Banking Sector – NEUTRAL (Maintain)
While loan growth improved and BI estimated NPL to stabilize in Aug’15, we still prefer to wait for any signs of improvement to confirm that loan and NPL are sustainably improving. The continuing depreciation on IDR and slowing growth can still pressurize asset quality. We still believe that government infrastructure program remains a key point to stimulate the economy and bank activity. We hope it can really start soon as budget spending normally occurs in 3Q and 4Q. The recent sharp drop in banks’ stock prices make the valuation more attractive with forward PBV currently below 2 standard deviation for banks under our coverage (BBCA, BMRI, BBRI, and BBNI). We still maintain neutral on the sector with BBCA and BBRI as our prefered stocks.
- Improvement in loan growth.
- Liquidity still not stretched.
- Pressure on NPL to continue.
- Government infrastructure project remains a key point.
- Recent price drop offers attractive valuation.
- Maintain NEUTRAL with BBCA and BBRI as our prefered stocks.