Sector Update  /  Banks  /    Click here for full PDF version 
 Author(s):   Jovent Muliadi ; Anthony  

• In recent weeks there have been concerns on the SOE banks' exposure on SOE contractors namely
  WIKA
  and
  WSKT
  .
• While
  WSKT
  has so far been well provisioned, we found that minimal provision on
  WIKA
  . Currently we only expect restructuring and hence, lower NIM instead of spike in CoC.
• We expect the base case impact shall be only 1.5-3% EPS drop for SOE banks. Worst case impact will be 5-13% EPS drop. BRI is clear winner.

Risk in contractors exposure especially on

WIKA

and

WSKT

In recent weeks there have been concerns on SOE banks' exposure on SOE contractors especially

WIKA

and

WSKT

. While

WSKT

has been well covered at 45-60%, exposure on

WIKA

hasn't been provisioned enough (less than 10%) except for BRI at 100% for the cash loan. We estimate total

WIKA

and

WSKT

exposure (including non-cash loan exposure but excluding govt guarantee loan) for SOE banks at Rp9.9/12.6/17.8tr for

BBRI

/BBNI/BMRI or 0.8/2.0/1.5% of its overall loan book (details on fig 1).
Base case of restructuring is relatively muted for all banks' EPS
We believe that the restructuring will happen and unlikely banks need to set aside full provision for both

WIKA

and

WSKT

. Hence, our base case expect that both

WIKA

and

WSKT

to stay in performing category (instead of non performing) but with significantly lower interest rate (i.e. Garuda restructuring scheme); even with as low as 0.5% interest rate for

WIKA

and

WSKT

(including cash loan and all non-cash loan is converted to cash loan) we found the impact to EPS will be only 1.5-3% (c.10bp NIM impact) - fig 2.
Worst case impact is taking into account additional provision and conversion of non-cash loan
We also run another assessment to estimate the additional provision of which we run two scenarios: 1) for the first scenario, we expect

WSKT

provision to go up to 70% and

WIKA

provision goes up to 35% and only 25% of non-cash loan converted to cash loan; the additional EPS impact from higher provision will be -1.8/-5/-7% for

BBRI

/BMRI/BBNI - fig 3. 2) For the second scenario, we expect

WSKT

provision to go up to 70% and

WIKA

provision goes up to 35% but 100% of non-cash loan converted to cash loan; the additional EPS impact from higher provision will be -3.4/-8.6/-9.7% for

BBRI

/BMRI/BBNI. - fig 3. Note that our calculation doesn't take into account the FY23 provision budget that the banks have set aside for both

WSKT

and

WIKA

.
BRI is the clear winner here;

BMRI

and

BBNI

seem to be exposed but have set adequate FY23 provision budget to absorb the impact
Given the peaking interest rate and relatively minimal exposure (also ample provision) on these contractors, BRI is the clear winner here. That being said, while

BMRI

/BBNI are seems to be exposed here, in absolute amount of provision that needs to be set aside of Rp2.5/1.4tr for scenario 1 can be allocated or even prioritized given that it has budgeted c.Rp19/10tr for FY23 provision (c.13/15% of total FY23 provision budget). For now we only expect NIM impact but no CoC impact. Our top pick stays with

BBRI

and

BMRI

for this year. Main risk will be more SOEs that need to be restructured.


Sumber : IPS