PT UOB Kay Hian Securities and PT Samuel Sekuritas Indonesia recommended hold on PT Bank Mandiri Tbk’s (BMRI) stock after the issuer reported net profit plunge by 28.7% to Rp 7.1 trillion in the first semester of 2016. The 250% increase in provision to Rp 9.9 trillion in anticipation of the risk of non-performing loan (NPL) growth causes BMRI’s profit to be eroded.
BMRI’s financial report showed that the company’s gross NPL ratio climbed up to 3.86% in the first semester of 2016 from 2.43% in the first semester of 2015. Net NPL stood higher at 1.53% as of June 2016 compared to 1.01% in the same period last year. “Profit drop is mainly due to the increased provision cost. If we disregard provision cost, Pre-Provision Operating Profit (PPOP) will reach Rp 19.3 trillion, rising 13.3% YOY,” said Rohan Hafas, Corporate Secretary of Bank Mandiri.
Alexander Margaronis, an analyst from UOB Kay Hian, said that deteriorating asset quality will be evident by the year end with gross NPL projected at 3.5% to 4%. Credit in commercial sector contributes the largest BMRI’s NPL. “Perhaps, BMRI’s stock price will be depressed due to the weak performance in the second quarter of 2016. However, with potential NPL recovery by 2017, investors may set position at low price,” Alexander said. UOB recommended hold on BMRI’s stock with target price of Rp 10,100.
Likewise, Samuel Sekuritas recommended hold on BMRI’s stock with target price consensus of Rp 10,059. Samuel Sekuritas assessed that BMRI’s net profit as of June 2016 reflected 36% of the forecast or consensus in fiscal year 2016. Pressure on NPL is also expected to continue until the third quarter of 2016. Hence, it should be kept observed. (*)
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