www.danareksa.com See important disclosure at the back of this report 1

Equity Research Company Update

Wednesday, 29 July 2020

BTPN Syariah (BTPS IJ) HOLD

Maintain Still focusing on collection

We maintain our HOLD call on BTPS with a higher GGM-derived TP of IDR3,600 (implying 3.9x 2021F P/BV) as we roll over our valuation to 2021. 1H20’s net profit dropped to IDR407bn mainly driven by credit costs of 893bps. With large-scale social distancing restrictions (PSBB) still not fully eased, BTPS continues to communicate with borrowers through calls or text messages. We expect 5.5% yoy financing growth with 704bps credit costs in FY20F, resulting to IDR963bn of FY20F net profits. 1H20 highlights. The 1H20 net profits declined by 33.3% yoy to IDR407bn. This is below our estimate due to a significant increase in credit costs to 893bps (1H19: 355bps). The NIM equivalent dropped by 117bps to 26.8% despite an 80bps drop in the blended CoF to 5.5%. Meanwhile, the credit costs rose to 893bps with a 1.8% gross NPF ratio as of June 2020. This resulted in a 351% loans loss coverage (LLC) ratio as of June 2020. Focusing on the collection process. We expect 5.5% yoy financing growth for this year. Moreover, given that most of the borrowers are from the grassroots level, BTPS’ management also highlighted that the bank will not take on new borrowers in 2020. Instead, the bank’s focus will be more on the collection of loan repayments from existing borrowers. In addition, BTPS’ management also highlighted that the bank does not benefit from the government’s relaxation policy on MSME loans as most of the borrowers need to apply for the subsidy online using the government’s application system. Spike in credit costs with a higher gross NPFs ratio. Given the current conditions, BTPS emphasized that the deterioration in assets quality is inevitable, particularly for the MSME segment. Indeed, the gross NPFs ratio elevated to 1.8% as of June 2020. Moreover, BTPS also adopted the rescheduling of monthly installments for most of the impacted borrowers as BTPS’ management views that some of them have already started their business even though not yet back to the pre-COVID-19 level. As such, we assume higher credit costs of 704bps than our previous assumption of 504bps. The gross NPFs ratio will reach 2.3% by December 2020F based on our model. Maintain HOLD, higher TP of IDR3,600. We maintain our HOLD call with a higher GGM-derived TP of IDR3,600 (implying 3.9x 2021F PBV) as we roll over our valuation to 2021F. We assume a CoE of 9.2%, a sustainable ROAE of 27.0% and 3% long-term growth.

Last price (IDR) 3,240

Target Price (IDR) 3,600

Upside/Downside +11.1%

Previous Target Price (IDR) 3,000

Stock Statistics

Sector Banking

Bloomberg Ticker BTPS IJ

No of Shrs (mn) 7,704

Mkt. Cap (IDRbn/USDmn) 24,960/1,717

Avg. daily T/O (IDRbn/USDmn) 57.6/4.0

Major shareholders (%)

PT. BTPN Tbk. 70.0

Estimated free float 30.0

EPS Consensus (IDR)

2020F 2021F 2022F

Danareksa 125.0 179.3 252.4

Consensus 126.4 186.9 241.7

Danareksa/Cons (1.1) (4.0) 4.4

BTPS relative to JCI Index

Source : Bloomberg

Eka Savitri

(62-21) 5091 4100 ext.3506

eka.savitri@danareksa.co.id

Key Financials

Year to 31 Dec 2018A 2019A 2020F 2021F 2022F

PPOP (IDRbn) 1,578 2,190 1,917 2,289 3,010

Net profit (IDRbn) 965 1,400 963 1,381 1,944

EPS (IDR) 129.8 181.7 125.0 179.3 252.4

EPS growth (%) 34.3 39.9 (31.2) 43.4 40.7

BVPS (IDR) 537.5 700.1 788.9 914.4 1,091.0

PER (x) 25.0 17.8 25.9 18.1 12.8

PBV (x) 6.0 4.6 4.1 3.5 3.0

Dividend yield (%) 0.0 1.7 1.2 1.7 2.3

ROAE (%) 30.9 29.8 16.8 21.1 25.2

Source : BTPS, Danareksa Estimates

www.danareksa.com See important disclosure at the back of this report 2

Exhibit 1. Loan and Growth Exhibit 2. Net Interest Income and Growth

Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates

Exhibit 3. NIM and LDR Exhibit 4. NPL

Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates

Exhibit 5. PBV ROAE Band Chart Exhibit 6. PE Band Chart

Source: Bloomberg, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

2,0

2,5

3,0

3,5

4,0

4,5

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5,5

6,0

6,5

May

-18

Au

g-1

8

No

v-1

8

Feb

-19

May

-19

Au

g-1

9

No

v-1

9

Feb

-20

May

-20

Fwd P/BV Mean +1SD -1SD ROAE (RHS)

x %

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

May

-18

Au

g-1

8

No

v-1

8

Feb

-19

May

-19

Au

g-1

9

No

v-1

9

Feb

-20

May

-20

Fwd P/E Mean +1SD -1SD

x

www.danareksa.com See important disclosure at the back of this report 3

Exhibit 7. BTPS’ result

FYE Dec (IDRbn) 2Q19 1Q20 2Q20 QoQ (%) YoY (%) 1H19 1H20 YoY (%)

Net interest income 949 1.047 625 (40,3) (34,2) 1.807 1.672 (7,5)

NIM equivalent (%) 39,7 36,3 17,8 38,5 26,8

Non-interest income 4 8 6 (25,0) 44,6 9 14 58,3

Non-II/Total income (%) 0,4 0,8 1,0 0,5 0,8

Operating income 954 1.055 631 (40,2) (33,8) 1.816 1.686 (7,1)

Overhead expenses (448) (419) (332) (20,8) (25,9) (854) (751) (12,1)

Cost-Income Ratio (%) 47,0 39,7 52,6 47,1 44,5

Pre-provisions profit 505 636 299 (53,0) (40,8) 961 935 (2,7)

Provisions allowance (76) (99) (292) 194,9 282,6 (142) (391) 175,6

Credit cost - annualised (bps) 376 435 1.305 355 893

Pretax profit 428 538 6 (98,9) (98,7) 818 544 (33,5)

Tax (107) (136) (1) (99,5) (99,4) (208) (137) (34,2)

Effective tax rate (%) 25.0 25.3 11,6 (54,0) (53,4) 25.4 25.2

Net Profit 321 402 5 (98,8) (98,4) 610 407 (33,3)

Other Key Data and Ratios

Gross financing 8.544 9.166 8.741 (4,6) 2,3 8.544 8.741 2,3

Customer deposits 8.884 9.679 9.462 (2,2) 6,5 8.884 9.462 6,5

Gross non-performing financing 114 128 157 22,6 37,4 114 157 37,4

Total assets 13.942 16.003 15.272 (4,6) 9,5 13.942 15.272 9,5

Shareholders' funds 4.601 5.782 5.440 (5,9) 18,2 4.601 5.440 18,2

ROAA (%) 9,7 10,2 0,1 9,4 5,3

ROAE (%) 28,9 28,8 0,4 28,4 15,0

LDR (%) 96,2 94,7 92,4 96,2 92,4

Gross NPF ratio (%) 1,3 1,4 1,8 1,3 1,8

LLC ratio (%) 220,4 230,0 351,0 220,4 351,0

CAR (%) 39,4 42,4 42.3 39,4 42.3

Source : Company, Danareksa Sekuritas estimates

Exhibit 8. Changes in forecast

Key assumptions 2019

Old New Changes (ppt)

2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F

Gross NPLs ratio (%) 1.4 1.8 1.6 1.5 2.0 1.8 1.7 0.2 0.2 0.2

LLC ratio (%) 238.1 226.0 223.7 220.4 320.0 316.8 312.0 94.0 93.1 91.6

Credit costs (bps) 382 504 371 353 704 493 456 200.0 122.0 103.0

Net profit growth (%) 45.0 (21.2) 33.3 38.6 (31.2) 43.4 40.7 (10.0) 10.1 2.1

ROAE (%) 29.8 19.1 22.0 25.7 16.8 21.1 25.2 (2.3) (0.9) (0.5) Source : Company, Danareksa Sekuritas estimates

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Exhibit 9. Income Statement

Year to 31 Dec (IDRbn) 2018A 2019A 2020F 2021F 2022F

Interest Income 3,447 4,457 4,281 4,746 5,630

Interest Expense (368) (524) (551) (556) (593)

Net Interest Income 3,080 3,934 3,730 4,190 5,037

Non-Interest Income (NII) 12 18 20 35 53

Oper. Income 3,092 3,952 3,749 4,225 5,090

Oper. Expenses (1,514) (1,761) (1,832) (1,936) (2,080)

Pre-provisions profit 1,578 2,190 1,917 2,289 3,010

Provisions & Allowances (276) (309) (650) (495) (518)

Operating Profits 1,303 1,881 1,267 1,794 2,492

Non-Operating Income (4) (3) 0 0 0

Exceptionals 0 0 0 0 0

Pre-tax Profit 1,299 1,878 1,267 1,794 2,492

Income Tax (334) (479) (304) (413) (548)

Minorities 0 0 0 0 0

Net Profit 965 1,400 963 1,381 1,944

Exhibit 10. Balance Sheet

Year to 31 Dec (IDRbn) 2018A 2019A 2020F 2021F 2022F

Gross Loans 7,359 9,089 9,587 10,702 12,257

Provisions (216) (292) (623) (627) (647)

Net Loans 7,143 8,797 8,964 10,075 11,611

Govt. Bonds 0 0 0 0 0

Securities 1,038 2,087 2,400 2,760 2,691

Other Earnings Assets 0 0 0 0 0

Total Earnings Assets 8,715 11,214 12,030 13,507 15,981

Fixed Assets 489 551 640 743 857

Non-Earnings Assets 179 213 258 310 373

Total Assets 12,039 15,383 16,696 18,822 21,723

Customer Deposits 7,612 9,447 10,137 11,272 12,787

Banks Deposits 0 0 0 0 0

Int. Bearing Liab. - Others 0 0 0 0 0

Total Liabilities 8,042 9,990 10,619 11,778 13,318

Share capital & Reserves 1,644 1,631 1,641 1,641 1,641

Retained Earnings 2,353 3,762 4,436 5,403 6,764

Shareholders' Funds 3,997 5,393 6,077 7,044 8,405

Minority interests 0 0 0 0 0

Total Equity & Liabilities 12,039 15,383 16,696 18,822 21,723

Exhibit 11. Ratios

Year to 31 Dec (IDRbn) 2018A 2019A 2020F 2021F 2022F

Yield on Earning Assets 43.6 44.7 36.8 37.2 38.2

Cost of funds 5.2 6.1 5.6 5.2 4.9

Interest Spread 38.4 38.6 31.2 32.0 33.3

Net Interest Margin 38.9 39.5 32.1 32.8 34.2

Cost/Income Ratio 49.0 44.6 48.9 45.8 40.9

Oper. Exp./Oper. Gross Inc. 62.4 58.0 70.5 62.5 56.1

Gross NPL Ratio 1.4 1.4 2.0 1.8 1.7

LLP/Gross NPL 214.1 238.1 320.0 316.8 312.0

Cost of Credit 4.1 3.8 7.0 4.9 4.5

Loan to Deposit Ratio 96.7 96.2 94.6 94.9 95.9

Loan to Funding Ratio 96.7 96.2 94.6 94.9 95.9

CASA Mix 22.8 21.2 21.2 21.4 21.6

ROAE 30.9 29.8 16.8 21.1 25.2

ROAA 9.1 10.2 6.0 7.8 9.6

CAR 40.9 43.8 41.1 41.7 44.6

Exhibit 12. Dupont and growth

Year to 31 Dec 2018A 2019A 2020F 2021F 2022F

Dupont

Pre-Tax ROAA 12.3 13.7 7.9 10.1 12.3

Tax Retention rate 74.3 74.5 76.0 77.0 78.0

Post-Tax ROAA 9.1 10.2 6.0 7.8 9.6

Goodwil, Assoc& Min 0.0 0.0 0.0 0.0 0.0

Leverage 3.4 2.9 2.8 2.7 2.6

ROAE 30.9 29.8 16.8 21.1 25.2

Growth (%)

Interest income 18.7 29.3 (4.0) 10.9 18.6

Net Interest Income 20.3 27.7 (5.2) 12.3 20.2

Other Oper. Expenses 6.4 16.3 4.0 5.7 7.4

Fee Based Income 12.2 63.2 (100.0) 0.0 0.0

Pre-Provision Oper. Profit 38.0 38.8 (12.5) 19.4 31.5

Net Profit 44.0 45.0 (31.2) 43.4 40.7

Shareholders’ Equity 77.3 34.9 12.7 15.9 19.3

Loan 21.6 23.5 5.5 11.6 14.5

Earnings Asset 22.5 28.7 7.3 12.3 18.3

Deposit 16.3 24.1 7.3 11.2 13.4

Int. Bearing Liab. 16.3 24.2 7.2 11.2 13.4

CASA 24.6 15.4 7.4 12.4 14.3

Total Asset 31.5 27.8 8.5 12.7 15.4 Source : BTPS, Danareksa Estimates