Grameen Bank business model most notablyMexico with Compartamos Banco, and India with Bharat Financial Inclusion Ltd.

19.118.4 18.2

17.416.7

16.0

17.8

16.6

15.4

14.213.3

12.411.7 11.5

11.0 11.110.7

10.1

0.0

5.0

10.0

15.0

20.0

25.0

%

Page 7: EQUITY RESEAR CH - ciptadana-securities.comciptadana-securities.com/system/researches/files/000/000/491/... · Bank Tabungan Pensiunan Nasional, Tbk (70%),a bankthatfocuses in pensioners

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

Please see analyst certification and other important disclosures at the back of this report 8

BTPS - Initiate Coverage - 17 May 2018

Exhibit 9: BTPS vs. other micro financing in various countries

Source : Companies and Ciptadana Sekuritas Asia

The financing to this market has its own characteristics that differentiate from commercialbank in general, most notably: 1) easy accessibility for the non-financially literate 2) higherand stickier asset yield, 3) intense after-credit relationship between loan officer andborrowers, 4) relatively shorter duration of financing, and 5) no physical collateral to back upthe loan.

BTPN Syariah Grameen BankCompartamos

Banco

BharatFinancial

Inclusion Ltd*

Country Indonesia Bangladesh Mexico India

Year of initiation 2014 1983 1990 1997

TypeCommercial

bankNon-

commercialbank

Commercialbank

Commercialbank

Total microfinancing (USD mn) 438.6 1,620.0 1,214.1 1,100.1Number of customer (mn) 2.9 8.9 2.7 5.3Avg. ticket size (USD) 151.2 181.5 456.6 206.6Number of Centres (Sentra) (k) 188.0 140.7 N/A 279.3Number of employees (k) 12.8 20.1 17.1 14.8Avg. customers per Centre (Sentra) 15.4 63.5 12-50 19.1Avg. customers per employee 227.3 443.3 155.5 360.8

NIM (%) 35.7% 15.0% 68.0% 17.1%Cost-to-income (%) 55.5% 80.0% 75.7% 50.0%NPL (%) 1.7% 0.4% 4.4% 6.0%

*) Previously under the name of SKS Microfinance

Page 8: EQUITY RESEAR CH - ciptadana-securities.comciptadana-securities.com/system/researches/files/000/000/491/... · Bank Tabungan Pensiunan Nasional, Tbk (70%),a bankthatfocuses in pensioners

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

Please see analyst certification and other important disclosures at the back of this report 9

BTPS - Initiate Coverage - 17 May 2018

Business ModelDistinctive approach in productive poor lendingBTPS primarily serves productive poor customers living in remote areas. Thus the financingpractice is largely different from other banks in general. The financing process in BTPS isintegrated under one program which called Paket Masa Depan (PMD) or Package for a BetterFuture. PMD targets groups of women living in rural villages, who have the dream anddetermination to change their lives. The program provides these women with opportunity tohave access to normal banking facilities that they would normally not have. PMD financingsize is Rp1-3 mn, which have been returned through two-week installment payment over oneyear period of time. At the end of the period, the customer could receive new financing for upto 100% of the initial plafond.

Exhibit 10: BTPS financing process under PMD

Source : Company and Ciptadana Sekuritas Asia

Another distinctive approach is the membership system under the ‘Sentra’. Every Sentra inBTPS consists of 3-5 groups, in which every group has an average of five individuals. BTPShad a 188k of ‘Sentra’ as of Dec-17. There is mechanism of shared liabilities in every groupwhere every member set aside a certain amount of fund (solidarity money) to be used whenany member is unable to pay the installment. Thus five members are considered as idealbecause it is small enough to ensure an optimum level of joint responsibility and largeenough to prevent the default of one member from causing the whole group to collapse.

On every two weeks, all group’s member gather in Sentra meeting. The venue of meeting isprovided by the groups itself, and the time and day arrangement is also agreed among thegroups. There are cash management systems in every Sentra meeting, where bank’s officersare assisted by third-party vendors to manage the cash disbursement. With this approach,and together with the branchless banking network, BTPS no need to build branch offices orexpands ATMs, as all transaction has been facilitated through meetings and branchlessbanking. The cost of providing financing to those remote areas could also be lower.

The Sentra meeting aims to nurture discipline, through compliance in attending Sentrameeting and paying timely installment. Small detail such as seating arrangement is alsoessential as it habituate the discipline character. But not only discipline, relationship betweenall the participants is also main intention. BTPS’s loan officers are mostly high schoolgraduate/undergraduate young woman while almost all borrowers are married women.Therefore family-like relationship is bonded between loan officers and members.

Customer repay thefinancing throughinstallments every

meeting

- Convenience and accessibility (loanofficer come to borrowers vs. otherwisein other banks)

- ‘Daya’ program (entrepreneurshiptraining, health education, and market &community access)

- Saving-conscious behaviour- Life insurance for borrower and spouse- Financial support (donation) upon of

death of spouse

- Attend ‘sentra’ meeting every 2 weeks onagreed day

- Mandatory saving- Shared liabilities under ‘solidarity

money’- Punishment system (such as late

meeting charge)

Customer entitled toupsize new financingup to 100% of initial

plafondThe benefits

The diciplines

Bank explores for newcommunities based on BPSdata, site visits anddiscussion with local leaders

1. Pre-marketing /introduction to localsocieties

2. Customer selectionprocess

3. Membership basictraining (mandatory for 5days)

4. Financing disbursement

Enter the next cycle

Page 9: EQUITY RESEAR CH - ciptadana-securities.comciptadana-securities.com/system/researches/files/000/000/491/... · Bank Tabungan Pensiunan Nasional, Tbk (70%),a bankthatfocuses in pensioners

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

Please see analyst certification and other important disclosures at the back of this report 10

BTPS - Initiate Coverage - 17 May 2018

Another essential activity in the meeting is to educate members about the need to havesaving for which they will have to work hard to earn more money to save. ‘Daya’ activities arenow part of the Sentra meeting aimed at inculcating the saving-conscious behavior usingsimple mobile phone through branchless banking. The bank educates customers on how tosave money better, which in the long term would impact in better saving behaviour andhigher saving balance, in our view.

Exhibit 11: Praying activities on Sentra meetings

Source : Company

Exhibit 12: Seating arrangement to nurture discipline

Source : Company

Page 10: EQUITY RESEAR CH - ciptadana-securities.comciptadana-securities.com/system/researches/files/000/000/491/... · Bank Tabungan Pensiunan Nasional, Tbk (70%),a bankthatfocuses in pensioners

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

Please see analyst certification and other important disclosures at the back of this report 11

BTPS - Initiate Coverage - 17 May 2018

Leveraging on technologyBTPS leverages on simple technologies in branchless banking under ‘BTPN Wow iB’ tofacilitate banking transaction to non-financial literate societies. BTPN Wow iB’s main featureis its practical and affordable nature which only use simple (non-smart phone) mobile phoneand is supported by branchless service agents who serve as a representative of BTPS. BTPScurrently has 120k of agents and has distributed many affordable phones (by sellingapproximately 1.1 mn of mobile phones in the past) to facilitate BTPN Wow iB. Customerscould do many activities namely: opening an account, saving and withdrawing money,transferring money, and paying bills. Customers could easily access those banking servicesthrough agents or by typing *247# from their mobile phone. With these services, even thenon-financial literate could enjoy easy, cheap and safe banking services. They could alsoperform financial transaction without having to wait for the schedule of Sentra meeting.Besides in the transactional side, BTPS also utilizes technology in its financing process inorder to increase the automation. All of these initiatives in technology are the keydifferentiation between BTPS and most of other micro financings in other developingcountries, in our view.

Exhibit 13: BTPN Wow iB’s feature

Source : Company and Ciptadana Sekuritas Asia

Summary of Porter five forces and SWOT analysisWe summarize our porter five forces analysis on BTPS along with the strengths,weaknesses, opportunities, and threats (SWOT) analysis based on current environment.

Exhibit 14: Porter Five C’s Analysis

Source : Company and Ciptadana Sekuritas Asia

• Fast: no queuing, any transactions can be done anytimeanywhere, transfer and bill payments can be donethrough a mobile phone

• Cheap: no monthly fees, no minimum balance and nominimum deposit, phone credit top-up according to thenominal (except for Telkomsel)

• Easy: opening an account only by registering phonenumber and ID card number, accessible through allGSM mobile phone by typing *247# from mobile phone,saving and withdrawing from nearest agents

• Safe: any transaction must use secret pin code; BTPNWow iB is a basic saving account which is regulated andmonitored by OJK and is guaranteed by the DepositInsurance Corporation (LPS)

BTPN Wow iB’s feature

Barriers to entry:- Strong micro financing culture and

discipline- Human capital & network

requirements- Transactional activity requires

branchless banking presence

Rivalry:- Niche market in mass market, no

rivalry from other banks inIndonesia

Funding:- Fully funded by using customer

deposits from affluent customerand basic saving account throughBTPN Wow iB

- Other alternatives of funding in thefuture: non-customer deposit(wholesale funding)

Lending:- Huge market size from 45 mn

productive poor people (17-65 age)

Subtitute of products:- Financing from loan sharks , non-

bank institutions, pawn place &others

- Government initiatives under BankWakaf Mikro

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EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

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BTPS - Initiate Coverage - 17 May 2018

Exhibit 15: BTPS SWOT analysis

Source : Company and Ciptadana Sekuritas Asia

- Sticky and higher than industry NIM- Solid managemement expertise in micro financing- Strong culture on unbankable mass market- Strong support from parents company (BTPN)- Tapping into branhless banking to facilitate

transaction- Tapping into technology to increase efficiency- Ample liquidity

Strengths

- High cost to provide services compared to generalservice bank

- High rate of loan run-off (avg. maturity <1.5 year).Any slowdown on loan disbursement may resultin lower financing balance.

- NPF trending up

Weaknesses

- Very huge market of 45 mn of productive poormarket in Indonesia

- Higher customer deposits from mass market

Opportunities

- Competition from new microfinancing institutions(i.e. non-bank financial institutions, Bank WakafMikro from government, cooperation, etc)

Threats

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EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

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BTPS - Initiate Coverage - 17 May 2018

Financial analysis and forecastStill in the early stages of balance sheet expansionBTPS financing portfolio grew by CAGR of 34.3% in 2014-2017. The stellar financing growthwas achieved through more customer acquisition and increase in the average loan size.Number of customers nearly doubled from 1.5 mn in 2014 to 2.9 mn in 2017. In term of loansize per customer, it has steadily increased from Rp1.7 mn per customer in 2014 to Rp2.1mn in 2017.

In terms of average loan size, we expect a positive outlook for average loan per customer.Financing in BTPS is offered in a sustained basis, whereby customers who have completedthe first cycle with a timely payment will be offered to continue the program to the next cyclefor up to 100% plafond upsize. We see BTPS’s customer upgrading to a higher cycle will be acontinuous pattern along with the progress of customer’s business. The progress is alsosupported by improvement in customer’s welfare, in our view, as shown by three indicators(usage of squatting toilet, usage of firewood, and un-schooled children). The progress ofcustomer’s welfare on each cycle is analyzed by the bank and we see improvement ofpoverty rates from cycle to cycle. That said, we believe average loan should increase furthergoing forward to Rp2.5 mn/customer by 2020F from current Rp2.1 mn/customer.

In terms of number of customers, we believe BTPS will poach more customers going forwardsupported by: 1) More penetration as they have only cover 6.4% of total productive poorpotential 2) Expansion to new villages and new provinces outside BTPS current presence (23provinces). Given the upside in both loan size and number of customers, we expect totalfinancing to grow by 12-19% annually in 2018-2020F. We have considered the high rate offinancing run-off on our forecast.

Exhibit 16: BTPS financing growth Exhibit 17: Number of customers and avg. loan size estimates

Source : Company and Ciptadana Sekuritas Asia Source : Company and Ciptadana Sekuritas Asia

Exhibit 18: Welfare impact on BTPS’s customerExhibit 19: Poverty rates of customers decline from cycle tocycle

Source : Company and Ciptadana Sekuritas Asia Source : Company and Ciptadana Sekuritas Asia

2,499

3,678

4,997

6,053

7,191

8,208

9,19847%

36%

21%19%

14%12%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2014 2015 2016 2017 2018F 2019F 2020F

Rp bnTotal financing (LHS) Financing growth YoY (RHS)

1.5

2.0

2.5

2.9

3.33.5

3.7

1.67

1.84

2.002.09

2.21

2.35

2.49

1.40

1.60

1.80

2.00

2.20

2.40

2.60

2.80

3.00

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2014 2015 2016 2017 2018F 2019F 2020F

Rp mnmn people Total customer (LHS)

Loan per customer (RHS)

18.0%

11.7%

14.0%13.4%

8.2%

10.2%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Usage of squatting toilet Usage of firewood Un-schooled children

% ofpopulation Before After 3 years

6.2%

28.3%

5.4%

26.1%

4.5%

23.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Below poverty line Below USD3.1 spending/day

% ofpopulation Cycle 1 Cycle 2 Cycle 3

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EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

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BTPS - Initiate Coverage - 17 May 2018

Sticky financing yield securing higher than industry NIMBTPS has an exceptionally high net interest margin (NIM) which stands at 35.7% in 2017, farhigher than industry average NIM of 5.3% in 2017. The margin was driven by high-yieldingproductive poor loan (52.1% yield in 2017), which accounted for 73% of total BTPN’s Syariahearnings asset. We see that the high margin comes as the financing provided by BTPS isunsecured and has a lot of value proposition in which customers would not receive fromother banks in general. We have summarized some of the proposition value that BTPS offersto its customers in exhibit 21.

In addition, we also see that relationship between loan officers and customers and thedistinctive lending approach is being the primary factors to create customers’ loyalty. Withthat said, we expect the yield to have sticky characteristic and does not move following themarket rate movement. We expect the yield on productive poor financing to stays at currentlevel.

Exhibit 20: BTPS vs. industry NIM Exhibit 21: Value proposition of productive poor loan

Source : Company and Ciptadana Sekuritas Asia Source : Company and Ciptadana Sekuritas Asia

In the funding side, BTPS is still fully funded by customers deposit; no borrowings wererecorded as of Dec-17. Most of the customers deposit was consisted of time deposit (79%)and the rest is low-cost deposit (CASA). On CASA ratio, we expect some upside to come fromtheir branchless banking initiatives through BTPN Wow iB. With branchless banking, the bankhas a big potential to become transaction bank for the mass market and could build someCASA from it. At the moment, we still conservatively projects CASA ratio to increasegradually from 21.3% in 2017 to reach 24.2% in 2020F.

Going forward, we expects a slightly lower NIM for BTPS at 31.3-33.5% in 2018-2020F (vs.35.7% in 2017) on more diversified asset base but still at a much higher level compared toindustry average. We expect BTPS’s balance sheet to include more placements in BankIndonesia or other sharia market instruments to balancing the liquidity needs along withhigher financing base.

32.9%31.9%

35.0% 34.2%35.4%

34.1%

37.2%36.1% 35.9% 35.8% 35.9% 35.7%

33.7%

5.3% 5.3% 5.3% 5.4% 5.6% 5.6% 5.6% 5.6% 5.4% 5.4% 5.3% 5.3% 5.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

BTPN Syariah NIM Industry NIM

• Accessibility to unbankable borrowers, as loan officer come toborrowers instead of otherwise in other banks in general

• No need collateral or previous banking records of customer• Various kind of training (health training, cash management

training, entrepreneurship training) and other services in‘Daya’ program

• Membership under group and Sentra• Access to saving deposit account in bank without any

administration charge• Life insurance for customers and spouse• Financial support (donation) upon of death of spouse

Productive poor loan

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BTPS - Initiate Coverage - 17 May 2018

Exhibit 22: BTPS CASA to total deposits trend Exhibit 23: BTPS NIM trend

Source : Company and Ciptadana Sekuritas Asia Source : Company and Ciptadana Sekuritas Asia

Sound asset quality on discipline cultureBTPS has a unique credit risk culture to maintain its repayment rate at a healthy level. Wefound two key disciplines that are important to maintain sound asset quality: 1) prospectiveborrowers have to prove their commitments to take a productive loan and 2) jointresponsibilities which make each member in a group to oversight and care about each otherfinancial conditions.

1) The evidence of borrower’s commitment

The mechanism lies on certain set of activities which prospective borrowers have tofollow to prove their commitment and eagerness to enter a business. Everycustomer who wants to take financing from BTPS should commit to a 5-daysmembership basic training. Every individual that is failed to attend the training foreven only one day is considered as uncommitted and instantly taken out from thegroup. After the financing being disbursed, there is also strong monitoringmechanism through mandatory regular meetings on every two weeks.

2) Joint responsibilities under ‘solidarity money’

The group is typically involving five individuals who are allowed to choose oneanother member but cannot be family members. The individuals within the groupcould oversight each other as they have joint responsibilities under ‘solidaritymoney’. Each member could flag any defect regarding another member’sbusinesses, which resulted in social pressures among the members. The group,together with the bank, could cooperate to find solution in facing a problem henceprevent deterioration in loan payment before it happens.

This disciplines has been conducted in BTPS within the past four years and we found nodramatic jump in the amount of non-performing financing (NPF) up until this moment. Assetquality remains solid with NPF stood at 1.7% of total loan as of 1Q18. We believe assetquality will stay sound as long as the bank keeps their strong discipline practice.

However, due to high pace expansion in the asset side (22% YoY loan growth as of 1Q18), weexpect BTPS NPF ratio to slightly trend up from 1.7% as of 2017 to 2.0-2.3% in 2018-2020F.In terms of new NPF (the addition of NPF plus the amount of financing being written-off)should also trending up but is very reasonable considering that financing base still growingaggressively. The recognition of provision expense would also follow accordingly from 3.9%of average financing in 2017 to be 4.4-4.8% of average financing in 2018-2020F. Overall, webelieve the increase in cost of credit is still acceptable and should be more than offset byhigher financing volume that comes with thick margin.

We see the recognition of provision expense is earlier compared to other banks in generaldue to its faster maturity nature. The recognition of provisioning has achieved 46% offinancing balance for special mention category (vs. 5% requirement from OJK and 10-20% inmost banks) while the recognition of provisioning in NPF category has reach 97% (vs. 65-80%in most banks) as of 2017. Hence financing loss coverage has achieved 156.4% of NPF as of2017.

19.620.6

19.621.3

22.7 23.4 24.2

-

5.0

10.0

15.0

20.0

25.0

30.0

2014 2015 2016 2017 2018F 2019F 2020F

%

50.5

34.2 36.1 35.733.5 32.0 31.3

-

10.0

20.0

30.0

40.0

50.0

60.0

2014 2015 2016 2017 2018F 2019F 2020F

%

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BTPS - Initiate Coverage - 17 May 2018

Exhibit 24: BTPS NPF trend Exhibit 25: BTPS cost of credit trend

Source : Company and Ciptadana Sekuritas Asia Source : Company and Ciptadana Sekuritas Asia

Exhibit 26: BTPS new NPF formation Exhibit 27: BTPS financing loss coverage to NPF

Source : Company and Ciptadana Sekuritas Asia Source : Company and Ciptadana Sekuritas Asia

Operational efficiency to continuously improveWithin the last three years, operational efficiency has improved significantly as indicated by alower cost-to-income ratio (CIR) at 51.7% in 4Q17 (vs. >80% in 2014). The CIR was recordedat a higher range in the early years as the bank built its infrastructure.

Nevertheless, BTPS still undertakes some initiatives to continuously improve the operationalefficiency. In terms of network, BTPS only has 152 outlets and 9 ATMs as of Dec-17. Realizingthat their weakness is lack of physical network, BTPS is tapping on technologies such asBTPN Wow iB to facilitate banking transaction of non-financial literate market. By doing so,BTPS could achieve efficiency while maintaining its service to the mass market. In addition,in terms of number of agents, BTPS could easily increase the number of agents by tapping ontheir own productive poor borrowers. At the moment, BTPS already has 120k of branchlessbanking agents.

To help increase employee efficiency, BTPS also tries automation application for employeesunder ‘M-Prospera’. This application was launched in mid-2017 and is expected to assist newcustomer acquisition process for the bank’s 12k of employees. We expect some moreefficiency impact going forward as BTPS could process more and more financing volumewith automation.

Overall we expect CIR to improve going forward from 55.5% in 2017 to 47.4-50.9% in 2018-2020F. The decrease in CIR was primarily driven by increase in revenue which comes athigher magnitude compared to the increase in operational expense.

21

46

76

10

1

14

1

18

5

21

3

0.9%

1.2%

1.5%1.7%

2.0%

2.2% 2.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

-

50

100

150

200

250

2014 2015 2016 2017 2018F 2019F 2020F

Rp bn NPF amount (LHS) NPF ratio (RHS)

16

65

11

9

21

6

29

0

37

3

40

7

1.3%

2.1%

2.7%

3.9%4.4%

4.8% 4.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

-

50

100

150

200

250

300

350

400

450

2014 2015 2016 2017 2018F 2019F 2020F

Rp bn Provision expense (LHS)

Credit cost as % of avg. financings (RHS)

28

63

10

1

20

1

28

6

36

7

40

1

0.0%

2.5%2.8%

4.1%

4.8%5.2%

5.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

-

50

100

150

200

250

300

350

400

450

2014 2015 2016 2017 2018F 2019F 2020F

Rp bn New NPF (LHS)

New NPF formation (% to beg. performing financing) (RHS) 155.3

135.2

149.0

156.4

148.6146.3

149.6

100.0

110.0

120.0

130.0

140.0

150.0

160.0

2014 2015 2016 2017 2018F 2019F 2020F

%

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BTPS - Initiate Coverage - 17 May 2018

Exhibit 28: BTPS quarterly cost-to-income trend Exhibit 29: BTPS cost-to-income estimates

Source : Company and Ciptadana Sekuritas Asia Source : Company and Ciptadana Sekuritas Asia

Untapped earnings power from fee based incomeTransaction services offered by BTPS to its customers are free. BTPS provides the freeservice to ensure costumer convenience and currently has no priorities to raise the fee.However, we think that BTPS actually has tremendous pricing power to raise some fee fromdeposits and transactional activities considering its niche market. The bank’s customer ismostly unbankable or non-financially literate which could only transact by using branchlessbanking service provided by BTPS. If BTPS were to charge a modest fee, we believe therewould be significant potential addition of fee-based income. However BTPS managementseems to keep their services free as they prioritizing customer convenience. Bankadministration fees income was recorded at only 0.02% of total revenue in 2017. Thereforewe do not include this potential additional fee income in our forecasts.

83.5 82.5

75.2 75.5 73.871.1

66.963.9

60.8 59.956.6 54.5

51.7

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

%

83.576.4

65.3

55.550.9 48.3 47.4

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2014 2015 2016 2017 2018F 2019F 2020F

%

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EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

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BTPS - Initiate Coverage - 17 May 2018

Earnings outlookBTPS scored tremendous earnings growth within the last few years driven by steep financinggrowth, high margin, improving operational efficiency, and sound asset quality. Earningsjumped from only Rp99 bn in 2014 to Rp670 bn in 2017, implying a CAGR of 89%. We expectthis trend to continue. We believe the earnings growth to be primarily driven by net interestincome which will grow at high double digits at 13-22% annually in 2018-2020F. Totalrevenue growth should follow net interest income closely as the fee based income still onlyvery small proportion of total revenue. Pre-provisioning operating profit (PPoP) should growstronger than total revenue at 15-35% annually in 2018-2020F as we expect some moreefficiencies in the operational expense side. Below PPoP, provision expense should increaseby 9-30% annually in 2018-2020F. Finally, on the bottom line we expect BTPS to deliverfurther earnings growth at 17-38% annually in 2018-2020F as the combination of abovementioned strong financing growth, stable margin, operational efficiency, and sound assetquality.

Exhibit 30: BTPS net profit trend Exhibit 31: BTPS ROE and ROA trend

Source : Company and Ciptadana Sekuritas Asia Source : Company and Ciptadana Sekuritas Asia

Exhibit 32: Disaggregation of ROA & ROE

Source : Company and Ciptadana Sekuritas Asia

99169

412

670

922

1,133

1,324

0

200

400

600

800

1,000

1,200

1,400

2014 2015 2016 2017 2018F 2019F 2020F

Rp bn

19.917.0

29.9

34.8

29.8

25.3 24.3

4.9 3.86.6

8.1 8.8 8.8 8.9

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2014 2015 2016 2017 2018F 2019F 2020F

%ROE ROA

% Average Total Assets 2014 2015 2016 2017 2018F 2019F 2020F

Asset yields 52% 35% 36% 35% 33% 32% 31%

CoF 8% 6% 5% 4% 4% 3% 3%

Net Interest Income 43% 30% 31% 31% 30% 28% 28%

Provision 1% 1% 2% 3% 3% 3% 3%

Risk Adjusted Margin 42% 28% 29% 28% 27% 26% 25%

Non Interest Income 0% 0% 0% 0% 0% 0% 0%

Noninterest Expenses 37% 23% 20% 17% 15% 14% 13%

Pre-Tax ROA 6% 6% 9% 11% 12% 12% 12%

Total Assets/Total Equity 4.0 4.5 4.5 4.3 3.4 2.9 2.7

Pre-Tax ROE 25% 25% 40% 47% 40% 34% 33%

Tax Retention Rate 75% 73% 74% 74% 74% 74% 74%

Minority interest 0% 0% 0% 0% 0% 0% 0%

Core ROE 19% 18% 30% 35% 30% 25% 24%

Non core items 2% -2% 0% 0% 0% 0% 0%

ROE 20% 17% 30% 35% 30% 25% 24%

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BTPS - Initiate Coverage - 17 May 2018

1Q18 results reviewBTPS recorded Rp212 bn net income in 1Q18, which went up by 56% YoY. On the top line, netinterest income grew by 22.0% YoY, parallel with the financing growth of 21.9% YoY.However NIM experiences a slight decline to 33.7% from 35.9% in the same period last yeardue to more diversified earnings asset with more placements in BI and marketablesecurities. Operational efficiency continued to take place in 1Q18 indicated by a 2.9% YoYoperational expense growth and improving cost to income ratio (CIR) to 50.6% from 59.9% inthe same period before. Asset quality also remains solid with NPL staying at 1.7% of totalfinancing. Capital remains strong despite aggressive assets growth as BTPS has notdistribute any dividends yet, hence total equity grew by 42.9% YoY and CAR increase to 27.7%(vs. 23.9% as of 1Q17). Overall, we see this is a solid result and we believe BTPS to achieveour earnings estimates in 2018F as we expect stronger performance in following quarters.

Exhibit 33: BTPS 1Q18 results

(in Rp bn) 3M18 3M17 YoY 1Q18 4Q17 QoQ 2018F 3M18/18F

Interest income 784 653 20.2% 784 789 -0.6% 3,518

Interest expense (85) (80) 6.9% (85) (92) -7.5% (389)

Net interest income 699 573 22.0% 699 697 0.3% 3,129 22%

Non-interest operating income 3 4 -37.3% 3 4 -33.3% 10 27%

Non-interest operating expense (355) (346) 2.6% (355) (362) -2.0% (1,599) 22%

PPOP 346 231 49.9% 346 338 2.4% 1,540 23%

Provision expense (62) (47) 31.9% (62) (60) 2.5% (290) 21%

Operating profit 285 184 54.5% 285 278 2.4% 1,250 23%

Net income 212 136 55.5% 212 201 5.4% 922 23%

Ratios (%)

Asset yield 37.8 40.9 -3.1 37.8 40.1 -2.3

Cost of fund 5.2 5.8 -0.6 5.2 5.8 -0.7

NIM 33.7 35.9 -2.2 33.7 35.4 -1.7

CASA 22.3 21.5 0.8 22.3 21.3 1.0

LDR 93.2 90.8 2.4 93.2 92.5 0.7

Cost to income 50.6 59.9 -9.3 50.6 51.7 -1.1

Tax rate 25.5 25.8 -0.3 25.5 27.3 -1.8

NPL gross 1.7 1.7 0.0 1.7 1.7 0.0

Credit cost 4.0 3.7 0.3 4.0 4.1 -0.1

Loan loss coverage 159.0 148.6 10.4 159.0 156.4 2.7

CAR 27.7 23.9 3.9 27.7 28.9 -1.2

ROA 9.1 7.3 1.8 9.1 9.1 0.0

ROE 35.9 32.8 3.1 35.9 37.2 -1.4

Deposit 6,696 5,635 18.8% 6,696 6,546 2.3%

Demand 96 94 2.6% 96 95 1.3%

Savings 1,396 1,118 24.8% 1,396 1,296 7.7%

Time 5,203 4,423 17.6% 5,203 5,154 0.9%

Loan 6,241 5,118 21.9% 6,241 6,053 3.1%

NPL 105 88 19.0% 105 101 3.7%

Loan loss reserves -166 -131 27.3% -166 -158 5.4%

Shareholders equity 2,474 1,731 42.9% 2,474 2,255 9.7%

Source : Company and Ciptadana Sekuritas Asia

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Please see analyst certification and other important disclosures at the back of this report 20

BTPS - Initiate Coverage - 17 May 2018

Rating and valuationWe initiate our coverage on BTPS with Buy recommendation and target price ofRp2,170/share. We believe BTPS profitability to remain strong with annual earnings CAGR of25% in 2017-2020F. Higher earnings should be driven by strong financing growth, stablemargin, operational efficiency, and sound asset quality. That said, BTPS is expected tomaintain its superior ROA at >8%, far higher than peers at less than 4%.

BTPS currently trades at 2.3x 2019F PBV, at par with its micro financing peers in Mexico,India, and Kenya at 2.3x 2019F PBV, and slightly higher than Indonesian banking average at2.1x 2019F PBV. Our target price is derived based on Gordon growth valuation assuming26.6% sustainable ROE in 2018-2020F and 11% required return. We arrived atRp2,170/share target price which implies 3.3x 2019F PBV, at 45/59% premium to microfinancing and Indonesian banking peers, respectively. We think our valuation is conservativeas we expect BTPS ROE to hover at 24.3-29.8% in 2018-2020F, far higher compared to bothmicro financing banks and Indonesian banks peers (details in exhibit 35 and 36).

Exhibit 34: BTPS vs. other banks ROA in 2017

Source : Bloomberg and Ciptadana Sekuritas Asia

Exhibit 35: Indonesian banks comparison

Source : Bloomberg and Ciptadana Sekuritas Asia

8.1

3.32.7

2.1 2.1 1.91.3 1.3

0.80.5

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

BTPS BBCA BBRI BDMN BBNI BMRI BTPN BBTN BNGA BNLI

%

18F 19F 18F 19F 18F 19F 18F 19F

Bank Central Asia BBCA 552 352 21.2 18.7 3.7 3.2 18.5 18.0 1.2 1.5

Bank Rakyat Indonesia BBRI 379 389 11.4 10.1 2.0 1.8 17.8 18.0 3.4 3.7

Bank Mandiri BMRI 320 307 12.8 10.8 1.7 1.6 14.2 16.0 3.2 3.3

Bank Negara Indonesia BBNI 149 157 9.5 8.3 1.4 1.2 15.2 15.6 3.3 3.6

Big four weighted average 15.4 13.5 2.5 2.3 17.0 17.3

Bank Tabungan Negara BBTN 30 55 8.4 7.3 1.2 1.1 15.8 16.5 2.5 3.0

Bank Danamon BDMN 55 15 12.5 11.0 1.3 1.2 11.1 11.8 2.4 3.1

Bank BJB BJBR 20 24 13.2 11.6 1.8 1.7 14.8 15.8 4.4 5.2

Bank Jatim BJTM 10 9 7.7 7.1 1.3 1.2 16.1 16.1 7.7 8.3

Bank CIMB Niaga BNGA 24 6 7.2 6.1 0.6 0.5 9.4 10.2 2.5 -

Panin Bank PNBN 20 3 6.7 5.9 0.6 0.5 8.9 9.2 - -

Bank Permata BNLI 14 7 13.8 10.6 0.6 0.6 4.6 5.7 0.7 0.7

BTPN BTPN 19 4 9.0 7.4 1.0 0.9 11.4 12.5 2.2 3.7

BTPN Syariah BTPS 12 N/A 12.7 10.3 3.0 2.3 29.8 25.3 - -

Bank Bukopin BBKP 4 5 3.0 2.7 0.5 0.4 14.0 16.7 1.1 10.0Small-to-mid cap weighted average 10.2 8.7 1.2 1.1 12.7 13.1

Weighted average 14.7 12.9 2.4 2.1 16.4 16.7

Small-to-mid cap banks

Big four banks

BbergTicker

Bberg TickerMkt.Cap.

(Rp tn)

3moavg.

Trading(Rp bn)

PER (x) PBV (x) ROE Div. Yield

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BTPS - Initiate Coverage - 17 May 2018

Exhibit 36: Micro financing peers comparison

Source : Bloomberg and Ciptadana Sekuritas Asia

Exhibit 37: Gordon growth valuation

Source : Company and Ciptadana Sekuritas Asia

Exhibit 38: Gordon growth valuation sensitivity (in Rp bn)

Source : Ciptadana Sekuritas Asia

2018F 2019F 2018F 2019F 2018F 2019F

Compartamos Banco GENTERA* MM 1,261 9.2 7.8 1.3 1.1 14.9 15.8Bharat Financial Inclusion Ltd BHAFIN IN 2,303 32.1 19.4 4.5 3.6 16.5 22.2Equitas Holdings EQUITAS IN 854 180.4 32.3 2.5 2.3 1.3 7.3Ujjivan Financial Services UJJIVAN IN 738 NMF 22.7 2.8 2.5 (1.0) 11.5Financiera Independencia FINDEP* MM 100 7.5 5.2 0.5 0.4 6.2 6.8Equity Bank EQBNK KN 1,866 9.0 7.6 1.8 1.6 21.0 22.5Weighted average 7,122 36.1 15.9 2.7 2.3 13.6 18.0

TickerCompanyPER PBV ROE

Mkt cap(USD mn)

As % of total assets 2016 2017 2018F 2019F 2020F TerminalAsset yield 35.6% 35.3% 33.4% 31.8% 31.2% 31.2%Cost of funds 4.6% 4.2% 3.7% 3.4% 3.3% 3.3%Net Interest Income 30.9% 31.1% 29.7% 28.4% 27.9% 27.9%Provision 1.9% 2.9% 2.8% 2.9% 2.7% 2.7%Risk Adjusted Margin 29.1% 28.2% 27.0% 25.5% 25.1% 25.1%Fee income 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%Noninterest Expenses 20.3% 17.3% 15.2% 13.8% 13.3% 13.3%Pre-Tax ROA 8.9% 11.0% 11.9% 11.9% 12.0% 12.0%Tax rate 25.8% 26.2% 26.2% 26.2% 26.2% 26.2%Tax Retention Rate 74.2% 73.8% 73.8% 73.8% 73.8% 73.8%ROA 6.6% 8.1% 8.8% 8.8% 8.9% 8.9%Total Assets/ Total Equity 4.5 4.3 3.4 2.9 2.7 3.0Core ROE 29.9% 34.8% 29.8% 25.3% 24.3% 26.6%Non-core items 0% 0% 0% 0% 0% 0%Minority interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%ROE 29.9% 34.8% 29.8% 25.3% 24.3% 26.6%Dividend payout ratio 0.0% 0.0% 0.0% 0.0% 40.0% 40.0%

Total assets (Rp bn) 7,323 9,157 11,884 13,974 15,945Total equity (Rp bn) 1,593 2,255 3,925 5,025 5,871

10 year govt. bonds 6.9%Required return 11.0%Dividend payout ratio 40.0%Long-term ROA 8.9%Target leverage 3.0Sustainable ROE 26.6%Terminal PBV 3.8Fair value (Rp bn) 16,725Number of shares (bn) 7.7Fair value per share 2,171

Required return2,170.98 9.0% 10.0% 11.0% 12.0% 13.0%

24.6% 2,496 2,193 1,946 1,742 1,57025.6% 2,639 2,318 2,057 1,841 1,660

ROE 26.6% 2,785 2,446 2,171 1,943 1,75227.6% 2,935 2,578 2,288 2,048 1,84628.6% 3,089 2,713 2,408 2,155 1,943

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BTPS - Initiate Coverage - 17 May 2018

Risk factorsKey risks to our forecasts may include:

1) New competitor in mass market segment

The entrance of new competitor could challenge financing growth in BTPS. Recentlygovernment initiated to form Bank Wakaf Mikro as the institution focusing on massmarket segment with maximum financing of Rp3 mn/customer. As of beginning ofMarch-18, Bank Wakaf Mikro has Rp2.5 bn (2.8k of customers) on its financing book,still far smaller compared to BTPS at Rp6.1 tn as of Dec-17. Bank Wakaf Mikrowould also consist of small scale local financing institutions thus should have lowfunding support. Overall we see the risk of significant new competitor would beminimal at the moment.

2) Lower than expected financing balance due to slower disbursement

Productive poor loan has a very high run-off rate given its short maturity structure.Any slowdown in new financing disbursement could cause the amount of maturedfinancing to more than offset the amount of new financing; hence total portfoliobalance could arrive at lower level.

3) Worse than expected NPF

Bad assets could increase greater than our estimates in the future on severalreason: 1) unfavorable economic condition that is damaging economic power inlow-income families 2) change in financing disbursement mechanics or indisciplinedisbursement practice. Higher than expected NPF could lead to higher thanexpected provision expense and hit earnings. In addition high NPF also could causefinancing disbursement to slow down.

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BTPS - Initiate Coverage - 17 May 2018

Board of commissioners and directorsBoard of commissionersKemal Azis Stamboel, President Commissioner/Independent CommissionerIndonesian citizen, 68 years old, appointed pursuant to the Extraordinary General Meeting ofShareholders (EGM) on May 20, 2014 and the approval of the Financial Services Authority(OJK) on February 24, 2014. Along with BTPS, he also serves as Independent Commissionerof PT Holcim Indonesia Tbk, Advisor to the Board of Directors of PT Indosat Tbk, Chairman ofBoard of Management of WWF Indonesia and the Secretary General of Association ofInternational Bank of Indonesia.

Dewie Pelitawati, Commissioner/Independent CommissionerIndonesian citizen, 58 years old, appointed pursuant to the EGM on May 20, 2014 and theapproval of the OJK on February 24, 2014. Dewie had various exposure in seniormanagement positions in several organization, including: as Head of Chairman Office inIndonesia Bank Restructuring Agency (1999-2000), Secretary to Junior Minister in theMinistry of National Economic Restructuring-RI (2001), Commissioner of PT Indosat MegaMedia Mobile and Commissioner of PT Satelindo (2002-2003), Chief Legal and Compliance inPT Indosat (2009-2010), Partners in Bahar and Partners Attorney At Law (2010-2013). Alongwith BTPS, she also serves as the Advisor in PT XL-Axiata Tbk.

Mahdi Syahbuddin, CommissionerIndonesian citizen, 56 years old, appointed pursuant to the Circular Decision of Shareholderstaken apart from the General Meeting of Shareholders (AGM) on January 13, 2015 and theapproval of the OJK on December 23, 2014. With more than 32 years of experience, Mahdiwas the Former Human Capital Director of BTPN leading a number of strategic initiatives totransform the Human Capital through massive organizational alignment, redesign the humancapital policy, processes and systems; and involve employees at various leadership levels tocraft the vision, mission and values of the Bank. Prior to Bank BTPN, Mahdi was the Chairmanof Implementation Team for the merger of several banks into Bank Permata.

Maya Kartika, CommissionerIndonesian citizen, 51 years old, appointed pursuant to the AGM on March 6, 2017 and theapproval of the OJK on June 14, 2017. She also serves as Head of Human Capital in BTPNand previously served as Director of Human Resources in HSBC Indonesia (2010-2014),Country Head of Human Resources in RBS Bank Indonesia (2003-2010), and Head of HumanResources in Kalbefood (2002-2003).

Board of directorsRatih Rachmawaty, President DirectorIndonesian citizen, 46 years old, appointed pursuant to the AGM on March 6, 2017 and theapproval of the OJK on June 7, 2017. Ratih is the founder and the architect of the TunasUsaha Rakyat (TUR) which now becomes the backbone of the BTPS Business. This businesswas rooted in her previous role as the Sharia Business Unit Head of Bank BTPN since 2011where she formulated a business model to serve the productive poor customers to realize abetter life through women empowerment by inculcating the spirit of Courage, Discipline,Hard Work and Solidarity to the customers. Her expertise in Micro Banking was dated back toher experience in Bank Danamon (2003-2008) when, as one of the key founders of MassMarket Business (Danamon Simpan Pinjam-DSP), she built the design architecture of thebusiness and managed to deliver the expected business performance. With a mission todevelop the micro banking industry in Indonesia, Ratih then proceeded to Bank BTPN andalso became one of the key founders of their micro banking unit under Mitra Usaha Rakyat(2008-2011). Not only leveraging her experience in Bank Danamon, Ratih had actively studiedworld class micro banking best practices in various countries to develop the designarchitecture of the Mitra Usaha Rakyat. The benchmarking studies include countries such asIndia, Mexico, Peru and Latin America; and she has also actively built strategic alliance withinstitutions of financial inclusion and poverty eradication such as Grameen Foundation, IFC,and United Nation Capital Development Fund (UNCDF).

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BTPS - Initiate Coverage - 17 May 2018

Mulia Salim, Deputy President DirectorIndonesian citizen, 46 years old, appointed pursuant to the AGM on March 6, 2017 and theapproval of the OJK on June 14, 2017. Previously he served as Head of Micro Business,Director of SME Business, and Director of Operation in BTPN. Prior to joining BTPN in 2008,he served as Executive Vice President-Finance, Operation & Collections Head, CardsBusiness and Project Leader of American Express business acquisition and integration inBank Danamon, and Country Procurement Head, Cards Operations Head, TransactionServices Head and Vice President-Quality & Customer Service Director in Citibank, N.A.

Taras Wibawa Siregar, DirectorIndonesian citizen, 48 years old, appointed pursuant to the EGM on October 1, 2015 and theapproval of the OJK on September 9, 2015. Taras served as a member of the Board ofCommissioners at BTPS (2014-2015) and as Deputy Chief Risk Officer in BTPN (2008-2015).Taras was the former Credit Risk Head of DSP in Bank Danamon (2004-2008) and he wasformerly the Citi Financial Credit Risk Head in Citibank NA (1998-2004).

M. Gatot Adhi Prasetyo, DirectorIndonesian citizen, 55 years old, appointed pursuant to the EGM on May 20, 2014 and theapproval of the OJK on February 24, 2014. Starting his professional career in 1987, Gatot hasexperience in various banks: Bank Pasific, Bank Universal, Bank Permata, Bank SahabatPurba Danarta and BTPS in a number of functions – Operations, Credit, System andProcedure Development, Human Capital and Board of Management.

Arief Ismail, Compliance DirectorIndonesian citizen, 51 years old, appointed pursuant to the AGM on March 6, 2017 and theapproval of the OJK on August 22, 2017. With more than 27 years of experience, hepreviously served as Unsecured Risk Management Head in PT Bank Danamon (2001-2005),Country Head of Risk and Head of Consumer Risk in ABN Amro (2005-2010), Head of RetailCredit Risk in PT ANZ Panin Bank Indonesia (2010-2011), and Senior Vice President Head ofRetail Banking & Wealth Management Risk in HSBC Indonesia (2011-2017).

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BTPS - Initiate Coverage - 17 May 2018

Exhibit 39 - Income Statement

Year to 31 Dec (Rpbn) 2016A 2017A 2018F 2019F 2020F

Interest income 2,226 2,905 3,518 4,115 4,660

Interest expenses -290 -346 -389 -440 -493

Net interest income 1,936 2,560 3,129 3,675 4,168

Other non-interest income 5 7 10 14 19

Total operating income 1,941 2,567 3,138 3,689 4,187

Operating expenses -1,268 -1,423 -1,599 -1,781 -1,984

PPoP 673 1,143 1,540 1,908 2,203

Prov. expenses and others -119 -235 -290 -373 -407

Operating profit 555 908 1,250 1,536 1,795

Non-operating income (exp.) 1 0 0 0 0

Pre-tax profit 556 909 1,250 1,536 1,796

Income tax -143 -239 -328 -403 -471

Minority interest 0 0 0 0 0

Net profit 412 670 922 1,133 1,324

Exhibit 40 - Balance Sheet

Year to 31 Dec (Rpbn) 2016A 2017A 2018F 2019F 2020F

Cash 192 229 265 300 339

Current acct, with BI 276 364 423 478 540

Interbank placement 1,308 1,139 1,511 1,797 2,140

Mkt, securities 0 1,024 2,002 2,620 3,037

Govt. Bonds 0 0 0 0 0

Loans 4,883 5,895 6,982 7,938 8,879

Fixed assets 186 190 228 274 329

Other assets 479 315 472 567 680

Total Asset 7,323 9,157 11,884 13,974 15,945

Deposits from customer 5,388 6,546 7,603 8,593 9,718

Borrowings 0 0 0 0 0

Other liabilities 343 356 356 356 356

Total liabilities 5,731 6,902 7,959 8,950 10,074

Shareholder equity 1,593 2,255 3,925 5,025 5,871

Minority interest 0 0 0 0 0

Total liab + SHE 7,323 9,157 11,884 13,974 15,945

Exhibit 41 - Per Share Data

(Rp) 2016A 2017A 2018F 2019F 2020F

EPS 59.5 96.7 119.7 147.1 171.9

BVPS 229.7 325.2 509.4 652.2 762.2

DPS 0.0 0.0 0.0 0.0 58.8

Source : BTPS, Ciptadana Estimates

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BTPS - Initiate Coverage - 17 May 2018

Exhibit 42 - Key Ratios

Year to 31 Dec 2016A 2017A 2018F 2019F 2020F

Ratios

ROA (%) 6.6 8.1 8.8 8.8 8.9

ROE (%) 29.9 34.8 29.8 25.3 24.3

Net interest margin (%) 36.3 35.9 33.7 32.2 31.6

Yield on earnings asset (%) 41.7 40.8 37.9 36.0 35.3

Average cost of fund (%) 6.3 5.8 5.5 5.4 5.4

Cost to income ratio (%) 65.3 55.5 50.9 48.3 47.4

Cost of credit (%) 2.2 3.3 3.1 3.3 3.1

Non-performing loan (%) 1.5 1.7 2.0 2.2 2.3

Coverage ratio (%) 149.0 156.4 148.6 146.3 149.6

Loan to deposit ratio (%) 92.7 92.5 94.6 95.5 94.7

CASA ratio (%) 19.6 21.3 22.7 23.4 24.2

Equity to Asset (%) 21.7 24.6 33.0 36.0 36.8

Capital adequacy ratio (%) 23.8 28.9 37.4 40.5 41.1

Tier-1 CAR 23.6 28.7 37.1 40.2 40.8

PER (x) 25.4 15.6 12.6 10.3 8.8

PBV (x) 6.6 4.6 3.0 2.3 2.0

Dividend yield (%) 0.0 0.0 0.0 0.0 3.9

Growth (%)

Total assets growth 41.1 25.0 29.8 17.6 14.1

Loan growth 35.9 21.1 18.8 14.2 12.1

Deposit growth 41.4 21.5 16.1 13.0 13.1

NPL growth 66.6 32.0 39.6 31.2 15.5

SHE growth 36.9 41.6 74.1 28.0 16.9

Net interest income growth 47.2 32.2 22.2 17.5 13.4

Non-interest income growth 1.3 43.9 40.0 40.0 40.0

Provision expense growth 93.1 98.4 23.3 28.6 9.3

Net profit growth 143.8 62.5 37.6 22.9 16.9

Source : BTPS, Ciptadana Estimates

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BTPS - Initiate coverage - 17 May 2018

EQUITY RESEARCHCIPTADANA SEKURITAS ASIA

EQUITY RESEARCH

HEAD OF RESEARCH ANALYST ANALYSTArief Budiman Erni Marsella Siahaan, CFA Yasmin SoulisaStrategy, Automotive, Heavy Equipment, Banking Property, PlantationsConstruction, Oil & Gas T +62 21 2557 4800 ext 919 T +62 21 2557 4800 ext 799T +62 21 2557 4800 ext 819 E [email protected] E [email protected] [email protected]

ECONOMIST ANALYST ANALYSTImanuel Reinaldo Niko Margaronis Fahressi FahalmestaT +62 21 2557 4800 ext 820 Telecommunication, Tower, Healthcare Cement, Toll Road, PoultryE [email protected] T +62 21 2557 4800 ext 734 T +62 21 2557 4800 ext 735

E [email protected] E [email protected]

ANALYST ANALYST ANALYSTStella Amelinda Fransisca Maharani Putri Christian SaortuaConsumer Media, Retail Coal, Metal miningT +62 21 2557 4800 ext 740 T +62 21 2557 4800 ext 760 T +62 21 2557 4800 ext 739E [email protected] E [email protected] E [email protected]

TECHNICAL ANALYST RESEARCH ASSISTANTTrevor Gasman SumarniT +62 21 2557 4800 ext 934 T +62 21 2557 4800 ext 920E [email protected] E [email protected]

EQUITY SALES

Co HEAD OF INSTITUTIONAL SALES Co HEAD OF INSTITUTIONAL SALESDadang Mulyana The Fei MingPlaza ASIA Office Park unit 2 Plaza ASIA Office Park unit 2Jl. Jend. Sudirman Kav. 59 Jl. Jend. Sudirman Kav. 59Jakarta - 12190 Jakarta - 12190T +62 21 2557 4800 ext 838 T +62 21 2557 4800 ext 807F +62 21 2557 4900 F +62 21 2557 4900E [email protected] E [email protected]

SURABAYABRANCH OFFICES

SURABAYAJAKARTA - MANGGA DUA JAKARTA - PURI KENCANA SURABAYAKomplek Harco Mangga Dua Perkantoran Puri Niaga III Intiland Tower SurabayaRukan Blok C No.10 Jl. Puri Kencana Blok M8 No.2E Ground Floor Suite 5 & 6Jl. Mangga Dua Raya Kembangan Jl. Panglima Sudirman 101-103Jakarta - 10730 Jakarta - 11610 Surabaya - 60271T +62 21 600 2850 T +62 21 5830 3450 T +62 31 534 3938F +62 21 612 1049 F +62 21 5830 3449 F +62 31 534 3886

SEMARANGGedung Menara Suara Merdeka6th Floor Unit 02Jl. Pandanaran No.30Semarang - 50134

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BTPS - Initiate Coverage - 17 May 2018

Analyst Certification

Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her personal views about thecompanies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are notand will not be influenced by any part or all of his or her compensation.

Disclaimer

This report does not constitute an offer to buy or sell any security/instrument, invitation to offer or recommendation to enter into anytransaction. Nor are we acting in any other capacity as a fiduciary to you. When making and investment decision, you should determine,without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume theserisks) as well as the legal, tax and accounting characterizations and consequences of any such transaction. In this regard, by accepting thisreport, you acknowledge that (a) we are not in the business of providing (and you are not relying on us for) legal, tax or accounting advice,(b) there may be legal, tax or accounting risks associated with any transaction, (c) you should receive (and rely on) separate and qualifiedlegal, tax and accounting advice and (d) you should apprise senior management in your organization as to such legal, tax and accountingadvice (and any risks associated with any transaction and our disclaimer as to these matters.

The information contained in this report is based on material we believe to be reliable; however, we do not represent that it is accurate,current, complete, or error free. Assumptions, estimates and opinions contained in this report constitute our judgment as of the date of thedocument and are subject to change without notice. Any projections are based on a number of assumptions as to market conditions andthere can be no guarantee that any projected results will be achieved. Past performance is not a guarantee of future results. PTCIPTADANA SECURITIES AND ITS AFFILIATES SPECIFICALLY DISCLAIMS ALL LIABILITY FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OROTHER LOSSES OR DAMAGES INCLUDING LOSS OF PROFITS INCURRED BY YOU OR ANY THIRD PARTY THAT MAY ARISE FROM ANYRELIANCE ON THIS REPORT OR FOR THE RELIABILITY, ACCURACY, COMPLETENESS OR TIMELINESS THEREOF.

Analyst Certi ficationDisclaimer: This document is not intended to be an offer, or a solicitation of an offer, to buy or sell relevant securities (i.e. securitiesmentioned herein or of the same issuer and options, warrants or rights to or interest in any such securities). The information and opinionscontained in this document have been compiled from or arrived at in good faith from sources believed to be reliable. No representation orwarranty, expressed or implied, is made by PT CIPTADANA SECURITIES or any other member of the Ciptadana Capital, including any othermember of the Ciptadana Group of Companies from whom this document may be received, as to the accuracy or completeness of theinformation contained herein. All opinions and estimates in this report constitute our judgment as of this date and there can be noassurance that future results or events will be consistent with any such opinions, forecasts or estimates. The information in this documentis subject to change without notice; its accuracy is not guaranteed; and it may be incomplete or condensed.