Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The LQ45 Index is a market cap weighted index of the 45 most liquid stocks listed on the Indonesia Stock Exchange (IDX). The LQ45 Index covers at least 70% of the stock market capitalization and transaction values in the Indonesia Stock Market.The IDX has announced the changes to the LQ45 Index as a part of the August review. <a href="https://www.smartkarma.com/entities/barito-pacific-tbk-pt" target="_blank" data-smartkarma-citation="entities:8851:1" rel="noopener">Barito Pacific (BRPT IJ)</a> and <a href="https://www.smartkarma.com/entities/timah-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:11174:1" rel="noopener">Timah Persero (TINS IJ)</a> have been added to the index while <a href="https://www.smartkarma.com/entities/bank-tabungan-pensiunan-nasi" target="_blank" data-smartkarma-citation="entities:27088:1" rel="noopener">Bank BTPN Syariah (BTPS IJ)</a> and <a href="https://www.smartkarma.com/entities/ciputra-development-tbk-pt" target="_blank" data-smartkarma-citation="entities:5513:1" rel="noopener">Ciputra Development (CTRA IJ)</a> have been deleted from the index.We expect the impact of passive funds (and active funds) will be quite high on <a href="https://www.smartkarma.com/entities/barito-pacific-tbk-pt" target="_blank" data-smartkarma-citation="entities:8851:1" rel="noopener">Barito Pacific (BRPT IJ)</a>, <a href="https://www.smartkarma.com/entities/bit-digital-inc" target="_blank" data-smartkarma-citation="entities:31155:1" rel="noopener">Bit Digital (BTBT US)</a> and <a href="https://www.smartkarma.com/entities/ciputra-development-tbk-pt" target="_blank" data-smartkarma-citation="entities:5513:1" rel="noopener">Ciputra Development (CTRA IJ)</a> and significantly lower on <a href="https://www.smartkarma.com/entities/timah-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:11174:1" rel="noopener">Timah Persero (TINS IJ)</a>.The changes are effective after the close of trading on 30 July, so there are only 4 trading days before passive funds have to rebalance their portfolios. Active funds benchmarked to the LQ45 index will also trade over the next few days so as not to deviate too far from their benchmark.

The LQ45 Index is a market cap weighted index of the 45 most liquid stocks listed on the Indonesia Stock Exchange (IDX). The LQ45 Index covers at least 70% of the stock market capitalization and transaction values in the Indonesia Stock Market.The IDX has announced the changes to the LQ45 Index as a part of the August review. Barito Pacific (BRPT IJ) and Timah Persero (TINS IJ) have been added to the index while Bank BTPN Syariah (BTPS IJ) and Ciputra Development (CTRA IJ) have been deleted from the index.We expect the impact of passive funds (and active funds) will be quite high on Barito Pacific (BRPT IJ), Bit Digital (BTBT US) and Ciputra Development (CTRA IJ) and significantly lower on Timah Persero (TINS IJ).The changes are effective after the close of trading on 30 July, so there are only 4 trading days before passive funds have to rebalance their portfolios. Active funds benchmarked to the LQ45 index will also trade over the next few days so as not to deviate too far from their benchmark.

LQ45 Index Rebalance: BRPT, TINS In; BTPS, CTRA Out

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Solid Result, But Challenges Ahead: Bank Central Asia (BBCA.IJ) [BCA] reported 2Q21 results of IDR 7.4 tn, improving IDR 376 mn (5.3%) on a linked quarter basis. BCA’s positive operating results were highlighted by non-interest income growth and a decline in operating expenses; and*Credit Challenges Persist, As Credit Break Re-Accelerates: By our calculation, we find that 2Q21 net new NPLs amounted to IDR 2.4 tn for an annualized rate of increase of 92.4%, comparing very unfavorably with 1Q21’s IDR 742 bn and 28.7%, respectively. Despite the recent acceleration in net new NPL formation, we calculate that loss reserves are likely right where they need to be given the uptick in special mention and lack of full clarity with the restructuring portfolio. Although, we worry the softness in current macro conditions.

*Solid Result, But Challenges Ahead: Bank Central Asia (BBCA.IJ) [BCA] reported 2Q21 results of IDR 7.4 tn, improving IDR 376 mn (5.3%) on a linked quarter basis. BCA’s positive operating results were highlighted by non-interest income growth and a decline in operating expenses; and*Credit Challenges Persist, As Credit Break Re-Accelerates: By our calculation, we find that 2Q21 net new NPLs amounted to IDR 2.4 tn for an annualized rate of increase of 92.4%, comparing very unfavorably with 1Q21’s IDR 742 bn and 28.7%, respectively. Despite the recent acceleration in net new NPL formation, we calculate that loss reserves are likely right where they need to be given the uptick in special mention and lack of full clarity with the restructuring portfolio. Although, we worry the softness in current macro conditions.

Bank Central Asia – Good, But New Credit Challenges Ahead

*Improved Operating Result: Bank Central Asia (BBCA.IJ) [BCA] reported 1Q21 results of IDR 7.0 tn do not do BCA justice, as core operating results grew IDR 1.5 tn (40.9%) over the same period. BCA’s positive operating results were highlighted by two factors: a) interest income growth of IDR 385 mn (2.8%) due largely to a bit of leverage in the corporate securities portfolio, and b) a tax rate reduction; and*Credit Challenges Persist, But Credit Break Decelerates: By our calculation, we find that 1Q20 net new NPLs amounted to IDR 742 bn for annualized rate of increase of 28.7% - which is quite favorable compared to 4Q20 results of IDR 1.3 tn and 46.5%. Given the surprise deceleration in net new NPL formation, we calculate that loss reserves are likely right where they need to be given the uptick in special mention and lack of full clarity with the restructuring portfolio.

*Improved Operating Result: Bank Central Asia (BBCA.IJ) [BCA] reported 1Q21 results of IDR 7.0 tn do not do BCA justice, as core operating results grew IDR 1.5 tn (40.9%) over the same period. BCA’s positive operating results were highlighted by two factors: a) interest income growth of IDR 385 mn (2.8%) due largely to a bit of leverage in the corporate securities portfolio, and b) a tax rate reduction; and*Credit Challenges Persist, But Credit Break Decelerates: By our calculation, we find that 1Q20 net new NPLs amounted to IDR 742 bn for annualized rate of increase of 28.7% - which is quite favorable compared to 4Q20 results of IDR 1.3 tn and 46.5%. Given the surprise deceleration in net new NPL formation, we calculate that loss reserves are likely right where they need to be given the uptick in special mention and lack of full clarity with the restructuring portfolio.

Bank Central Asia – Light At The End Of The Tunnel

Bank Negara Indonesia Persero / Equity Bottom-Up

*Capital Raise Coming:Without any detail whatsoever, on March 10, 2021, the Ministry of State-Owned Enterprises (MOSOE) announced that Bank Negara Indonesia (BBNI.IJ) [BBNI] will seek a rights offering sometime in 2022; and*Big Dilution Expected Given Awful Credit Metrics:BBNI’s stated capital levels are low by sector comparison at a 16.8% CAR. Net new NPLs have increased 206.0% on an annualized basis – the absolute worst we have witnessed regionally this quarter. We calculate a minimum loss reserve shortfall of IDR 29.7 tn which represents 28% of stated capital – intimating a significant capital is on the horizon.

*Capital Raise Coming:Without any detail whatsoever, on March 10, 2021, the Ministry of State-Owned Enterprises (MOSOE) announced that Bank Negara Indonesia (BBNI.IJ) [BBNI] will seek a rights offering sometime in 2022; and*Big Dilution Expected Given Awful Credit Metrics:BBNI’s stated capital levels are low by sector comparison at a 16.8% CAR. Net new NPLs have increased 206.0% on an annualized basis – the absolute worst we have witnessed regionally this quarter. We calculate a minimum loss reserve shortfall of IDR 29.7 tn which represents 28% of stated capital – intimating a significant capital is on the horizon. 

Bank Negara Indonesia – MOSOE Tosses A Grenade

Bank Tabungan Negara Persero / Equity Bottom-Up

*Good Number: Bank Tabungan Negara (BBTN.IJ) [BBTN] reported 4Q20 bottom-line result of IDR 482 bn, increasing IDR 130 bn (36.9%) linked quarter. On an operating basis excluding gains (assumed in 4Q20), we calculate results improved even further – increasing IDR 98 bn or 47.3% linked quarter; and*Credit Outlook Brightens: We were also quite pleased to see that net new NPLs too have decelerated and now amount to IDR 240 bn or just 8.2% on an annualized basis. Given the deceleration of net new NPLs, mix of loans, and the strong reserve cover, BBTN’s reserves appear to right where they need to be.

*Good Number: Bank Tabungan Negara (BBTN.IJ) [BBTN] reported 4Q20 bottom-line result of IDR 482 bn, increasing IDR 130 bn (36.9%) linked quarter. On an operating basis excluding gains (assumed in 4Q20), we calculate results improved even further – increasing IDR 98 bn or 47.3% linked quarter; and*Credit Outlook Brightens: We were also quite pleased to see that net new NPLs too have decelerated and now amount to IDR 240 bn or just 8.2% on an annualized basis. Given the deceleration of net new NPLs, mix of loans, and the strong reserve cover, BBTN’s reserves appear to right where they need to be. 

Indonesia

Bank Danamon Indonesia Tbk PT provides general banking services. The Bank's head office is located in Jakarta with branch offices throughout Indonesia.

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Bank Danamon Indonesia (BDMN IJ)

LQ45 Index Rebalance: BRPT, TINS In; BTPS, CTRA Out

The LQ45 rebalance will be implemented at the close on 30 July. BRPT & TINS have been included, replacing BTPS & CTRA. There is a large impact on...

Brian Freitas

Bank Central Asia – Good, But New Credit Challenges Ahead

BANK CENTRAL ASIA: BCA reported a 5.3% QOQ 2Q21 results increase. Despite the 92.4% net new NPLs increase, we calculate that loss reserves are...

Thomas J. Monaco

Bank Central Asia – Light At The End Of The Tunnel

BANK CENTRAL ASIA: BCA's core operating results grew 40.9% QOQ in 1Q21, and were highlighted by interest income growth and lower taxes. Another...

Thomas J. Monaco

Bank Negara Indonesia – MOSOE Tosses A Grenade

Bank Negara Indonesia: Without any detail the MOSOE announced that BBNI will seek a rights offering in 2022. We calculate a minimum loss reserve...

Thomas J. Monaco

Bank Tabungan Negara – Well Managed

BANK TABUNGAN NEGARA: BBTN reported 4Q20 bottom-line result which increased 36.9% linked quarter. Net new NPLs too have decelerated at just 8.2% on...

Thomas J. Monaco

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