Bank Negara Indonesia's net profit up 8.5% to US$243m

Loans also grew by 21%.

Maybank Kim Eng expects the strong loan growth momentum and stable asset quality achieved in 1Q17 to continue for the rest of the year. Management’s strategy to clean up Bank Negara Indonesia's (BBNI’s) loan book back in 2015 and build higher provision has resulted in a stronger buffer against NPL risk in the future.

Here's more from Maybank Kim Eng:

BBNI’s 1Q17 earnings were largely in line with our estimate. Net profit was IDR3.23t (~US$243m) (+8.5% YoY) vs our IDR3.15t (~US$237m) estimate. Loans grew by a healthy 21% YoY, which mostly went to the infrastructure and agriculture sectors.

This rapid expansion allowed BBNI to partly offset its declining yield, which was a reflection of lower benchmark rates and loan restructuring in 2016. By 1Q17, NIM slipped to 5.6% from the normalised FY16 level of 5.9%. Despite the lower NIM, ROE improved by 50bps to 16% thanks to stable NPLs of 3% and manageable provisioning.

BBNI’s special-mention loans increased to 4.3% of total loans in 1Q17 from 2.9% by YE16. Meanwhile, its ratio of restructured-to-total loans stayed at 7.8%, which so far is the highest among the big banks.

However, based on our estimates, BBNI has sufficient buffer to absorb up to IDR13.5t of NPLs (+23% YoY) and at the same time raise its NPL coverage to 150% from 147% currently.