Gravity Works As WeWork Doesn't; Now Plan B

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

Bank Tabungan Negara Persero / Equity Bottom-Up

We agree with <a href="https://www.smartkarma.com/profiles/thomas-j-monaco" target="_blank" data-smartkarma-citation="accounts:1716" rel="noopener">Thomas J. Monaco</a> that BBTN is a bank in Indonesia to follow.GEM investors tend to prefer expensive bank franchises within Indonesia’s innovative financial ecosystem. They should instead take a very close look at much improved BBTN which is the value “play”.Bank Tabungan Negara is today a well-managed State-controlled bank, dedicated to mainly subsidized and non-subsidized mortgages (46% and 31% of book, respectively) and to a lesser extent the construction segment, backed by source of funding from not just time deposits but from fast-expanding CASA deposits (41%).Bank Tabungan Negara will continue to benefit from the government's subsidized mortgage program for low-income first-time buyers. Mortgages are being successfully digitalized via the bank’s Proporti Portal. Management is making progress too with its mobile banking BTN which now commands more than 1.5 million users, accounting for IDR13.7tn in transaction value.The bank is fast-developing its Shariah offering as well with financings up 6% YoY.FY20/19 results show positive fundamental momentum and trends with improvement in Profitability, in Efficiency, In Liquidity, in Asset Quality, and in Provisioning while Capital Adequacy and NIM showed some erosion. Growth in “Core Income” was restrained, given the muted credit impulse and decrease in fee Income streams, added to margin/spread erosion, which was more than offset by tight OPEX-control, treasury gains, and by lower LLPs given the trends in Asset Quality and LLR level.<div class="content-highlight">
A FV of 7%, a PBV of 1.0x, and an Earnings Yield of 8.8% are not unappealing. The bank commands both a high PH Score™ (8.1) and top quartile VFM ranking.
The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. 
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We agree with Thomas J. Monaco that BBTN is a bank in Indonesia to follow.GEM investors tend to prefer expensive bank franchises within Indonesia’s innovative financial ecosystem. They should instead take a very close look at much improved BBTN which is the value “play”.Bank Tabungan Negara is today a well-managed State-controlled bank, dedicated to mainly subsidized and non-subsidized mortgages (46% and 31% of book, respectively) and to a lesser extent the construction segment, backed by source of funding from not just time deposits but from fast-expanding CASA deposits (41%).Bank Tabungan Negara will continue to benefit from the government's subsidized mortgage program for low-income first-time buyers. Mortgages are being successfully digitalized via the bank’s Proporti Portal. Management is making progress too with its mobile banking BTN which now commands more than 1.5 million users, accounting for IDR13.7tn in transaction value.The bank is fast-developing its Shariah offering as well with financings up 6% YoY.FY20/19 results show positive fundamental momentum and trends with improvement in Profitability, in Efficiency, In Liquidity, in Asset Quality, and in Provisioning while Capital Adequacy and NIM showed some erosion. Growth in “Core Income” was restrained, given the muted credit impulse and decrease in fee Income streams, added to margin/spread erosion, which was more than offset by tight OPEX-control, treasury gains, and by lower LLPs given the trends in Asset Quality and LLR level.
A FV of 7%, a PBV of 1.0x, and an Earnings Yield of 8.8% are not unappealing. The bank commands both a high PH Score™ (8.1) and top quartile VFM ranking.
The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. 


Bank Tabungan Negara Persero

BBTN: Top Pick in Indonesia