Bank Mandiri (BMRI IJ) (Buy) - Unexciting (in-line) FY24 results

Banks EW 373 5th Feb, 2025

BMRI has released its FY24 results with headline consolidated profit at IDR55.8tn (+1.3% y-y). This brings implied ROAA and ROAE to ~2.4% (down from ~2.7% in FY23) and ~20.5% (down from ~22.4%), respectively. At the operating level, the bank recorded FY24 PPOP of IDR87.8tn (+4% y-y). We attribute the soft operating growth to its lower recoveries of ~IDR7tn in 2024 (down from ~IDR10tn in 2023) – reflecting a generally challenging macroeconomic environment.

On a q-q basis, headline consolidated profit fell to IDR13.8tn (-11% q-q), largely coming from a lower PPOP of IDR21.1tn (-10% q-q), a result of significant q-q jump in all key opex items; specifically, employee-related expenses which have jumped +33% y-y on a YTD basis.  

From the results, we think a key concern is the very strong loan growth of ~20% y-y. Yet, headline net interest income only rose by ~6% y-y in FY24. This suggests declining NIMs, which can be attributed to the bank’s lack of loan pricing power as well as higher funding costs. We think such a high level of loan growth is unlikely to be repeated in FY25F. Thus, it is no surprise that the bank is guiding for a lower loan growth of 10-12% in 2025 – a marked deceleration from 2024’s 20%. This should moderate the risk of a further increase in LDR which stood at 98% in FY24 (up from 88% a year ago). Thus, we think the bank may need to reprice (upward) its lending rates. So far, we have seen early signs of lending rate repricing by several of its peers. However, we note that it is too early to conclude whether such loan repricing can be executed against a backdrop of softening macroeconomic.

On balance sheet, given the improvement in overall asset quality, we believe this should result in a stabilized CoC of 100-120bp in 2025F. One of the leading indicators that we monitor relates to the bank’s write-off trends, which came down to <100bp 12MMA in 4Q24 (refer to chart inside). This aligns with the bank’s CoC guidance.

Valuation and risks

We derive our TP of IDR8,700 using a DuPont methodology, with key parameters as follows: 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 valuations 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 FY24 results (%)

Source: Company data, Verdhana research

 

Fig. 2: BMRI quarterly results

 BMRI IDRbn 1Q242Q243Q244Q24QoQ %YoY %YTD 2024YTD 2023Y-Y %
 NII 24,72925,45425,72328,37310.315.5104,27898,0106.4
 Total op inc 34,33435,29537,12639,9317.65.4146,686138,7655.7
 PPOP 21,19722,32223,26021,060(9.5)(6.8)87,83884,8763.5
 Prov 3,5923,3212,5392,326(8.4)100.211,77810,23415.1
 PBT 17,60519,00020,72018,734(9.6)(12.6)76,06074,6421.9
 NP 12,70213,84815,46713,765(11.0)(13.8)55,78355,0601.3
        
 1Q242Q243Q244Q24QoQ %YoY %YTD 2024YTD 2023 
 Total Assets 2,163,7852,257,8012,323,9912,427,2234.411.611.69.1 
 Gross Loans 1,429,9811,526,8231,584,0371,664,7905.119.519.516.4 
 Provisions 53,01851,75550,35750,3920.1(6.5)(6.5)(17.6) 
 Net loans 1,376,9621,475,0681,533,6811,614,3985.320.620.618.4 
 Total Deposits 1,571,8911,651,0251,667,4971,698,8971.97.77.75.8 
 CASA 1,168,9351,238,4501,231,3691,271,2103.28.58.57.0 
 - CA 562,103612,071596,388605,7651.63.63.67.9 
 - SA 606,832626,379634,981665,4464.813.413.46.2 
 Equities 240,687254,353272,119283,7964.38.88.813.6 
Source: Company data, Verdhana research

 

Fig. 3: BMRI ratios

         
 BMRI Ratios % 1Q232Q233Q234Q231Q242Q243Q244Q24
 ROAA 2.62.62.83.12.32.52.72.3
 ROAE 20.320.421.223.018.320.121.217.9
 CAR 20.320.721.322.019.920.120.720.8
 NIM 5.55.75.75.35.15.15.05.2
 CIR 37.236.940.740.338.336.837.447.3
 CoC 1.21.30.50.31.00.90.70.6
 LDR 86.288.690.388.391.092.595.098.0
 LLR 5.35.04.53.93.73.43.23.0
 LAR 11.710.59.98.78.67.87.36.8
 LAR Cov 59.161.158.256.855.255.355.556.5
 NPL             1.7            1.5            1.4            1.0            1.0            1.0            1.0            1.0
 NPL cov         409.8        420.9        424.5        489.9        470.4        429.8        419.3        399.6
 Asset yield             7.5            7.7            7.8            7.6            7.6            7.4            7.5            7.8
Source: Company data, Verdhana research

 

Fig. 4: BMRI loan breakdown

BMRI - Bank-only Loan  IDRbn4Q194Q204Q214Q224Q231Q242Q243Q244Q24
Corporate364,800344,300370,200414,100490,000507,000561,000581,000620,000
Commercials/SMEs210,300212,200234,000263,700314,800321,900345,400359,000380,000
Micro123,000120,700131,900152,100168,000170,000174,000184,000188,000
Consumers94,30086,40092,100102,800113,000115,000116,000118,000123,000
Total792,400763,600828,200932,7001,085,8001,113,9001,196,4001,242,0001,311,000
as % of total4Q194Q204Q214Q224Q231Q242Q243Q244Q24
Corporate                46.0                45.1                44.7                44.4              45.1              45.5              46.9              46.8              47.3
Commercials/SMEs                26.5                27.8                28.3                28.3              29.0              28.9              28.9              28.9              29.0
Micro                15.5                15.8                15.9                16.3              15.5              15.3              14.5              14.8              14.3
Consumers                11.9                11.3                11.1                11.0              10.4              10.3                 9.7                 9.5                 9.4
Total             100.0             100.0             100.0             100.0            100.0            100.0            100.0            100.0            100.0
NPL by segment (IDRbn)4Q194Q204Q214Q224Q231Q242Q243Q244Q24
Corporate1804,200             4,368             3,700            1,519            1,217            2,244            2,266            2,232
Commercials/SMEs15,59017,600           15,616           10,300            4,862            4,650            4,093            3,977            4,023
Micro1,020900             1,385             1,600            2,302            2,805            3,010            3,275            3,647
Consumers1,020900             1,385             1,600            2,302            2,805            3,010            3,275            3,647
Total           17,810           23,600           22,754           17,200          10,985          11,477          12,358          12,794          13,550
NPL ratio %4Q194Q204Q214Q224Q231Q242Q243Q244Q24
Corporate                  0.0                  1.2                  1.2                  0.9                 0.3                 0.2                 0.4                 0.4                 0.4
Commercials/SMEs                  7.4                  8.3                  6.7                  3.9                 1.5                 1.4                 1.2                 1.1                 1.1
Micro                  0.8                  0.7                  1.1                  1.1                 1.4                 1.7                 1.7                 1.8                 1.9
Consumers                  1.1                  1.0                  1.5                  1.6                 2.0                 2.4                 2.6                 2.8                 3.0
Total                  2.2                  3.1                  2.7                  1.8                 1.0                 1.0                 1.0                 1.0                 1.0
Source: Company data, Verdhana research

 

Fig. 5: BMRI LAR / NPL formation %

Source: Company data, Verdhana research

 

Fig. 6: BMRI - 12MMA WO %

Source: Company data, Verdhana research

 

Fig. 7: NPL ratios

 NPL ratios %  1Q23  2Q23  3Q23  4Q23  1Q24  2Q24  3Q24  4Q24 
 Corporate           0.85          0.83          0.82          0.31          0.24          0.40          0.39          0.36
 Commercial           3.86          2.93          2.24          1.73          1.58          1.24          1.15          1.10
 Small            0.93          0.98          1.01          0.97          1.02          1.01          0.97          0.92
 Micro           1.15          1.31          1.33          1.37          1.65          1.73          1.78          1.94
 Consumers           1.92          2.13          2.09          2.04          2.23          2.30          2.11          2.18
 Total           1.70          1.53          1.36          1.02          1.02          1.01          0.97          0.97
 Commercial (incl SME/Micro)           2.41          2.04          1.72          1.48          1.52          1.37          1.34          1.35
Source: Company data, Verdhana research

 

Fig. 8: BMTI Dupont % of assets

 BMRI Dupont % of assets 1Q232Q233Q234Q231Q242Q243Q244Q24
 Int inc            7.1           7.5           7.6           7.2           7.2           7.0           7.2           7.7
 Int exp            2.2           2.4           2.5           2.5           2.6           2.4           2.7           2.9
 Net Int Inc            4.8           5.1           5.1           4.7           4.6           4.6           4.5           4.8
 Non-int inc            2.0           1.8           1.8           2.5           1.8           1.8           2.0           1.9
 Total op. inc            6.8           6.9           6.9           7.2           6.3           6.4           6.5           6.7
 Non-int exp            2.5           2.5           2.8           2.9           2.4           2.3           2.4           3.2
 PPOP            4.3           4.4           4.1           4.3           3.9           4.0           4.1           3.5
 Prov            0.8           0.8           0.3           0.2           0.7           0.6           0.4           0.4
 PBT            3.5           3.5           3.8           4.1           3.2           3.4           3.6           3.2
 Net profit            2.6           2.6           2.8           3.1           2.3           2.5           2.7           2.3
 Assets to Equities            7.9           7.8           7.6           7.5           7.8           8.0           7.8           7.7
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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Rating
Remains
Buy
Target price
Remains
IDR 8,700
Closing price
4 February 2025
IDR 5,675

Erwin Wijaya (erwin.wijaya@verdhana.id)