Bank BJB's Sharia NPL issues to persist

BJB’s total FY16 Sharia NPL soared back to 17.9%.

According to Maybank Kim Eng, BJB’s Sharia NPL issue might not be as short term as we had previously expected.

"Hence, we raised our FY17F consolidated NPL and net provisioning estimates, which resulted in a 4% decline in our net profit forecast to IDR1.85t (US$138m)."

Here's more from Maybank Kim Eng:

During our last meeting, BJB Sharia’s management indicated that it might take until 3Q17 at the earliest to upgrade the IDR542b (US$40m) of NPLs, which ultimately came from a single debtor in the property sector, back to performing category.

Around 40% of this NPL was upgraded in 3Q16, but after a review by OJK (Indonesia Financial Services Authority) in 4Q16, the amount was moved back to NPL status until the debtor’s cashflow improves.

Combined with an additional IDR86b (US$6m) of NPLs from other business sectors, BJB’s total FY16 Sharia NPL soared back to 17.9% and consolidated NPL hit 3% vs our estimate of 2.3%.