BBNI released its 9M24 results with headline profit at IDR16.3tn (+3.3% y-y), accounting for 76% of our FY24 projection, largely driven by management’s efforts to lower credit costs (CoC) (-23.2% y-y), as 9M24 PPOP declined (-4.5% y-y). The decline in CoC was a result of the bank’s broad improvement in asset quality and shift to higher-quality loans (hence competitive pricing was compensated by the lower CoC). For the remaining 2024, we see limited room for funding costs to head lower, given the still generally tight liquidity in the system, although we could see a reduction in SRBI loan outstanding. In 3Q24 BBNI saw strong y-y growth in CASA, particularly its savings account (+7.4% y-y). While on a q-q basis savings declined, overall 3Q24 CoF for the bank remained resilient at 3.0% (vs 3.1% in 2Q24). BBNI was also able to reprice its loans upwards (with corporate loans resulting in the largest absolute yield gains). The combination of higher loan yields (at 7.7% in 3Q24 vs 7.4% in 2Q24) and stable CoF led to improvements in its 3Q24 NIM. We think that the upward loan repricing signals a more rational competition dynamic within the banking industry, which is positive for BBNI. Management has noted that margin expansion would be the company’s strategy. Hence, we maintain our Buy call on the stock.

9M24 results summary

• 3Q24 net interest income (NII) stood at IDR10.8tn (+6.9% q-q; -1.4% y-y) and 3Q24 NIM reached 4.4% (+30bps q-q -30bps y-y). 9M24 NII at IDR30.7tn (-5.2% y-y) accounted for 68% of our FY24F projection. We attribute the quarterly NII improvement to upward loan repricing (blended loan yield was at 7.7% in 3Q24 vs 7.4% in 2Q24) as well as lower funding costs due to a stronger CASA franchise.

• 3Q24 PPOP reached IDR8.8tn (+7.4% q-q; -2.1% y-y), bringing 3Q24 PPOP to IDR25.1tn (-4.5% y-y), accounting for 72% of our FY24F projection. During 3Q24, the bank reported CoC of 1.0% (flat q-q; -40bp y-y) as overall asset quality improved. Indeed, in 3Q24 NPL reached 2.0% (flat q-q; -30bp y-y), while the loans-at-risk (LAR) ratio was 11.8% (-50bp q-q; -260bp y-y). This brings LAR coverage to 46.9% (-50bp q-q; -390bp y-y). At the bottom line, 3Q24 profit reached IDR5.6tn (+4.7% q-q; +2.3% y-y), bringing 9M24 profit to IDR16.3tn (+3.3% y-y), accounting for 76% of our FY24F projection.

• On the balance sheet, BBNI booked loan growth of +9.5% y-y (+5.7% YTD); predominantly coming from the corporate segment (+17.1% y-y / +11.5% YTD). We see better quality loan growth, as management would put more focus on quality. Deposits for the bank only rose by 3% y-y (-5.1% YTD), with growth mostly came from savings accounts (+7.4% y-y / +3.0% YTD), resulting in an increase in the CASA ratio to 70.3% (+170bp y-y). With BBNI’s ongoing digital transformation, we expect that the CASA ratio will remain elevated. The above translated to a loans-to-deposits ratio (LDR) of 95.5% in 3Q24 (+570bp y-y).

Valuation and risks

We derive our TP of IDR6,600 based on a DuPont analysis, assuming a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 8.5%, beta 1.0x and a CAR-adjusted ROAE of 16.5%. We also use 2025F book as reference. The implied multiples at our TP are 1.4x 2025F book and 10.7x 2025F earnings (compared to current multiples of 1.2x and 9.3x, respectively). Key risks to our view are worsening macroeconomic trends, unfavorable regulatory changes, and tighter liquidity competition (which would increase funding cost), and worsening credit quality (which would raise credit costs), and higher opex.

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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Nicholas Santoso (nicholas.santoso@verdhana.id) 

Erwin Wijaya (erwin.wijaya@verdhana.id)