BMRI released its 9M24 results on 30 October, with the company remaining on a steady growth trajectory. Headline consolidated 9M24 profit reached IDR42.0tn (+8% y-y), which was on track with our FY24 profit estimate. This brings implied ROAA and ROAE to ~2.7% and ~21.2%, respectively. At the operating level, the bank recorded 9M24 PPOP of IDR66.8tr (+7% y-y) – accounting for 72% of our FY24F projections.
Based on the results, we believe a key area of concern would be related to strong loan growth of ~21% y-y. Yet, headline net interest income for 9M24 only rose by ~3% y-y. This suggests declining NIMs which can be attributed to lack of loan pricing power as well as higher funding costs. For 2025, we think the current high loan growth is unlikely to be maintained. Thus, we think the bank may need to reprice its lending rates upward. Currently, we see early evidence of lending rates getting repriced at levels similar to some of its peers; albeit, this is too early to conclude if such loan repricing can be executed given softening macro-economic backdrop, in our view.
Still, within the Indonesian banking sector, we see BMRI as one of our preferred Indonesian banking stocks.
Key drivers to BMRI’s earnings came from:
● Low funding costs of ~2.8% in 3Q24 (despite slightly up from 2.6% in 2Q24), resulting in NIM of 5.0% in 3Q24 (-10bp q-q , -70bp y-y). Previously, we had argued that stable funding costs would be key to banks’ future earnings predictabilities.
● Stable asset quality persisted. This led to credit costs (CoC) of 70bp in 3Q24 (-20bp q-q / +20bp y-y), bringing 9M24 CoC to 90bp (-10bp y-y). This resulted in risk-adjusted NIM for the bank of 4.5% (+10bp q-q). While this may lead to a Loan-Loss-Reserve (LLR) ratio of 3.2% (-20bp q-q / -130bp y-y), the bank has so far seen near-zero NPLs for its corporate loan book. As of 9M24, LARs stood at 7.3% (-50bp q-q / -260bp y-y) with implied coverage at 56%. Meanwhile, NPLs stood at 1.0% (flat q-q / -40bp y-y) with coverage of >400%.
● Strong loan growth of 21% y-y (+14% YTD 9M24); we believe this could lead to BMRI raising its FY24 loan growth guidance to 16-18%. We think that loan growth is coming from corporate segments – taking market shares away from mid-sized banks whose recent results show inferior loan growth compared to major key banks such as BMRI. We anticipate that these trends will continue for the foreseeable future.
● Strong growth in key saving deposits. The most important saving deposit showed a growth of 13% y-y (+8.2% YTD 9M24). This helped to boost its CASA ratio to 73.8% (+10bp y-y) and has kept consolidated funding costs (CoF) at 2.8% (+20bp q-q).
Valuation and risks
We derive our TP of IDR8,700 using DuPont methodology, with key parameters as follow: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 1.03x, and a CAR-adjusted ROAE of 20.0%. We also use 2025F book as reference. Our TP implies 2.5x FY25F P/B and 12.6x FY25F P/E – compared with the current valuation of 2.1x FY25F P/B and 10.1x FY25F P/E. Risks are worse-than-expected macroeconomic trends, government intervention, tight liquidity competition, and higher credit cost (due to worsening asset qualities) and higher opex growth.
Fig. 1: BMRI quarterly results
BMRI IDRbn
3Q23
2Q24
3Q24
QoQ %
YoY %
YTD 2024
YTD 2023
Y-Y %
2024F
vs. FY24F (%)
NII
25,198
25,454
25,723
1.1
2.1
75,905
73,450
3.3
105,985
71.6
Total op inc
34,207
35,295
37,126
5.2
8.5
106,755
100,882
5.8
147,178
72.5
PPOP
20,299
22,322
23,260
4.2
14.6
66,778
62,274
7.2
92,332
72.3
Prov
1,516
3,321
2,539
(23.5)
67.5
9,452
9,073
4.2
11,423
82.7
PBT
18,784
19,000
20,720
9.1
10.3
57,326
53,202
7.8
80,909
70.9
NP
13,853
13,848
15,467
11.7
11.6
42,017
39,085
7.5
59,770
70.3
3Q23
2Q24
3Q24
QoQ %
YoY %
YTD 2024
YTD 2023
Total Assets
2,006,939
2,257,801
2,323,991
2.9
15.8
6.9
0.7
Gross Loans
1,310,546
1,526,823
1,584,037
3.7
20.9
13.7
9.5
Provisions
58,374
51,755
50,357
(2.7)
(13.7)
(6.5)
(10.7)
Net loans
1,252,172
1,475,068
1,533,681
4.0
22.5
14.6
10.7
Total Deposits
1,451,708
1,651,025
1,667,497
1.0
14.9
5.7
(2.6)
CASA
1,070,317
1,238,450
1,231,369
(0.6)
15.0
5.1
(2.2)
- CA
506,233
612,071
596,388
(2.6)
17.8
2.0
(6.6)
- SA
564,084
626,379
634,981
1.4
12.6
8.2
2.1
Equities
243,310
254,353
272,119
7.0
11.8
4.3
5.9
CASA %
73.7
75.0
73.8
Source: Company data, Verdhana research
Fig. 2: BMRI ratios
BMRI - Ratios (%)
1Q23
2Q23
3Q23
4Q23
1Q24
2Q24
3Q24
Gross Yield (%)
7.5
7.7
7.8
7.6
7.6
7.4
7.5
Cost of funds (%)
2.1
2.2
2.3
2.5
2.6
2.6
2.8
Spread (%)
5.4
5.6
5.5
5.2
5.0
4.8
4.7
NIM %
5.5
5.7
5.7
5.3
5.1
5.1
5.0
Risk-adj NIM %
4.6
4.8
5.3
5.0
4.4
4.4
4.5
Asset growth yoy (%)
10.0
10.0
9.1
9.1
13.4
15.0
15.8
Asset growth qoq (%)
(4.2)
2.9
2.2
8.3
(0.5)
4.3
2.9
Loan growth yoy (%)
12.4
11.8
12.8
16.4
19.2
20.5
20.9
Loan growth qoq (%)
0.3
5.6
3.5
6.3
2.7
6.8
3.7
Deposit growth yoy (%)
9.6
8.5
6.6
5.8
13.0
15.4
14.9
Deposit growth qoq (%)
(6.7)
2.8
1.5
8.6
(0.3)
5.0
1.0
LDR %
86.2
88.6
90.3
88.3
91.0
92.5
95.0
CASA %
74.2
73.4
73.7
74.3
74.4
75.0
73.8
CAR %
20.3
20.7
21.3
22.0
19.9
20.1
20.7
ROAE %
20.3
20.4
21.2
23.0
18.3
20.1
21.2
Credit cost %
1.2
1.3
0.5
0.3
1.0
0.9
0.7
NPL %
1.7
1.5
1.4
1.0
1.0
1.0
1.0
LLR %
5.3
5.0
4.5
3.9
3.7
3.4
3.2
NPL cov %
409.8
420.9
424.5
489.9
470.4
429.8
419.3
LARs %
11.7
10.5
9.9
8.7
8.6
7.8
7.3
LAR cov % RHS
59.1
61.1
58.2
56.8
55.2
55.3
55.5
Source: Company data, Verdhana research
Fig. 3: Loan breakdown
Loans (Bank only) IDRtn
1Q23
2Q23
3Q23
4Q23
1Q24
2Q24
3Q24
QoQ %
YoY %
Corporate
396.2
432.9
448.8
490.0
507.0
561.0
581.0
3.6
29.5
Commercial
203.7
215.7
222.3
238.0
244.0
263.0
275.0
4.6
23.7
Small scale
69.2
72.4
74.2
76.8
77.9
82.4
84.0
1.9
13.2
Micro
154.2
157.5
161.4
168.0
170.0
174.0
184.0
5.7
14.0
Consumers
103.8
106.3
109.3
113.0
115.0
116.0
118.0
1.7
8.0
Total
927
985
1,016
1,086
1,114
1,196
1,242
3.8
22.2
Micro as % of total loans
16.6
16.0
15.9
15.5
15.3
14.5
14.8
Consumer loan IDRbn
1Q23
2Q23
3Q23
4Q23
1Q24
2Q24
3Q24
QoQ %
YoY %
Mortgages
50,985
50,986
53,400
56,000
57,400
59,700
62,100
4.0
16.3
Credit cards
13,905
13,906
15,500
16,700
17,000
17,600
18,400
4.5
18.7
Autos
36,153
36,154
37,800
38,000
37,400
35,700
34,100
(4.5)
(9.8)
Other
2,781
2,782
2,600
2,750
3,270
2,880
2,970
3.1
14.2
Total
103,824
103,825
103,826
113,450
115,070
115,880
117,570
1.5
13.2
Source: Company data, Verdhana research
Fig. 4: NPL ratio %
NPL ratios %
1Q23
2Q23
3Q23
4Q23
1Q24
2Q24
3Q24
Corporate
0.85
0.83
0.82
0.31
0.24
0.40
0.39
Commercial
3.86
2.93
2.24
1.73
1.58
1.24
1.15
Small
0.93
0.98
1.01
0.97
1.02
1.01
0.97
Micro
1.15
1.31
1.33
1.37
1.65
1.73
1.78
Consumers
1.92
2.13
2.09
2.04
2.23
2.30
2.11
Total
1.70
1.53
1.36
1.02
1.02
1.01
0.97
Commercial (incl SME/Micro)
2.41
2.04
1.72
1.48
1.52
1.37
1.34
Source: Company data, Verdhana research
Fig. 5: BMRI LAR / NPL formation %
Source: Company data, Verdhana research
Fig. 6: BMRI Dupont % of assets
BMRI Dupont % of assets
1Q23
2Q23
3Q23
4Q23
1Q24
2Q24
3Q24
Int inc
7.1
7.5
7.6
7.2
7.2
7.0
7.2
Int exp
2.2
2.4
2.5
2.5
2.6
2.4
2.7
Net Int Inc
4.8
5.1
5.1
4.7
4.6
4.6
4.5
Non-int inc
2.0
1.8
1.8
2.5
1.8
1.8
2.0
Total op. inc
6.8
6.9
6.9
7.2
6.3
6.4
6.5
Non-int exp
2.5
2.5
2.8
2.9
2.4
2.3
2.4
PPOP
4.3
4.4
4.1
4.3
3.9
4.0
4.1
Prov
0.8
0.8
0.3
0.2
0.7
0.6
0.4
PBT
3.5
3.5
3.8
4.1
3.2
3.4
3.6
Net profit
2.6
2.6
2.8
3.1
2.3
2.5
2.7
Assets to Equities
7.9
7.8
7.6
7.5
7.8
8.0
7.8
BMRI ROAE
20.3
20.4
21.2
23.0
18.3
20.1
21.2
Source: Company data, Verdhana research
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.
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