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PT Bank Negara Indonesia (Persero) Tbk. (BNI, stock code: BBNI) recorded a solid performance and expansion in the second quarter of this year in line with a healthy growth focus on top-tier customers.
The achievement was parallel with efforts to strengthen its green portfolio and implement sustainable principles, or environment, social and governance (ESG), in every aspect of the company's business. BNI’s net profit for the first half of 2022 reached Rp 8.8 trillion, an increase of 75.1 percent year-on-year (YoY).
BNI's business focus to become a pioneer of financial institutions that strengthen green financing has paid off well. Morgan Stanley Capital International (MSCI) announced the results of its latest ESG Leaders index review. From the results of the review, MSCI increased BNI's ranking in the MSCI Indonesia ESG Leader Index to the top three in Indonesia. BNI also holds an A Rating from MSCI, the best rating in the industry today. Digitalization is one of the main drivers of high transactions, both by business and individual customers, which is also one of the inspirations of implementing green banking-based business.
BNI president director Royke Tumilaar said that BNI noted the firm economic recovery that occurred in the middle of this year. Business activity and consumer spending are getting stronger, thus encouraging BNI's performance as an intermediary.
As first mover in green banking, BNI has proven how the implementation of green financing in Indonesia has a positive correlation to profitability. The digital transformation that increases banking transactions continuously encourages BNI’s green banking to be more comprehensive.
“We are very grateful for the performance until the middle of this year. The performance of the intermediation function is getting stronger in line with the economic recovery. Green banking can still be carried out, and even become a potential for profitability," he said.
Royke explained that the growth of digital services at BNI resulted in the highest operational income before reserves (PPOP) in BNI's history. This resulted from healthy credit expansion and was supported by low-cost deposits (CASA).
Stable net interest margins in the range of 4.7 percent supported the high amount of non-interest income in the first half of 2022 of Rp 7.6 trillion, up 11.0 percent YoY. Loans in the first half of this year amounted to Rp 620.42 trillion, up 8.9 percent YoY.
One of the programs that should be taken into account as a driver of credit realization, especially in the small and medium segment, is the BNI Xpora Program. During the first half of 2022 alone, BNI Xpora disbursed loans worth Rp 7.2 trillion. By June 2022, loans to export-oriented MSMEs reached Rp 22.1 trillion with 39,000 borrowers.
Public fundraising also remained strong with the value of third-party funds (DPK) reaching Rp 691.84 trillion, up 7 percent YoY. These deposits are dominated by CASA, which accounted for 69.2 percent of the total collected deposits. The biggest contributors to CASA are savings customers who actively transact through the BNI Mobile Banking application and current accounts from customers who use cash management services on BNI Direct.
"As of June 2022, BNI Mobile Banking users contributed 59.2 percent of savings. Meanwhile, 92 percent of current account funds are contributed by users of cash management services," he said.
Green financing continuously increases
Royke said that until the end of June 2022, BNI's financing in the green segment had reached Rp 176.6 trillion, 28.6 percent of total loans. The entire financing is intended for industries that produce products or services that have a positive impact on the environment.
BNI’s green financing so far has prioritized the needs of economic recovery through financing MSMEs by Rp 117.9 trillion. The rest is utilized for green environmental ecosystem development at Rp 16.1 trillion, new and renewable energy at Rp 12.0 trillion, pollution management at Rp 7.2 trillion, and water and waste management at Rp 23.4 trillion.
"BNI also provides ease of ownership of electric vehicles through BNI consumer financing and financing through its subsidiary BNI Multifinance, with more attractive interest rates compared with conventional car financing. We are also working with PLN in the construction of a Public Electric Vehicle Charging Station [SPKLU] with a partnership scheme in the BNI office environment," he said.
He also emphasized that financing for new and renewable energy (NRE) continues to increase. Until the middle of this year, financing for NRE covered the needs of hydropower, solar power and biogas.
“In an effort to support a green portfolio, BNI became a pioneer by issuing green bonds denominated in rupiah worth Rp 5 trillion. This issuance will later be used to encourage green banking, especially financing in 11 categories of green areas according to POJK 60/POJK.04/2017," he said.
Digital service performance
BNI deputy president director Adi Sulistyowati said that the digital transformation contributed greatly to the operational segment and the profitability of BNI. As one of the pioneers of digital banking, the company is proactive in increasing service capacity and capability in encouraging and developing digital solutions for customers.
BNI noted that the number of users of the BNI Mobile Banking application reached 12.14 million as of June 2022, an increase of 34.7 percent YoY. The number of transactions increased significantly by 34.8 percent to reach 271 million with a transaction value of Rp 368 trillion, up by 36.8 percent YoY.
“Of course, this excellent achievement will continue to be maintained and improved. BNI continues to strengthen to become the main banking service channel for Indonesian banking customers," said Adi “Sulis” Sulistyowati.
Susi added that the company formed a partnership with more than 4,000 partners in its Application Programming Interface (API) with a total of 443 services. Providing access to financial services to the public, especially in remote areas, is also continuously improved by branchless banking services known as BNI Agen46.
Agen46, an extension of the bank, has more than 161,000 agents to help customers who have not been served by formal financial institutions. The transaction volume of Agen46 amounts to Rp 37.32 trillion.
Tapcash has also supported cashless transactions. A total of 8.89 million Tapcash cards support transportation, food and beverages and minimarket transactions amounting to Rp 698 billion.
The digital performance of Business Banking also strengthened in the first half of the year. BNIDirect's digital business solutions recorded a transaction volume of more than Rp 2,500 trillion.
“All BNIDirect transaction authorizations are secured with a Dynamic PIN generated by a physical or mobile token. BNIDirect's role as Corporate Digital Services has been very helpful for business customers and continues to be appreciated," she said.
Intermediation function performance
Meanwhile, BNI finance director Novita Widya Anggraini said that BNI was able to encourage stronger intermediation in the second quarter of 2022. Corporate loans are still the vehicle of BNI's credit acceleration. During the second quarter of 2022, BNI disbursed loans of Rp 74.3 trillion, higher than in the second quarter of 2021, which reached Rp 59.3 trillion. Loan disbursement in the second quarter of 2022 was mainly channeled to top tier corporate borrowers.
This private corporate lending increased by 14.7 percent YoY to Rp 205.3 trillion; the large commercial segment grew 31.2 percent YoY to Rp 48.5 trillion; and the small segment also grew 10.2 percent YoY to Rp 100.2 trillion. The overall loans in the Business Banking sector grew 7.7 percent YoY to Rp 512.3 trillion.
“The economic sectors targeted in the Business Banking segment are manufacturing, trade, agriculture, transportation and warehousing, and telecommunications. BNI has also entered the green economy sector such as new and renewable energy," she said.
From consumer loans, Novita said that BNI was able to record a positive performance in the payroll credit business with 19.6 percent YoY growth to Rp 39.1 trillion and housing loans which grew 7.6 percent YoY to Rp 51.2 trillion.
"With BNI's consumer banking brand getting stronger, BNI is able to increase competitiveness, while launching various innovations to increase the attractiveness of consumer products in competing with peers," Novita said.
BNI hoped the economic performance for the second half of 2022 will again make BNI's intermediation function and performance stronger. With the stronger growth potential of green banking, BNI is optimistic that the credit growth by the end of the year will be between 7 and 10 percent.
"The continuous economic recovery and the transformation that we are carrying out has begun to show results, we also hope that this year will see the highest profit record in BNI's history," she said.
Novita asserted that there is still room for BNI’s expansion, as indicated by the loan to deposit ratio (LDR) which is at 90.1 percent. On the capital side, the capital adequacy ratio (CAR) is in a strong position of 18.42 percent.
The increase was accompanied by strengthening the quality of the company's assets supported by various factors, improvement in Loan at Risk (LaR) to 19.6 percent (including restructuring loans due to COVID-19), and non-performing loans (NPLs) declined to 3.2 percent. Cost of funds is more efficient at 1.4 percent, and net interest margin is stable at 4.7 percent.
This positive performance is in line with the support received from the government, which has made the business climate very conducive, even in the midst of the threat of a global crisis. Credit restructuring due to the pandemic continues to show increasingly significant improvements.
"COVID-19 restructuring credit is recorded at Rp 62.9 trillion, down from the position in the same period last year of Rp 81.8 trillion. In fact, 64 percent of BNI's borrowers affected by the pandemic have started making payments above the base lending rate, so we are optimistic that the trend of improving credit quality will continue in all segments," she added.
Stock performance
Novita further said that BBNI’s stock price closed at Rp 7,850 on June 20, an increase of 69.5 percent compared with the year before. With a market capacity of Rp 146.4 trillion, BBNI remains the first pick for investors. Other than the positive performance and a solid first half of 2022, several points can be seen as a supporting note for BNI investors. First is that the company is a leading financial business entity in carrying out digital transformation to prepare business foundations for the future.
Second, the company has had an extensive corporate transformation as a bank that focuses on profitability. Third, BNI has an attractive valuation, because it does not reflect the actual fundamental conditions. In terms of transformation, the company continues to strengthen capital, digitalization and asset quality.
“In the long term, this transformation is expected to make BNI a highly profitable bank. BNI also remains an excellent investment because in terms of valuation, BNI's price to book value [PBV] ratio is still in the range of 1.2 times, not reflecting actual fundamental conditions," she said.
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