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Bank BTPN (BTPN IJ) (Neutral) - Raise earnings estimates post-FY24 results

Bank BTPN (BTPN IJ) (Neutral) - Raise earnings estimates post-FY24 results

Banks EW 139 27th Mar, 2025

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Raise earnings estimates post-FY24 results

Raise FY25-26F earnings by ~47.5-71.3% on higher asset yields

We expect liquidity in the Indonesia banking sector to remain tight (although it is not worsening) given the already-high LDRs as well as still-elevated reserve requirements (effectively at ~6-7%). Hence, we believe that within the sector, major banks will continue to dominate. We expect mid-sized banks, such as BTPN, to experience flat/declining market share (either in terms of loans, assets, or profit). Hence, we maintain our Neutral rating and lower TP to IDR2,250 (from IDR2,600), reflecting our raised beta and hence discount rate assumptions. However, we raise our earnings forecasts to incorporate the strong FY24 results.

Earnings changes summary

We raise our earnings estimates for FY25F and FY26F, and introduce FY27F estimates. For FY25F/26F, we raise our earnings by 47.5%-71.3% to factor in its strong FY24 results (Fig. 1). Hence, we estimate a higher NIM of ~8.0% for FY25-26F (up by ~180bp from our previous estimates). However, we expect funding cost risk to remain (reflecting the generally-tight liquidity in the banking system). Meanwhile, credit costs (CoC) in 4Q24 for BTPN slightly increased to 320bp from 310bp in 4Q23, suggesting a worsening asset quality. Hence, we maintain our CoC assumptions for FY25F-26F at 200bps. On the balance sheet, we expect BTPN’s loans to decrease by 6.6% while deposits to grow slightly by ~1.9-4.3% in FY25-26F as we expect major banks to continue dominating.

Valuation and risks

We derive our new TP of IDR2,250 (Fig. 3) based on an unchanged DuPont analysis, assuming a risk-free rate of 6.5%, an equity risk premium of 7.8%, a CAR-adjusted ROAE of 13.0% and a beta of 2.0x (vs 1.5 previously). Our new TP implies 0.4x 2025F PBV and 6.5x 2025F P/E. The stock currently trades at 0.3x 2025F PBV and 5.8x 2025F P/E. Key risks include better/worsening macroeconomic developments, higher/lower loan growth, higher/lower asset yields, lower/ higher deposit rates and lower/ higher NPLs. In the Indonesia banking sector, we prefer BMRI IJ, BRIS IJ and BBCA IJ, all rated Buy.

Surging risk perception lowers BTPN’s valuation outlook

Though we raise our earnings forecasts for BTPN, we reduce our TP from IDR2,600 to IDR2,250 to reflect a combination of higher risk perception, increased cost of capital and declining loan growth in the current macroeconomic condition. The most significant factor contributing to this revision is the higher beta (raised from 1.5x to 2.0x), factoring in greater perceived volatility and risk, as we have witnessed on an YTD basis that the banking sector has been under pressure due to liquidity concerns (particularly funding costs). Other key parameters are a risk-free rate of 6.5%, an equity risk premium of 7.80%, and a CAR-adjusted ROAE of 13.0%.

These lead to a significant rise in cost of capital from 18.2% previously to 22.1%, which substantially reduces the present value of future earnings. Further, we believe that major banks will continue to dominate the sector (especially in terms of loans). With these in mind, we are discounting the stock at a higher rate due to increased risk factors and weaker long-term growth prospects.

Year-end 31 DecFY24FY25FFY26FFY27F
Currency (IDR)ActualOldNewOldNewOldNew
PPOP (bn)8,0016,3797,3036,5528,03208,319
Reported net profit (bn)2,8131,9042,8071,8433,15603,171
Normalised net profit (bn)2,8131,9042,8071,8433,15603,171
FD normalised EPS345.20233.61344.49226.15387.30389.14
FD norm. EPS growth (%)19.3-14.0-0.2-3.212.40.5
FD normalised P/E (x)5.8–5.8–5.2–5.1
Price/adj. book (x)0.3–0.3–0.3–0.3
Price/book (x)0.3–0.3–0.3–0.3
Dividend yield (%)–––––––
ROE (%)6.54.55.64.25.95.6
ROA (%)1.30.91.10.81.21.1
Source: Company data, Verdhana estimates

Key data on Bank BTPN

Profit and loss (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Interest income
18,816
23,588
24,659
26,025
27,268
Interest expense
-6,772
-8,380
-8,830
-8,933
-9,380
Net interest income
12,044
15,208
15,829
17,092
17,888
Net fees and commissions
2,073
1,230
1,248
1,326
1,392
Trading related profits
0
449
500
500
500
Other operating revenue
0
543
550
550
550
Non-interest income
2,073
2,221
2,298
2,376
2,442
Operating income
14,118
17,429
18,127
19,468
20,330
Depreciation
-487
-640
-803
-908
0
Amortisation
0
0
0
0
0
Operating expenses
-3,363
-3,938
-4,109
-4,356
-5,571
Employee share expense
-3,756
-4,850
-5,912
-6,171
-6,441
Pre-provision op profit
6,511
8,001
7,303
8,032
8,319
Provisions for bad debt
-3,050
-3,897
-3,112
-3,305
-3,470
Other provision charges
0
0
0
0
0
Operating profit
3,461
4,104
4,191
4,727
4,848
Other non-op income
-3
16
0
0
0
Associates & JCEs
0
Pre-tax profit
3,458
4,120
4,191
4,727
4,848
Income tax
-775
-904
-920
-1,037
-1,064
Net profit after tax
2,682
3,216
3,271
3,689
3,784
Minority interests
-324
-403
-464
-533
-613
Other items
0
0
0
0
0
Preferred dividends
0
0
0
0
0
Normalised NPAT
2,358
2,813
2,807
3,156
3,171
Extraordinary items
0
0
Reported NPAT
2,358
2,813
2,807
3,156
3,171
Dividends
Transfer to reserves
2,358
2,813
2,807
3,156
3,171
Growth (%)
Net interest income
3.1
26.3
4.1
8.0
4.7
Non-interest income
3.0
7.1
3.5
3.4
2.8
Non-interest expenses
0.7
17.1
4.3
6.0
27.9
Pre-provision earnings
0.2
22.9
-8.7
10.0
3.6
Net profit
-23.8
19.3
-0.2
12.4
0.5
Normalised EPS
-23.8
19.3
-0.2
12.4
0.5
Normalised FDEPS
-23.8
19.3
-0.2
12.4
0.5
Loan growth
6.7
-4.1
6.6
4.5
4.5
Interest earning assets
-3.8
4.5
22.9
5.9
6.0
Interest bearing liabilities
-5.5
16.0
7.5
5.0
5.0
Asset growth
-3.7
19.7
7.9
5.9
6.0
Deposit growth
-5.1
12.1
7.5
5.0
5.0
Source: Company data, Verdhana estimates
Balance sheet (IDRbn)
As at 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Cash and equivalents
1,429
1,380
32,931
35,136
37,498
Inter-bank lending
0
0
0
0
0
Deposits with central bank
9,277
9,443
9,443
9,443
9,443
Total securities
17,264
28,174
32,682
37,911
43,977
Other int earning assets
9,927
13,730
13,730
13,730
13,730
Gross loans
157,659
150,734
161,220
169,281
177,745
Less provisions
-4,618
-3,923
-4,744
-5,759
-6,939
Net loans
153,041
146,812
156,476
163,522
170,806
Long-term investments
103
75
160
176
194
Fixed assets
2,048
2,284
4,253
4,587
4,966
Goodwill
0
0
0
0
0
Other intangible assets
0
0
0
0
0
Other non IEAs
8,362
39,197
10,582
11,081
11,605
Total assets
201,448
241,096
260,257
275,587
292,219
Customer deposits
108,199
121,318
130,417
136,937
143,784
Bank deposits, CDs, debentures
10,822
758
815
855
898
Other int bearing liabilities
31,558
52,619
56,566
59,394
62,364
Total int bearing liabilities
150,578
174,695
187,797
197,187
207,046
Non-int bearing liabilities
9,587
11,656
11,673
11,685
11,697
Total liabilities
160,165
186,350
199,469
208,871
218,744
Minority interest
2,617
6,979
9,072
11,794
15,332
Common stock
11,325
17,775
17,775
17,775
17,775
Preferred stock
0
0
0
0
0
Retained earnings
26,402
28,794
32,742
35,949
39,170
Reserves for credit losses
0
0
0
0
0
Proposed dividends
0
0
0
0
0
Other equity
939
1,199
1,199
1,199
1,199
Shareholders' equity
38,666
47,767
51,716
54,922
58,143
Total liabilities and equity
201,448
241,096
260,257
275,587
292,219
Non-perf assets
2,097
2,716
2,920
3,066
3,219
Balance sheet ratios (%)
Loans to deposits
145.7
124.2
123.6
123.6
123.6
Equity to assets
19.2
19.8
19.9
19.9
19.9
Asset quality & capital
NPAs/gross loans (%)
1.3
1.8
1.8
1.8
1.8
Bad debt charge/gross loans (%)
1.93
2.59
1.93
1.95
1.95
Loss reserves/assets (%)
2.29
1.63
1.82
2.09
2.37
Loss reserves/NPAs (%)
220.3
144.4
162.5
187.8
215.6
Tier 1 capital ratio (%)
22.5
23.1
27.4
27.4
27.2
Total capital ratio (%)
25.6
26.2
27.4
27.4
27.2
Per share
Reported EPS (IDR)
289.40
345.20
344.49
387.30
389.14
Norm EPS (IDR)
289.40
345.20
344.49
387.30
389.14
FD norm EPS (IDR)
289.40
345.20
344.49
387.30
389.14
DPS (IDR)
0.00
0.00
0.00
0.00
0.00
PPOP PS (IDR)
798.99
981.87
896.13
985.60
1,020.82
BVPS (IDR)
4,744.97
5,861.80
6,346.32
6,739.79
7,135.10
ABVPS (IDR)
4,744.97
5,861.80
6,346.32
6,739.79
7,135.10
NTAPS (IDR)
4,744.97
5,861.80
6,346.32
6,739.79
7,135.10
Valuations and ratios
Reported P/E (x)
6.9
5.8
5.8
5.2
5.1
Normalised P/E (x)
6.9
5.8
5.8
5.2
5.1
FD normalised P/E (x)
6.9
5.8
5.8
5.2
5.1
Dividend yield (%)
–
–
–
–
–
Price/book (x)
0.4
0.3
0.3
0.3
0.3
Price/adjusted book (x)
0.4
0.3
0.3
0.3
0.3
Net interest margin (%)
6.19
7.79
7.12
6.77
6.68
Yield on assets (%)
9.66
12.08
11.09
10.31
10.19
Cost of int bearing liab (%)
4.37
5.15
4.87
4.64
4.64
Net interest spread (%)
5.29
6.93
6.22
5.67
5.55
Non-interest income (%)
14.7
12.7
12.7
12.2
12.0
Cost to income (%)
53.9
54.1
59.7
58.7
59.1
Effective tax rate (%)
22.4
21.9
21.9
21.9
21.9
Dividend payout (%)
0.0
0.0
0.0
0.0
0.0
ROE (%)
6.2
6.5
5.6
5.9
5.6
ROA (%)
1.15
1.27
1.12
1.18
1.12
Operating ROE (%)
9.2
9.5
8.4
8.9
8.6
Operating ROA (%)
1.69
1.85
1.67
1.76
1.71
Source: Company data, Verdhana estimates
Company profilePT. Bank Tabungan Pensiunan Nasional Tbk. (BTPN) operates as a commercial bank. BTPN has operational services activities to customers, saving and loan, with main specialize to retired and civil servant. BTPN offers term loans, saving accounts, tax management, treasury, investment, insurance, and project finance. In 2008, BTPN added micro-financing to its portfolio of pension banking services. BTPN was listed on Indonesia Stock Exchange in 2008 under the Main Board. The company was founded in 1985 and based in Jakarta, Indonesia. As of December 31, 2020, it operated 84 branches and 226 branches. The company was founded in 1958 and is headquartered in Jakarta, Indonesia. PT Bank BTPN Tbk is a subsidiary of Sumitomo Mitsui Banking Corporation.
Valuation MethodologyWe derive our TP of IDR2,250 based on Dupont analysis with key parameters risk-free rate rf 6.5%, equity risk premium k 7.8% and CAR-adj ROAE 13.0%. At this TP, the stock would trade at 0.4x 2025F PBV and 6.5x 2025F P/E. The benchmark index for this stock is the JCI
Risks that may impede the achievement of the target priceKey risks include 1) better/worsening macroeconomic developments, 2) higher/lower loan growth, 3) higher/lower asset yields, 4) lower/ higher deposit rates and 5) lower/ higher NPLs (and, hence, provision charges).
ESGBank BTPN is actively involved in realising the Sustainable Development Goals (SDGs) through sustainable financial management. Bank BTPN endeavors to integrate the principles of sustainable finance in various policies and every aspect of the Company’s operations to create economic, social, and environmental value. During this pandemic, Bank BTPN has fully acknowledged its role to support the community and customers in facing such hindrances. Bank BTPN offers solutions through various mitigating policies while continuing to provide support and donations to affected communities. In the midst of this disruption, Bank BTPN continued to record excellent growth while adapting to the new normal. Bank BTPN continues to implement the principles of sustainable finance and to expand financial inclusion for the wider community for the welfare of the nation.

Fig. 1: BTPN – earnings changes

Source: Company data, Verdhana estimates

 

Fig. 2: Loan assumption

Source: Company data, Verdhana estimates

 

Fig. 3: BTPN – valuation

BTPN - Fair valuation NewOldRemarks
Risk free rate          6.5        6.5
Equity risk premium          7.8        7.8
Beta          2.0        1.5
Cost of capital        22.1       18.2
Long-term terminal growth rate          8.0        7.5
Sustainable ROAE        13.0
FY2025F BVPS (IDR)6,346FY2025F as reference
Implied P/B 12-mth fwd          0.4
Implied 12mth fwd PER          6.5
Implied share price IDR      2,250     2,613IDR2,250 (from IDR2,600)
Source: Company data, Verdhana estimates

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

GENERAL DISCLOSURE/DISCLAIMER 
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.


This report is not to be construed as an offer or a solicitation of an offer to buy or sell any securities or financial products. PTVSI and its associates, its directors, and/or its employees may from time to time have interests in the securities mentioned in this report or it may or will engage in any securities transaction or other capital market services for the company (companies) mentioned herein.

ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.


RESTRICTIONS ON DISTRIBUTION

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Rating Table

Rating
Remains
Neutral
Target price
Reduced from IDR 2,600
IDR 2,250
Closing price
24 March 2025
IDR 2,000
Implied upside+12.5%
Market Cap (USD mn)1,273.3
ADT (USD mn)0.0

Relative performance chart



Source: LSEG, Verdhana
M cap (USDmn)
1,273.3
Free float (%)
6.6
3-mth ADT (USDmn)
0.0
(%)
1M
3M
12M
Absolute (IDR)
-7.4
-9.5
-23.4
Absolute (USD)
-9.0
-11.5
-27.0
Rel to Jakarta Stock Exchange Composite Index
1.3
3.3
-7.2

Research Analysts

Erwin WIjaya (erwin.wijaya@verdhana.id)

Tags: BANKS, BTPN, BTPN JK, BTPN IJ, Erwin WIjaya
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