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Bank BTPN Syariah (BTPS)

Since long time ago, if we wanted to buy stocks for long-term investment on the Indonesia Stock Exchange, there were only two sectors to choose from: Consumer goods and banking. However, for those of you who are sharia account holders, you cannot buy banking stocks, so the choice is limited to consumers. Other options are Islamic banking stocks, but the earnings power of Islamic banks is generally not as good as conventional bank’s. Luckily, for BTPN Syariah (BTPS), based on its performance as of third quarter of 2018 which is fairly good, we may consider the stock for investment. Okay, here we go.


PT Bank Tabungan Pensiunan Nasional Syariah, Tbk, or abbreviated as BTPN Syariah (BTPS), was originally a sharia business unit of Bank BTPN (BTPN) which was initiated in 2010, before being separated from its parent company as a subsidiary under the name BTPN Syariah in 2014. BTPS is currently held and controlled by two entities namely BTPN, and businessman Arif Rachmat (son of conglomerate Theodore P. Rachmat), with BTPN as the majority shareholder.

Now, from the beginning I was already interested in this BTPS because if the company ran the same business as BTPN as its parent, namely the financing of micro, small and medium enterprises, aka SMEs (except by using the sharia method), the company could make even greater profits. Note: BTPN has been able to grow from a small bank to a middle class bank (the value of BTPN's assets is now almost Rp100 trillion, or about US$ 7 billion), because the company has successful in pioneering the micro banking industry that reaches rural areas throughout the country, that with electronic data capture (EDC) technology, then instead of asking customers to go to the bank office, it is BTPN that comes to them. Yup, BTPN is like a rural bank with clients such as grocery store owners, vegetable traders in the market, street food vendors, to home industry business owners. In terms of ‘it is the bank who meet the customers’ like this, BTPN is even superior to Bank BRI (BBRI), the largest bank in Indonesia which also focus on microcredit. And the good news is that, in Indonesia, microcredit interest is generally greater than corporate credit interest (20 – 24% compared to 12 – 16% per annum), and this is what caused BTPN's success (as well as BBRI, which was the third largest bank behind Bank Mandiri and Bank BCA, but now has become number one).

However, if we talk about ‘rural bank’, then in Indonesia, it is synonymous with loan sharks, where the debtor is usually burdened with a very high loan interest, and BTPN is not spared the negative image. And even though the interest charged by BTPN is actually much smaller than the interest from illegal rural banks, but still it offers loan with interest or ‘usury’. While recently more and more Indonesian citizens are 'allergic' to the banking interest system which is considered detrimental.

So what is the solution? Well of course, by replacing the banking interest system with the sharia system, but by still using the 'rural bank' infrastructure, where BTPS agents can continue to tour the rural environment (BTPS even employ high school graduates, who could enter the villages in the middle of rice fields using bicycles), but this time the bank is no longer offering loans, but sharia-based business capitals. Now look! Imagine if you are a farmer who needs US$ 200 in capital to buy fertilizer, but your house is too far from the bank office in the city center, while the moneylenders that roam in your village offer US$ 200 loan, but with payment of US$ 400 after 3 months. But then an agent came in with an official ID from the BTPN Syariah, which offered sharia business capital that no longer required you to pay interest, but instead used a profit sharing system where you only need to pay according to the harvest results, and even you are given free training to increase your farm’s production. What d’ya say?

That’s why, I think it is not surprising that the presence of BTPS was very well received by the people in rural arease, and the company then booked earnings that were even better than its parent: In 2015, BTPS posted a net profit of Rp174 billion, which rose to Rp422 billion in 2016, became Rp670 billion in 2017, and now became Rp698 billion for a nine-month period in 2018. BTPS's net equity also grew rapidly from Rp1.2 to Rp3.7 trillion in less than three years, that except from the IPO proceeds of Rp751 billion, all of the increase in equity came from the accumulation of the company's net income. It can be said that BTPS has two advantages at once, which other banks do not possess: 1. A sharia system that is more accepted by the community, and certainly has a much better image than those which called ‘rural banks’, 2. Banking infrastructure that reaches rural areas that have been pioneered previously by BTPN as the parent company. Other interesting facts are:

  1. 100% of BTPS debtors are impoverished women, where BTPS not only provides them with capital, but also provides mentoring programs through empowering bankers who train customers to manage family finances, to save money, and to open businesses. In this case BTPS is one of the few banks that truly focus on 'improving the welfare of the community', where their debtors actually come from the poor.
  2. Currently there are an estimated 23 million impoverished women in Indonesia, while BTPS has only 3.2 million active customers, so the growth opportunity is still wide open.
  3. In its existence which is not even 10 years old, BTPS has reached 23 provinces from Aceh to East Nusa Tenggara, and employs more than 12,000 empowering bankers. This number is expected to continue to increase in the future.
  4. In addition to business capital, BTPS also provides sharia financing for daily needs, children's education, and housing improvements, where previously this type of credit was only reached by the loan sharks.
  5. The weakness of micro-credit is the large risk of default by the debtor, and the risk is even greater if the debtors are poor. However, with an empowerment program that accompanies each lending (in other words, the debtors are not only given the financing, but also trained/mentored by such empowering bankers so they could repay the money), the NPF gross of BTPS as of Third Quarter of 2018 is only 1.6%, lower than the average gross NPF of Islamic banks in Indonesia which is 3 – 4%.
Note: NPF or non-performing financing, is the term of Islamic banks for NPLs or non-performing loans, considering that the loans they provide to debtors are not loans that use the interest system, but financing that uses a profit sharing system.


In addition to employing 'empowering bankers', then through a 'power program' with the concept of fellow customers helping each other, BTPS also collaborates with deposit-owner customers who have certain special skills to provide training for underprivileged mothers. This is amazing!

The conclusion is, well, it looks like we have just found a wonderful company here, where BTPS also very similar to the famous Grameen Bank of Muhammad Yunus. But what about the stock?

Unfortunately at a price of Rp1,680 per share, the PBV is 3.5 times, and PER of 13.9 times, of course it was high, especially in the current market conditions where there were many stocks from other larger, more well-known banks, whose valuations were lower. In addition, although BTPS has excellent performance in the past 3 years, but the 3-year track record is certainly too short to be used as a basis for the statement that BTPS's earnings will remain good for the future. So once again, PBV above 3 times is already high, or at least it can't be said to be cheap anymore.

But due to the latest performance, which BTPS's profit is still significantly increased, including the ROE is still very high (annualized 25.1%), it is also unrealistic to expect its stock to decline in the near future. So in this case you have two options: 1. Start buying from now for long-term investment purposes, but only use a small money at a time 2. Wait for like 1 – 2 years, that if the company still posts good earnings, while the price does not change, then the valuation will still go down (because BTPS's equity and net income rise), and that's when you can buy the stocks in large quantities. Remember, BTPS is only good for long term, so if you buy the stock for resale it later, you can consider other shares.

Any inquiries, contact the author by email teguh.idx@gmail.com

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