/      /      /  
Bank Danamon Indonesia (BDMN IJ) (Neutral) - Post-FY24 adjustments

Bank Danamon Indonesia (BDMN IJ) (Neutral) - Post-FY24 adjustments

Banks EW 291 11th Mar, 2025

download (85)

Post-FY24 adjustments

Maintain Neutral with TP of IDR2,750 (from IDR3,300)

Post FY24 results, we reduce FY25-26F earnings by ~7-14%; maintain Neutral

We expect the Indonesia banking sector to continue to experience liquidity issues in 2025F. However, we believe that within the sector, major banks will continue to dominate. We expect midsized banks, such as BDMN, to experience declining market share (either in terms of loans, assets, or profit). Consequently, we adjust our earnings forecasts and reiterate our Neutral call on the stock with a lower TP of IDR2,750 (from IDR3,300).

Summary of earnings forecast changes

We update our earnings projections for FY25F and FY26F, as well as add FY27F as a new forecast year. Broadly, we have adopted more conservative earnings projections for BDMN, lowering earnings by 7-14%, primarily due to high funding costs (reflecting the overall tight liquidity in the banking system). We project headline profit to reach IDR3.2tn in FY25F (-7% from our previous projection) and IDR3.5tn in FY26F (-14% from our previous estimates). We expect reported ROAEs to decline to 6.2-6.4% in FY25-26F from our previous estimates of 6.6-7.4%. On the balance sheet, we assume gross loans of IDR205tn for FY25F and IDR220tn for FY26F (-2-5% compared to our previous projections). On the deposits side, we assume IDR166tn for FY25F and IDR178tn for FY26F (+4.5-5% compared to our previous projections). As a result, the bank’s implied LDR reaches 124% for FY25-26F.

Valuation and risks

We derive our TP for BDMN based on the DuPont methodology, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 1.20x, a terminal growth rate of 10.0% and a CAR-adjusted ROAE of 13.05%. At our TP, the implied valuation multiples would be 0.51x FY25F book and 8.4x FY25F P/E. Upside/downside risks are an improving/worsening macroeconomic environment, more/less excess liquidity leading to lower/higher funding costs, higher/lower loan growth, as well as an increase in operating costs and/or better/worse trends in credit quality, leading to lower/higher credit costs for the bank.

Year-end 31 DecFY24FY25FFY26FFY27F
Currency (IDR)ActualOldNewOldNewOldNew
PPOP (bn)8,4109,6948,87610,9719,537010,430
Reported net profit (bn)3,1793,4733,2154,0603,47503,852
Normalised net profit (bn)3,1793,4733,2154,0603,47503,852
FD normalised EPS325.30355.38328.94415.45355.53394.11
FD norm. EPS growth (%)-9.32.81.116.98.110.9
FD normalised P/E (x)7.4–7.4–6.8–6.1
Price/adj. book (x)0.5–0.4–0.4–0.4
Price/book (x)0.5–0.4–0.4–0.4
Dividend yield (%)5.2–4.7–4.8–5.1
ROE (%)6.36.66.27.46.46.8
ROA (%)1.41.41.31.61.31.3
Source: Company data, Verdhana estimates

Key data on Bank Danamon Indonesia

Profit and loss (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Interest income
20,210
22,789
23,502
24,996
26,721
Interest expense
-4,994
-7,184
-7,292
-7,925
-8,520
Net interest income
15,216
15,605
16,210
17,071
18,201
Net fees and commissions
3,733
3,936
4,283
4,603
4,948
Trading related profits
221
381
400
425
425
Other operating revenue
306
310
325
375
375
Non-interest income
4,260
4,627
5,008
5,403
5,748
Operating income
19,476
20,231
21,218
22,474
23,949
Depreciation
-387
-492
-524
-606
-687
Amortisation
0
0
0
0
0
Operating expenses
-4,779
-4,930
-5,249
-5,579
-5,892
Employee share expense
-6,141
-6,400
-6,569
-6,752
-6,941
Pre-provision op profit
8,170
8,410
8,876
9,537
10,430
Provisions for bad debt
-3,667
-4,491
-4,939
-5,309
-5,707
Other provision charges
0
0
0
0
0
Operating profit
4,503
3,919
3,937
4,228
4,723
Other non-op income
-88
-57
0
0
0
Associates & JCEs
0
0
0
0
0
Pre-tax profit
4,415
3,862
3,937
4,228
4,723
Income tax
-1,036
-893
-904
-977
-1,082
Net profit after tax
3,380
2,970
3,033
3,251
3,640
Minority interests
-154
-112
-118
-127
-138
Other items
278
321
300
350
350
Preferred dividends
0
0
0
0
0
Normalised NPAT
3,504
3,179
3,215
3,475
3,852
Extraordinary items
Reported NPAT
3,504
3,179
3,215
3,475
3,852
Dividends
-1,156
-1,226
-1,113
-1,125
-1,216
Transfer to reserves
2,348
1,953
2,102
2,350
2,636
Growth (%)
Net interest income
7.8
2.6
3.9
5.3
6.6
Non-interest income
8.4
8.6
8.2
7.9
6.4
Non-interest expenses
5.8
3.2
6.5
6.3
5.6
Pre-provision earnings
8.8
2.9
5.5
7.5
9.4
Net profit
6.1
-9.3
1.1
8.1
10.9
Normalised EPS
6.1
-9.3
1.1
8.1
10.9
Normalised FDEPS
6.1
-9.3
1.1
8.1
10.9
Loan growth
19.9
7.8
8.3
6.0
6.0
Interest earning assets
13.5
10.3
6.8
6.8
7.0
Interest bearing liabilities
14.1
13.2
7.1
7.5
7.5
Asset growth
11.9
9.5
6.6
6.9
7.0
Deposit growth
10.8
8.8
10.0
7.5
7.5
Source: Company data, Verdhana estimates
Balance sheet (IDRbn)
As at 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Cash and equivalents
2,362
2,468
3,091
7,916
13,280
Inter-bank lending
11,166
6,088
6,255
6,438
6,640
Deposits with central bank
5,035
6,382
7,020
7,722
8,495
Total securities
3,261
12,693
12,693
12,693
12,693
Other int earning assets
16,318
18,699
17,764
16,876
16,032
Gross loans
172,859
186,429
204,695
220,047
236,550
Less provisions
-8,900
-9,745
-13,265
-17,155
-21,443
Net loans
163,959
176,684
191,430
202,892
215,107
Long-term investments
81
80
88
114
143
Fixed assets
2,161
2,483
1,986
2,130
2,193
Goodwill
0
0
0
0
0
Other intangible assets
0
0
0
0
0
Other non IEAs
16,963
16,758
17,977
19,325
20,775
Total assets
221,305
242,335
258,305
276,109
295,360
Customer deposits
138,412
150,569
165,626
178,048
191,402
Bank deposits, CDs, debentures
3,032
4,205
4,625
4,972
5,345
Other int bearing liabilities
15,040
22,308
19,348
20,799
22,359
Total int bearing liabilities
156,484
177,082
189,600
203,820
219,106
Non-int bearing liabilities
14,861
13,427
14,769
15,877
17,068
Total liabilities
171,345
190,509
204,369
219,697
236,174
Minority interest
723
758
876
1,002
1,140
Common stock
5,996
5,996
5,996
5,996
5,996
Preferred stock
0
0
0
0
0
Retained earnings
35,236
37,200
39,193
41,542
44,178
Reserves for credit losses
0
0
0
0
0
Proposed dividends
0
0
0
0
0
Other equity
8,005
7,872
7,872
7,872
7,872
Shareholders' equity
49,237
51,068
53,060
55,410
58,045
Total liabilities and equity
221,305
242,335
258,305
276,109
295,360
Non-perf assets
3,070
26,946
28,967
31,139
33,475
Balance sheet ratios (%)
Loans to deposits
124.9
123.8
123.6
123.6
123.6
Equity to assets
22.2
21.1
20.5
20.1
19.7
Asset quality & capital
NPAs/gross loans (%)
1.8
14.5
14.2
14.2
14.2
Bad debt charge/gross loans (%)
2.12
2.41
2.41
2.41
2.41
Loss reserves/assets (%)
4.02
4.02
5.14
6.21
7.26
Loss reserves/NPAs (%)
289.9
36.2
45.8
55.1
64.1
Tier 1 capital ratio (%)
26.3
25.0
24.4
24.0
23.6
Total capital ratio (%)
53.8
51.2
50.1
49.3
48.5
Per share
Reported EPS (IDR)
358.51
325.30
328.94
355.53
394.11
Norm EPS (IDR)
358.51
325.30
328.94
355.53
394.11
FD norm EPS (IDR)
358.51
325.30
328.94
355.53
394.11
DPS (IDR)
118.26
125.48
113.86
115.13
124.44
PPOP PS (IDR)
835.93
860.48
908.12
975.84
1,067.17
BVPS (IDR)
5,037.74
5,225.08
5,428.95
5,669.35
5,939.02
ABVPS (IDR)
5,037.74
5,225.08
5,428.95
5,669.35
5,939.02
NTAPS (IDR)
5,037.74
5,225.08
5,428.95
5,669.35
5,939.02
Valuations and ratios
Reported P/E (x)
6.8
7.4
7.4
6.8
6.1
Normalised P/E (x)
6.8
7.4
7.4
6.8
6.1
FD normalised P/E (x)
6.8
7.4
7.4
6.8
6.1
Dividend yield (%)
4.9
5.2
4.7
4.8
5.1
Price/book (x)
0.5
0.5
0.4
0.4
0.4
Price/adjusted book (x)
0.5
0.5
0.4
0.4
0.4
Net interest margin (%)
8.00
7.34
7.03
6.93
6.91
Yield on assets (%)
10.63
10.72
10.19
10.14
10.14
Cost of int bearing liab (%)
3.40
4.31
3.98
4.03
4.03
Net interest spread (%)
7.23
6.41
6.21
6.12
6.12
Non-interest income (%)
21.9
22.9
23.6
24.0
24.0
Cost to income (%)
58.1
58.4
58.2
57.6
56.4
Effective tax rate (%)
23.5
23.1
23.0
23.1
22.9
Dividend payout (%)
33.0
38.6
34.6
32.4
31.6
ROE (%)
7.3
6.3
6.2
6.4
6.8
ROA (%)
1.67
1.37
1.28
1.30
1.35
Operating ROE (%)
9.4
7.8
7.6
7.8
8.3
Operating ROA (%)
2.15
1.69
1.57
1.58
1.65
Source: Company data, Verdhana estimates
Company profilePT. Bank Danamon Indonesia Tbk. (BDMN) operates as a domestic private bank, which offers a wide range of services in consumer banking, private banking, corporate banking, international operations & trade finance, treasury & foreign exchange, and financial services. In 2002, BDMN started its activities based on Syariah principles. In 2003, BDMN was acquired by Asia Financial (Indonesia) Pte. Ltd., a consortium of Fullerton Financial Holding, a fully owned subsidiary of Temasek Holdings, and Deutsche Bank AG, which took a majority controlling stake. BDMN was listed on Indonesia Stock Exchange in 1989 under Main Board. The bank was founded in 1956 and based in Jakarta, Indonesia.
Valuation MethodologyOur TP of IDR2,750 is derived based on Dupont analysis with a risk-free rate 6.5%, an equity risk premium 7.8%, a CAR-adjusted ROAE of 13.05%, and a beta of 1.2x. At our TP, the implied valuation multiples would be 0.52x FY25F book and 8.4x FY25F P/E. The benchmark index for this stock is the JCI
Risks that may impede the achievement of the target priceKey upside/ downside risks include 1) better/worsening macro 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).
ESGBDMN has initiated various programs to meet ESG commitments, mainly through its Corporate Social Responsibility Program and the Partnership and Community Development Program. BDMN 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, BDMN carries out commitment to environmental safety by creating an environment-friendly infrastructure in its Headquarters area and implementing reforestation in all regional offices. BDMN implements various community social responsibility programs, including the Education and Financial Literacy Program and the Community Development Program. Additionally, Bdmn 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: BDMN – Quarterly results

 BDMN IDRmn 4Q231Q242Q243Q244Q24QoQ %YoY %YTD-24YTD-23YoY %
 Int income 5,344,4085,525,3265,655,5155,782,7585,825,3360.79.022,788,93520,210,34612.8
 Int expense 1,361,8171,533,3381,677,1151,821,3911,858,2692.036.56,890,1134,737,86245.4
 NII 3,982,5913,991,9883,978,4003,961,3673,967,0670.1(0.4)15,898,82215,472,4842.8
           
 Non-int inc 1,319,4231,066,6441,133,1971,233,4361,193,451(3.2)(9.5)4,626,7284,260,0958.6
 Total op. inc 5,302,0145,058,6325,111,5975,194,8035,160,518(0.7)(2.7)20,525,55019,732,5794.0
           
 Non-int exp 2,975,8492,724,8423,021,7413,128,6353,057,315(2.3)2.711,932,53311,334,2585.3
 PPOP 2,326,1652,333,7902,089,8562,066,1682,103,2031.8(9.6)8,593,0178,398,3212.3
 Prov 1,019,5951,216,6501,242,846927,457965,7554.1(5.3)4,352,7083,705,79317.5
           
 PBT 1,306,5701,117,140847,0101,138,7111,137,448(0.1)(12.9)4,240,3094,692,528(9.6)
 Net income 942,959831,246623,621846,853877,6153.6(6.9)3,179,3353,503,882(9.3)
           
 Total assets 221,304,532226,561,617231,916,439240,383,677242,334,5400.89.59.511.9 
 Gross loans 171,414,271176,781,788180,418,986181,348,508183,476,4751.27.07.019.1 
 Provisions 8,960,7429,266,1369,435,7169,203,3939,102,139(1.1)1.61.610.0 
 Net loans 162,453,529167,515,652170,983,270172,145,115174,374,3361.37.37.319.6 
 Deposits 138,411,812140,872,634143,598,564146,441,863150,569,4692.88.88.810.8 
 CASA 71,749,08168,376,23865,630,31063,578,45362,286,451(2.0)(13.2)(13.2)(9.4) 
 TD 66,662,73172,496,39677,968,25482,863,41088,283,0186.532.432.445.7 
 Equities 49,236,61748,823,93949,341,57851,239,99451,067,632(0.3)3.73.75.1 
Source: Company data, Verdhana research

 

Fig. 2: BDMN – Quarterly ratios

 Ratios % 4Q231Q242Q243Q244Q24
 Yield 10.710.610.610.510.4
 COF 3.73.94.24.44.4
 Spread 7.06.76.46.16.0
 NIM 8.07.77.47.27.1
 LDR 123.8125.5125.6123.8121.9
 Loan yoy 19.118.714.111.67.0
 Loan qoq 5.53.12.10.51.2
 Deposit yoy 10.814.114.914.18.8
 Deposit qoq 7.81.81.92.02.8
 CASA ratio 51.848.545.743.441.4
 CIR 56.153.959.160.259.2
 CAR 27.526.125.926.126.2
 ROAE 7.76.85.16.76.9
 LARs 10.010.29.99.48.6
 NPL 1.11.11.00.90.9
 LLR 5.25.25.25.15.0
 NPL Cov 247247251262280
 CoC bps                244               280               278               205               212
Source: Company data, Verdhana research

 

Fig. 3: BDMN – Earnings forecast changes

Source: Company data, Verdhana estimates

 

Fig. 4: BDMN – Loan assumptions

Source: Company data, Verdhana estimates

 

Fig. 5: BDMN – Valuation

BDMN Dupont TP derivation New  Remarks 
Risk-free rate Rf %         6.50
Equity risk premium k %         7.80
Beta x         1.20
Cost of equity COE %       15.86
Growth %       10.00
CAR-Adj ROAE %       13.05
FY25F PB x         0.52 Using FY25F book  
Implied target price IDR       2,720 Rounded to IDR2,750 (Old IDR3,300) 
FY25F PER x          8.4
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 3,300
IDR 2,750
Closing price
7 March 2025
IDR 2,420
Implied upside+13.6%
Market Cap (USD mn)1,437.4
ADT (USD mn)0.1

Relative performance chart


Source: LSEG, Verdhana
M cap (USDmn)
1,437.4
Free float (%)
5.9
3-mth ADT (USDmn)
0.1
(%)
1M
3M
12M
Absolute (IDR)
-4.0
-5.5
-16.0
Absolute (USD)
-4.1
-8.1
-19.3
Rel to Jakarta Stock Exchange Composite Index
-2.4
4.6
-6.0


Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

Tags: BANKS, BDMN, BDMN JK, BDMN IJ, Erwin Wijaya
Disclaimer
Facebook
Twitter
Instagram
Google
Website