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Bank BTPN Syariah (BTPS IJ) (Neutral) - FY24 results below expectations

Bank BTPN Syariah (BTPS IJ) (Neutral) - FY24 results below expectations

Banks EW 276 19th Feb, 2025

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FY24 results below expectations

We cut FY25-26F earnings by ~30-35%; maintain Neutral at IDR1,100 (from IDR1,450)

Post BTPS's FY24 results release, which came in below our expectations, we identify several areas of concern. The bank's net financing margin of 33.9% in 4Q24 may indicate financing mispricing. Recovery may be longer than anticipated due to a lower repayment capacity. Despite having 14,000 personnel, attendance rates during collection meetings remain low, and the bank's 'Reward and Punishment' scheme is not fully effective, in our view. For this reason, we turn more conservative in our earnings projections for BTPS, reducing our medium-term earnings projections by ~30-35% for FY25-26F. Subsequently, we maintain our Neutral rating on the stock with a revised TP of IDR1,100.

Broadly, we have made more conservative earnings projections for BTPS. On the balance sheet, we assume gross loans of IDR10.1tn for FY25F and IDR10.6tn for FY26F, (-29-32% compared to our previous projections). On the deposits side, we assume IDR11.3tn for FY25F and IDR12.5tn for FY26F (-26% compared to our previous projections). These bring the bank’s implied LDR to 89.4% for FY25F and 85.4% for FY26F. At P&L, we project headline profit to reach IDR1.28tn in FY25F (-30% from our previous projection) and IDR1.32tn in FY26F (-35% from our previous estimate). We expect teported ROAEs to decline to 10-12% in FY25-26F from our previous estimates of 12.8-13.1%.

Valuation and risks

We derive our new TP of IDR1,100 based on DuPont analysis, with a risk-free rate of 6.5%, an equity risk premium of 7.8%, a CAR-adjusted ROAE of 19.0% and a beta of 2.3x. Our TP implies 0.7x 2025F PBV and 6.6x 2025F P/E.

Upside/downside risks are management changes, lower/higher operational/fraud risks due to the cash-based nature of the business, better/adverse macroeconomic development, better/tighter regulatory risks (especially the risk of lending rate caps), and better/worse asset-quality risks.

Year-end 31 DecFY24FY25FFY26FFY27F
Currency (IDR)ActualOldNewOldNewOldNew
PPOP (bn)2,6503,2222,5563,5502,65502,782
Reported net profit (bn)1,0611,5851,2791,8521,31801,377
Normalised net profit (bn)1,0611,5851,2791,8521,31801,377
FD normalised EPS137.75205.78166.03240.40171.05178.68
FD norm. EPS growth (%)-1.815.320.516.83.04.5
FD normalised P/E (x)7.3–6.1–5.9–5.6
Price/adj. book (x)0.8–0.6–0.6–0.5
Price/book (x)0.8–0.6–0.6–0.5
Dividend yield (%)–––––––
ROE (%)11.712.611.912.910.29.7
ROA (%)4.96.05.66.35.24.9
Source: Company data, Verdhana estimates

Key data on Bank BTPN Syariah

Profit and loss (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Interest income
5,746
5,398
5,319
5,571
5,888
Interest expense
-486
-504
-486
-501
-552
Net interest income
5,260
4,894
4,833
5,070
5,337
Net fees and commissions
1
1
1
1
1
Trading related profits
0
0
0
Other operating revenue
60
42
42
42
42
Non-interest income
61
44
44
44
44
Operating income
5,321
4,938
4,877
5,114
5,381
Depreciation
-17
-12
-8
-6
-6
Amortisation
0
0
0
0
0
Operating expenses
-720
-813
-852
-1,005
-1,109
Employee share expense
-1,362
-1,463
-1,460
-1,448
-1,484
Pre-provision op profit
3,222
2,650
2,556
2,655
2,782
Provisions for bad debt
-1,898
-1,360
-988
-1,038
-1,090
Other provision charges
56
63
63
63
63
Operating profit
1,380
1,353
1,631
1,680
1,755
Other non-op income
0
0
0
Associates & JCEs
0
0
0
Pre-tax profit
1,380
1,353
1,631
1,680
1,755
Income tax
-299
-292
-352
-363
-379
Net profit after tax
1,081
1,061
1,279
1,318
1,377
Minority interests
0
0
0
0
0
Other items
0
0
0
0
0
Preferred dividends
0
0
0
0
0
Normalised NPAT
1,081
1,061
1,279
1,318
1,377
Extraordinary items
0
0
0
Reported NPAT
1,081
1,061
1,279
1,318
1,377
Dividends
0
0
0
0
0
Transfer to reserves
1,081
1,061
1,279
1,318
1,377
Growth (%)
Net interest income
4.6
-6.9
-1.3
4.9
5.3
Non-interest income
-7.2
-28.3
0.0
0.0
0.0
Non-interest expenses
1.8
12.9
4.7
18.0
10.3
Pre-provision earnings
1.5
-17.8
-3.5
3.9
4.8
Net profit
-39.3
-1.8
20.5
3.0
4.5
Normalised EPS
-39.3
-1.8
20.5
3.0
4.5
Normalised FDEPS
-39.3
-1.8
20.5
3.0
4.5
Loan growth
-4.8
-14.5
-5.7
-6.3
-7.1
Interest earning assets
1.3
-0.4
9.8
9.3
8.9
Interest bearing liabilities
0.8
-3.4
-3.4
10.0
10.0
Asset growth
1.3
1.5
11.4
10.1
9.8
Deposit growth
0.8
-3.4
-3.4
10.0
10.0
Source: Company data, Verdhana estimates
Balance sheet (IDRbn)
As at 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Cash and equivalents
497
593
572
630
693
Inter-bank lending
0
0
0
0
0
Deposits with central bank
763
1,669
1,612
1,773
1,950
Total securities
8,647
9,049
11,640
14,016
16,484
Other int earning assets
245
252
243
268
294
Gross loans
11,533
9,743
10,228
10,740
11,277
Less provisions
-1,214
-924
-1,912
-2,950
-4,040
Net loans
10,319
8,819
8,316
7,790
7,237
Long-term investments
0
0
0
0
0
Fixed assets
587
548
1,049
1,332
1,689
Goodwill
0
0
0
0
0
Other intangible assets
0
0
0
0
0
Other non IEAs
377
817
788
862
944
Total assets
21,435
21,748
24,220
26,670
29,291
Customer deposits
12,143
11,724
11,320
12,453
13,698
Bank deposits, CDs, debentures
0
0
0
0
0
Other int bearing liabilities
0
0
0
0
0
Total int bearing liabilities
12,143
11,724
11,320
12,453
13,698
Non-int bearing liabilities
515
707
661
661
661
Total liabilities
12,658
12,431
11,982
13,114
14,359
Minority interest
0
0
0
0
0
Common stock
4,730
4,730
4,730
4,730
4,730
Preferred stock
0
0
0
0
0
Retained earnings
4,022
4,561
7,483
8,800
10,177
Reserves for credit losses
0
0
0
0
0
Proposed dividends
0
0
0
0
0
Other equity
26
26
26
26
26
Shareholders' equity
8,777
9,317
12,238
13,556
14,932
Total liabilities and equity
21,435
21,748
24,220
26,670
29,291
Non-perf assets
Balance sheet ratios (%)
Loans to deposits
95.0
83.1
90.4
86.2
82.3
Equity to assets
40.9
42.8
50.5
50.8
51.0
Asset quality & capital
NPAs/gross loans (%)
0.0
0.0
0.0
0.0
0.0
Bad debt charge/gross loans (%)
16.46
13.96
9.66
9.66
9.66
Loss reserves/assets (%)
5.66
4.25
7.90
11.06
13.79
Loss reserves/NPAs (%)
–
–
–
–
–
Tier 1 capital ratio (%)
51.0
47.5
52.6
52.9
53.1
Total capital ratio (%)
51.7
48.2
53.3
53.6
53.8
Per share
Reported EPS (IDR)
140.27
137.75
166.03
171.05
178.68
Norm EPS (IDR)
140.27
137.75
166.03
171.05
178.68
FD norm EPS (IDR)
140.27
137.75
166.03
171.05
178.68
DPS (IDR)
0.00
0.00
0.00
0.00
0.00
PPOP PS (IDR)
418.25
343.99
331.83
344.64
361.12
BVPS (IDR)
1,139.34
1,209.37
1,588.60
1,759.65
1,938.33
ABVPS (IDR)
1,139.34
1,209.37
1,588.60
1,759.65
1,938.33
NTAPS (IDR)
1,139.34
1,209.37
1,588.60
1,759.65
1,938.33
Valuations and ratios
Reported P/E (x)
7.2
7.3
6.1
5.9
5.6
Normalised P/E (x)
7.2
7.3
6.1
5.9
5.6
FD normalised P/E (x)
7.2
7.3
6.1
5.9
5.6
Dividend yield (%)
–
–
–
–
–
Price/book (x)
0.9
0.8
0.6
0.6
0.5
Price/adjusted book (x)
0.9
0.8
0.6
0.6
0.5
Net interest margin (%)
25.85
23.96
22.60
21.64
20.87
Yield on assets (%)
28.24
26.43
24.88
23.78
23.03
Cost of int bearing liab (%)
4.02
4.22
4.22
4.22
4.22
Net interest spread (%)
24.22
22.20
20.66
19.56
18.81
Non-interest income (%)
1.1
0.9
0.9
0.9
0.8
Cost to income (%)
39.4
46.3
47.6
48.1
48.3
Effective tax rate (%)
21.7
21.6
21.6
21.6
21.6
Dividend payout (%)
0.0
0.0
0.0
0.0
0.0
ROE (%)
12.6
11.7
11.9
10.2
9.7
ROA (%)
5.07
4.91
5.56
5.18
4.92
Operating ROE (%)
16.1
15.0
15.1
13.0
12.3
Operating ROA (%)
6.48
6.27
7.10
6.60
6.27
Source: Company data, Verdhana estimates
Company profilePT Bank BTPN Syariah Tbk provides various banking products and services in Indonesia. It offers savings and current accounts; time deposits; and various financing services. The company also provides bills payment, credit purchase, fund transfer, cash deposit and withdrawal, ATM, and mobile banking services. The company was formerly known as PT Bank Tabungan Pensiunan Nasional Syariah Tbk. PT Bank BTPN Syariah Tbk is a subsidiary of PT Bank BTPN Tbk and was founded in 1991.
Valuation MethodologyWe derive our TP of IDR1,100 using Dupont analysis, with key parameters as follows: risk-free rate (rf) of 6.5%, equity risk premium (k) of 7.8%, CAR-adj ROAE of 19.0%, and beta of 2.3x. Our TP implies 0.7x 2025F PBV and 6.6x 2025F PE. The benchmark index for this stock is the JCI.
Risks that may impede the achievement of the target priceUpside/downside risks are management changes, lower/higher operational/fraud risks due to the cash-based nature of the business, better/adverse macroeconomic development, better/tighter regulatory risks (especially the risk of lending rate caps), and better/worse asset quality risks.
ESGBTPS has initiated various programs to meet ESG commitments, mainly through its Corporate Social Responsibility Program and the Partnership and Community Development Program. BTPS implements a Sustainable Finance Action Plan that aligns with Sustainable Finance regulations; a part of the plan includes implementing ESG risk management for lending process and encouraging green finance products. The company also actively participates in the government’s Sustainable Development Goals, specifically through home ownership financing products. Further, BTPS carries out commitment to environmental safety by creating an environment-friendly infrastructure in its Headquarters area and implementing reforestation in all regional offices. BTPS implements various community social responsibility programs, including the Education and Financial Literacy Program and the Community Development Program. Additionally, BTPS implements GCG principles and carries out various programs and trainings to encourage fair operations, such as the Socialization Program for Increasing Awareness of Fraud.

Fig. 1: BTPS quarterly summary

 BTPS - QUARTERLY SUMMARY (IDRbn)         
 IDR bn 4Q231Q242Q243Q244Q24Q-Q %Y-Y %YTD24YTD23Y-Y %
 Margin inc 1,4381,3731,3641,3301,3310%-7%5,3985,746-6%
 Margin exp 124126130127122-4%-2%5044864%
 Net margin inc 1,3141,2471,2341,2041,2100%-8%4,8945,260-7%
 Non-int inc 11211915(11)-175%-201%4463-31%
 Total op inc 1,3251,2681,2531,2191,198-2%-10%4,9385,323-7%
 Non-margin exp 5135285285405879%14%2,1841,98010%
 PPOP 811740724678611-10%-25%2,7543,343-18%
 Provisions 700384338386251-35%-64%1,3601,898-28%
 NP 8026428821829033%263%1,0611,084-2%
   
           3,302           3,154           3,030           2,996         2,950   
 Gross financing 11,38710,87610,44810,33110,172-2%-11%41,82647,239-11%
 Funding 12,14311,73911,76011,83811,724-1%-3%47,06250,043-6%
 LLR         1,213.9        1,092.1           929.1           972.6         924.3
Source: Company data, Verdhana research

 

Fig. 2: Quarterly ratios

 BTPS Ratios (%) 4Q231Q242Q243Q244Q24
 NFM %              36.8             34.8             34.5             33.6           33.9
 LFR %              93.8             92.6             88.8             87.3           86.8
 Financing YTD %               (1.2)              (4.5)              (8.3)              (9.3)          (10.7)
 Financing  y-y %               (1.2)              (8.0)            (13.6)            (13.4)          (10.7)
 Financing q-q %               (4.6)              (4.5)              (3.9)              (1.1)            (1.5)
 Deposit YTD %                0.8              (3.3)              (3.2)              (2.5)            (3.4)
 Deposit y-y %                0.8              (8.0)              (5.0)              (7.2)            (3.4)
 Deposit q-q %               (4.8)              (3.3)               0.2               0.7            (1.0)
 CIR %              38.8             41.6             42.2             44.3           49.0
 CAR %              51.6             47.6             50.1             51.7           53.2
 NPL %                2.9               3.2               3.0               3.6             3.7
 NPL cov %            362.9           309.0           291.7           260.9         242.3
 LAR %              12.4             11.5               9.0               7.8             6.6
 LAR cov %              86.4             86.8             99.1           121.1         136.8
 ROAE %                3.7             12.2             13.4               9.8           12.7
 ROAA %                1.5               4.9               5.5               4.1             5.4
 LLR %              10.7             10.0               8.9               9.4             9.1
 Asset to equity x                2.4               2.5               2.4               2.4             2.3
 Credit cost % RHS              24.0             13.8             12.7             14.8             9.8
 Risk-adj margin %            12.76           21.00           21.85           18.76         24.06
 Est write-off % of loans              14.9             18.2             18.8             13.2           11.7
Source: Company data, Verdhana research

 

Fig. 3: BTPS earnings projection

Source: Company data, Verdhana estimates

 

Fig. 4: BTPS loan assumptions

Source: Company data, Verdhana estimates

 

Fig. 5: Loan classifications

Source: Company data, Verdhana estimates

 

Fig. 6: BTPS valuation

BTPS - TP derivationNewOLD
Risk free rate %            6.5                 6.5
Equity risk premium %            7.8                 7.8
Beta x            2.3                 2.1Reflecting still high credit risk
Cost of capital %          24.1                22.9
Growth rate %            8.0                10.0Reflecting lower earnings
CAR-adj ROAE %          19.0                22.0Reflecting lower profitability
Target P/B x             0.7                 0.9
Target price IDR        1,089              1,744Rounded to IDR1,100 (from IDR1,450)
TP P/E 2025F            6.6                 8.5FY25F as reference
TP PB 2025F0.71.0
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

By accepting this report, the recipient hereof represents and warrants that you are entitled to receive such report in accordance with the restrictions and agrees to be bound by the limitations contained herein. Neither this report nor any copy hereof may be distributed except in compliance with applicable Indonesian capital market laws and regulations. 

Rating Table

Rating
Remains
Neutral
Target price
Reduced from IDR 1,450
IDR 1,100
Closing price
18 February 2025
IDR 1,005
Implied upside+9.5%
Market Cap (USD mn)471.1
ADT (USD mn)0.6

Relative performance chart


Source: LSEG, Verdhana
M cap (USDmn)
471.1
Free float (%)
30.0
3-mth ADT (USDmn)
0.6
(%)
1M
3M
12M
Absolute (IDR)
9.8
9.2
-29.2
Absolute (USD)
10.4
6.4
-32.1
Rel to Jakarta Stock Exchange Composite Index
14.4
13.5
-22.3

Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

Tags: BANKS, BTPS, BTPS JK, BTPS IJ, Erwin Wijaya
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