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Bank BTPN: Best Bank so Far

Bank Tabungan Pensiunan Nasional (BTPN), or you may call it the National Bank of Pensionary Fund, is a bank belonged to a giant private equity fund, Texas Pacific Group (TPG), which is managed by its Indonesian partner, Northstar Equity Partners (Northstar). TPG acquired the Bank on March 14, 2008, or just two days after the company's listing on the Stock Exchange. By Northstar, the Bank entered a new business venture, namely the small medium enterprises (SME) banking and financing, while still running its original business of pensionary credit and financing.

In Indonesia, the leader in SME financing business is Bank Rakyat Indonesia (BBRI), or you may called People’s Bank of Indonesia, and several other banks. But the banking services in Indonesia, including that of BBRI, only able to reach about one-third of all SMEs throughout the archipelago. So in this case, BTPN does not need to compete with BBRI to enter the SME banking business, as its market is still wide open. According to data from the Ministry of Cooperatives and SMEs, until the end of 2011, there were approximately 55 million unit of SMEs in Indonesia, and is predicted to continue to grow. BTPN itself estimates that there are about 15 million SMEs in Indonesia, which are potential to be their clients.

But the biggest challenge in the SME banking business is distance. Yup, in contrast to formal and big companies which have office in the center of cities, many of the SME companies operating in remote area which is far away from nowhere. So banking services are also difficult to reach them.

However, BTPN is able to deal with this by using at least two strategies. First, by developing the community banking. The trick, BTPN opens a service unit (sub-branches) in the middle of the SME community, for example, next to a traditional market, then the bank personnel went around to offer banking services to SME businesses which located in a radius of 10 kilometers from the position of the service unit. In addition, to the SMEs who have served well, they are advised to recommend the service to their fellow small business owners, so the radius of the service area could be wider than just 10 kilometers.

For this strategy, I gave two thumbs up for BTPN. When I look around to traditional markets in Jakarta and Bandung, I could easily find a small building with a sign board of the Bank. Hopefully in other cities too.

Second, if SME owners do not have time to come to the bank, let say because they are busy in trading or because the distance is too far, then it was the bank that came to them. The trick? By using the technology of Electronic Data Capture (EDC), which identifies fingerprints and others. The officer that carrying EDC machine may come to the customer, then the customer can do the banking transaction in his shop with his fingerprints as confirmation of identification. By this way, even the customers who live in the interior can still do the banking transaction with BTPN.

With the above strategies, BTPN recorded SME lending of Rp7.4 trillion in First Quarter 2012, grew 10.1% over the same period in 2011. Actually, this has not been a significant growth record. The SME lending only accounted for about 23.5% of all loans of the Bank during first quarter 2012. Most of the loans of BTPN is still the pensionary loan. But with the opening of more than 500 units of SMEs service in last 2009, and with the implementation of the above strategies, then the prospect of SMEs financing business is still quite bright. Currently from all service units of  BTPN, which are spread throughout Indonesia, 49% of which are SMEs service units, or already larger than the pensionary serivce units of 40% (the rest of 5 - 6% is consists of general credit services and sharia units).

About the bank’s expansion in the field of SME financing, BTPN has been and will continue to develop the program of 'Daya Tumbuh Usaha' (the power to grow the business), that is a entrepreneurship training center for SMEs. In 2011, the training program is successfully reaching 206,000 participants, increased almost two-fold compared to 104,000 participants in 2010. The Bank has also developing 'Pulsamu', a franchise business of telephone credit, where the customer can join in it. The franchise has been run since 2011, and will continue to be developed in 2012.

That’s all about SMEs. And what about the company's original business, the pensionary credit? For this business, BTPN focused on the development of health care and life insurance for retiree customers of the Bank. Through the program of ‘Daya Sehat Sejahtera’ (the power to be healthy and prosperous), the pensionary service units providing brochures of health information, clinical services, and health consultations. Especially for health consultations, the officers of the Bank also motivate the retirees to keep a healthy life until death. BTPN even also provides entrepreneurship training for retirees who want to use their spare time by opening a small business. As for providing life insurance, the Bank is working with Allianz. As a result, during the year of 2011, the Bank had 520,000 clients of pensionary, grew from 250,000 in 2010.

Unfortunately, BTPN does not have a lot of plan to expand their  pensionary business, because they will be more focused on the development of SMEs, as already discussed above. But it is not an issue, given that since its inception, BTPN has been a market leader in retirement financing in Indonesia.

Outside the SME and pensionary business, BTPN still has two more business units, namely the general credit business, and sharia, although the portions were small. In the general business credit, the Bank developing the service of productive poor, which is a lending service in small amounts (up to Rp5 million, or about US$ 500) for working people such as farmers, fishermen, market vendors, etc. Through these poor productive services, BTPN also offers savings and insurance services for ‘grassroots’ customers. The Bank estimates that there are at least 36 million people in Indonesia which has good potential to be customers of this, so again, the opportunity is still quite wide open.

In addition to poor productive services, BTPN also developing the brand of 'Sinaya', ie lending service for businesses with a larger scale which need funding of more than just US$ 500. Both of these services (productive poor and Sinaya) are still in the development stage, and will contribute to the company's revenue in the next 1 - 2 years.

For sharia business unit, in 2012 BTPN is developing the program of 'Tunas Usaha Rakyat' (TUR), which is a program that is approximately equal to the SME financing programs, only packaged in the form of sharia. The market is also different, which is the group of low class women in a rural area, so that they can be helped to improve the welfare of her family through entrepreneurial activities. I think, this program is quite unique. So the women personnel of the bank will go to the villages using motorcycles to be present at the meeting of the housewives, and to provide entrepreneurship education for them. The personnel then offer business loans amounting to US$ 150, that can be paid in installments over one year. If the customer can repay the loan without any issues, and their business also growing well, then in the second year, the customer can apply for a larger loan larger, let say US$ 300. And in the third year, the customer may file a loan for housing or education for their sons and daughters. Sounds nice, is not it? If this program is success, then it is possible that in the year of 2012, the program will also contributed a significant revenue for the Bank.

Okay, so in conclusion BTPN is a good company, especially as always, if we talk about long-term investment. Now how about the performance of the company, and also its stock?



Since before it was acquired by Northstar and listing on the Stock Exchange in 2008, BTPN was bank with a good performance, with net income increasing from year to year (at least from 2005). And the good performance continues. In the full year 2011, the Bank recorded a net profit of Rp1.4 trillion. And in first quarter of 2012, its net profit was Rp439 billion, up 61.5% from the previous Rp272 billion. The ​​net book value of the company also continues to increase, which becomes Rp6.2 trillion (US$ 620 million) from Rp5.6 trillion in the previous three months.

Beyond that, BTPN's financial ratios are at a very good position. The CAR is still strong in 22.2%, while its ROE has now reached 31.3%. Then, usually the biggest problem in the banking business for 'grassroots' is the bad ratio of non-performing loans (NPL), which usually large. But through the strategy of infrastructure improvement for risk management (I won’t explain the strategy, it was too long), the Bank's net NPL ratio is successfully pressed to just 0.4%. This figure was better than of BBRI, which was 0.8%, but it may be due to the business scale of BTPN, that is still much smaller than BBRI.

About the stock, when this article was written, BTPN is at Rp3,600 per share. With its PER of only 11.7 times, the valuation is fairly reasonable considering the quality of its financial performance. Assuming that BTPN will be able to maintain its profit rise over 50%, then the target price for the next year is 4,500. This target may not too attractive, but not bad for the size of the 'stock of deposits'. Yup, one of the Bank's services for the their depositor is 'Taseto', ie savings with high interests. So if you want to save your money in the Bank, then maybe you could put that savings in the form of BTPN shares.

About the entry point, what is its ideal price? Actually, I had hoped that when the Jakarta Stock Index fell by 1.4% yesterday, the stock would follow. But BTPN was firmly stood at 3,500. But this price is already ideal to buy, given that its decline is technically supported at 3,550, unless the JCI is corrected further. Only I personally prefer to wait for the moment of a deeper correction of JCI, who knows I could take some of the shares at a lower price.

PT Bank Tabungan Pensiunan Nasional, Tbk
Rating of Performance in First Quarter 2012: AAA
Rating of Stock at 3,600: A

Original article was written at May 8, 2012

Any inquiries about investment in Indonesia Stock Market? Please send an email to teguh@averepartners.com.

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