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Bank OCBC NISP Credit Opinion 2016

By administrator | October 23, 2016 | Finance.
OCBC NISP Credit Opinion

Illustration: OCBC NISP Credit Opinion

Bank OCBC NISP Credit Opinion 2016

Key Financial Ratios FY2015
Asset Quality:
Gross NPL 1.3%
Loan Loss Provision (LLP)/ NPL 164.6%

Capitalization:
Net Open Position 1.0%
Capital Adequacy Ratio 17.3%

Funding/Liquidity:
Loan-to-Deposit 98.0%
CASA 41.4%

Profitability:
Net Interest Margin 4.1%
Return on Asset 1.7%
Return on Equity 9.6%
Cost-to-Income 53.4%

Major Shareholders
OCBC Overseas Investment Pte. Ltd 85.08%
Public (ownership each below 5%) 14.92%

Outstanding Bonds: OCBC NISP 06/17 – Sub. Bond III 2010 IDR 880 bn, OCBC NISP 02/17 – Bond I/ II B 2015 IDR 670 bn, and OCBC NISP 02/18 – Bond I/ II C 2015 IDR 1,23 tn

OCBC NISP Credit Opinion and Net Interest Income

Increase in net interest income and maintain provision expense supported net interest income growth. Bank OCBC NISP Tbk (NISP) recorded a net profit of IDR1.50trillion in 2015, growing by 12.6% YoY. The increase in net profit growth was supported by the increase in net interest income which has outpaced the operating expenses in the same period. The net interest income grew by 18% in 2015 while the interest expenses inched up by 15.4%.

Manageable NPL by consistently observing the prudent banking principle. Bank OCBC NISP managed to maintain its healthy assets quality by consistently observing the prudent banking principle. The company’s gross NPL was maintained at 1.3% of total gross loan worth IDR85.87trillion in 2015 versus 2.0% in 2010. Considerably lower than the average industry with 2.5% amid slower economic growth.

Maintain NIM as the company able to maintain the interest rate. In 2015, the bank recorded NIM at 4.1%, same level from last year’s. The moderate NIM indicates the bank’s ability to maintain its interest rate compared to last year. For the record, the company’s CASA ratio posted at 41.4% in 2015.

OCBC NISP Credit Opinion and Merits

Focusing on SMEs
Bank OCBC NISP (formerly known as NISP Bank), was established on April 4, 1941 in Bandung with the name NV Nederlandsch Indische Spaar En Deposit Bank. The bank was developed to serve SMEs segment after officially inaugurated as a commercial bank in 1967, foreign exchange bank in 1990, and the bank listed its share in Indonesia Stock Exchange in 1994.

Strong support from parent company, Oversea-Chinese Banking Corporation Limited (OCBC Bank)
OCBC Overseas Investments Pte. Ltd has been acting as the controlling shareholders since 2012 with 85.08% stake in the company. OCBC Overseas Investments Pte. Ltd is subsidiary of the Oversea-Chinese Banking Corporation Limited (OCBC Bank), and constantly provides strong support to OCBC NISP.

OCBC NISP Credit Opinion and Economics Highlights

A recovery in economic growth is underway
Indonesia’s economic growth slowed down to 4.8% in 2015, from +5.0% in 2014, affected by sluggish external trade performance given global economic slowdown and made worse by weaker household spending, on the back of falling commodity prices as well as high interest rate environment domestically. The negative impact arising from tepid global growth is expected to continue posing a drag to Indonesia’s economic growth, particularly in 1H 2016, in our view.

Indonesia, however, has weathered sluggish global condition relatively well given its large and resilient domestic base economy and a flexible exchange rate policy. We envisage domestic demand to remain as the main engine of growth this year, and are of the view that the economy will likely bounce back to post a slightly stronger growth of 5.1% in 2016, from +4.8% in 2015.

This is on account of a pick-up in consumption and investment due to faster pace of government budget disbursement. In particular, the government intends to accelerate its capital spending by pushing for project tenders to be completed by the end of 2015 so that its spending programs can begin to be realized as soon as in 1Q2016.

Indeed, we have seen construction activities picking up momentum for two consecutive quarters towards the end of last year, while cement sales also recovered. Meanwhile, we expect private consumption to chart a stronger growth going forward, given improvement in consumer confidence and on the back of the government stimulus in the form of energy price cuts, increase in minimum wages, and in the form of tax that we believe could boost the purchasing power in 2016.

OCBC NISP Credit Opinion and Business Highlights

Increase in net interest income, and maintain provision expense supported net interest income growth. Bank OCBC NISP Tbk (NISP) recorded a net profit of IDR1.50trillion in 2015, growing by 12.6% YoY. The increase net profit growth was supported by the increase in net interest income which has outpaced the operating expenses in the same period. The net interest income grew by 18% in 2015 while the interest expenses inched up by 15.4%.

The company was able to post a credit growth up to 25.6% in 2015, relatively higher than the third-party funds growth. Loan to deposit ratio (LDR) rose to 98.0%. However, the bank’s loan to funding (LTF) that include third party deposits, banks, MTN at level 88,9% by end at 2015.

Total assets and equity grew along with the bank expansion
The net income growth was also driving higher assets productivity as seen by maintain ROA and ROE to 1.70% and 9.60% respectively in 2015. While its capital adequacy ratio (CAR) stood at 17.3%. The company’s total assets and equity grew along with the loan expansion in 2015. Total assets grew by 16.8% to record IDR120.48trillion while equity grew by 9.8% to IDR16.41trillion. The company’s total loans expanded by 25.6% to IDR85.9trillion.

OCBC NISP Credit Opinion and Third Party Fund

Third-party funds grew by 19.9%, driven by time deposits and savings
In the funding side, the third-party deposits also continue to increase, growing by 19.9% to post IDR87.28trillion in 2015. The total third party deposits growth driven market share to 2.0% than 1.8% in previous year. The third-party funds growth in 2015 was also supported by current account and savings which grew by 60.5% and 21.3% respectively.

Manageable NPL by consistently observing the prudent banking principle
Bank OCBC NISP managed to maintain its healthy assets quality by consistently observing the prudent banking principle. The company’s gross NPL was maintained at 1.3% of total gross loan worth IDR85.87trillion in 2015 versus 2.0% in 2010. Considerably lower than the average industry with 2,5%, amid slower economic growth.

Maintain NIM as the company able to maintain the interest rate
In 2015, the bank recorded NIM at 4.1%, same level from last year’s. The moderate NIM indicates the bank’s ability to maintain its interest rate compared to last year. For the record, the company’s CASA ratio posted at 41.4% in 2015.

OCBC NISP Credit Opinion and  Management Analysis

Focusing on SMEs
Bank OCBC NISP (formerly known as NISP Bank), was establish on April 4, 1941 in Bandung with the name NV Nederlandsch Indische Spaar En Deposit Bank. The bank was develop to serve SMEs segment after officially inaugurated as a commercial bank in 1967, foreign exchange bank in 1990, and the bank listed its share in Indonesia Stock Exchange in 1994.

OCBC NISP successfully weathered Asian financial crisis and banking sector collapse and has become one of the first few banks to resume credit disbursement during the crisis. In addition, the company has successfully increased its equity by almost 2 times through the issuance of “Zero-Coupon Mandatory Exchangeable Notes”, with the support from Regent Pacific Private Equity (RPPE).

Strong support from parent company, Oversea-Chinese Banking Corporation Limited (OCBC Bank). OCBC Overseas Investments Pte. Ltd has been acting as the controlling shareholders since 2005 with 85.1% stake in the company. OCBC Overseas Investments Pte. Ltd is subsidiary of the Oversea-Chinese Banking Corporation Limited (OCBC Bank), and constantly provides strong support to OCBC NISP.

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