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Bank Negara Indonesia (BBNI IJ) (Buy) - FY24 earnings review, TP adjustment

Bank Negara Indonesia (BBNI IJ) (Buy) - FY24 earnings review, TP adjustment

Banks EW 319 4th Feb, 2025

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FY24 earnings review, TP adjustment

Maintain Buy with a revised TP of IDR6,250

Post FY24 results, we revise FY25F-26F earnings estimates. We also add a new forecast year FY27F. Key reasons for our revised earnings are

1. Stable NIMs in 2024, reflecting our key thesis for the Indonesia banking sector. Specifically, we think that liquidity in the system will remain tight, but it should not worsen. This would keep NIMs stable for BBNI, which we esimate at 4.2% in 2025F, and 4.4-4.5% in 2026-27F.

2. Slight uptick in credit costs in 2024. In 2024, average credit costs (CoC) stood around 110bp, which was lower than the gross write-off rate of approximately 250bp. This drove a fast drop in LLR (Loan-Loss-Reserve) to 5.0% in 2024 from 6.8% in 2023. We think that such a fall is NOT sustainable unless we see a large decline in write-off rate (which in 4Q24 remained stubbornly elevated at >200bp). Thus, we assume a slight increase in CoC in 2025F to 120bp, which translates into a LLR of 4.80% in 2025F.

3. On Balance Sheet, we assume loan and deposit would grow 9.0-10.0% and 5.0-7.5% respectively in FY25-27F. These imply a LDR of 100-107%, up from 96% in 2024. The increase in LDR can be funded with equities as well as other wholesale financings, in our view.

Our revised earnings for FY25-26F imply an earnings cut of ~4.0%. These should result in implied ROAEs of 13-13.4% in FY25-27F. In our view, a near-term share price catalyst is a further improvement in system liquidity. Of late, we have not only seen BI reducing the benchmarket rate to 6.5% but also SRBIs blended rate to 6.715% (as of 31st Jan 2025) from 7.253% (as of 27th Dec 2024).

Valuation and risks We derive our TP of IDR6,250 based on a DuPont analysis, assuming a risk-free rate of 6.5% (unchanged), an equity risk premium of 7.8% (unchanged), growth of 8.5% (previously 10%), beta 1.0x (unchanged) and a CAR-adjusted ROAE of 16.5% (unchanged). We also use 2025F book as reference. The implied multiples at our TP are 1.3x 2025F book and 10.6x 2025F earnings (compared to current multiples of 1.0x and 8.1x, 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.

Year-end 31 DecFY24FY25FFY26FFY27F
Currency (IDR)ActualOldNewOldNewOldNew
PPOP (bn)34,82638,08336,87041,82840,392043,759
Reported net profit (bn)21,46422,85721,89125,12124,007025,883
Normalised net profit (bn)21,46422,85721,89125,12124,007025,883
FD normalised EPS575.47612.83586.94673.53643.681,387.94
FD norm. EPS growth (%)2.77.12.09.99.7115.6
FD normalised P/E (x)8.3–8.1–7.4–3.4
Price/adj. book (x)1.1–1.0–0.5–0.4
Price/book (x)1.1–1.0–0.5–0.4
Dividend yield (%)5.9–6.0–12.3–13.5
ROE (%)13.713.513.013.713.313.4
ROA (%)1.91.91.91.92.02.0
Source: Company data, Verdhana estimates

Key data on Bank Negara Indonesia

Profit and loss (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Interest income
68,325
73,324
78,105
84,190
90,641
Interest expense
-25,390
-31,120
-33,756
-35,038
-37,163
Net interest income
42,935
42,204
44,349
49,153
53,478
Net fees and commissions
10,120
10,249
11,299
11,544
12,210
Trading related profits
2,199
3,031
2,519
2,519
2,519
Other operating revenue
7,494
9,030
9,030
9,030
9,030
Non-interest income
19,812
22,311
22,848
23,093
23,759
Operating income
62,747
64,515
67,198
72,246
77,237
Depreciation
-2,305
-2,417
-2,657
-2,764
-2,870
Amortisation
0
0
0
0
0
Operating expenses
-12,639
-13,324
-12,180
-12,438
-12,707
Employee share expense
-12,834
-13,948
-15,491
-16,653
-17,902
Pre-provision op profit
34,970
34,826
36,870
40,392
43,759
Provisions for bad debt
-9,196
-8,211
-9,729
-10,656
-11,721
Other provision charges
0
0
0
0
0
Operating profit
25,773
26,616
27,141
29,736
32,037
Other non-op income
-134
-35
-35
-35
-35
Associates & JCEs
0
0
0
0
0
Pre-tax profit
25,640
26,580
27,105
29,701
32,002
Income tax
-4,534
-4,911
-5,008
-5,488
-5,913
Net profit after tax
21,106
21,669
22,097
24,213
26,089
Minority interests
-197
-206
-206
-206
-206
Other items
0
0
0
0
0
Preferred dividends
0
0
0
0
0
Normalised NPAT
20,909
21,464
21,891
24,007
25,883
Extraordinary items
0
0
0
0
0
Reported NPAT
20,909
21,464
21,891
24,007
25,883
Dividends
-7,325
-10,455
-10,732
-10,946
-12,004
Transfer to reserves
13,585
11,009
11,160
13,062
13,880
Growth (%)
Net interest income
0.1
-1.7
5.1
10.8
8.8
Non-interest income
6.5
12.6
2.4
1.1
2.9
Non-interest expenses
2.3
5.4
-8.6
2.1
2.2
Pre-provision earnings
1.6
-0.4
5.9
9.6
8.3
Net profit
15.3
2.7
2.0
9.7
7.8
Normalised EPS
15.3
2.7
2.0
9.7
115.6
Normalised FDEPS
15.3
2.7
2.0
9.7
115.6
Loan growth
8.7
13.8
9.2
10.2
10.1
Interest earning assets
6.0
3.4
4.0
5.6
7.7
Interest bearing liabilities
4.4
3.5
3.1
5.0
7.5
Asset growth
5.5
4.0
3.8
5.4
7.5
Deposit growth
5.4
-0.6
5.0
5.0
7.5
Source: Company data, Verdhana estimates
Balance sheet (IDRbn)
As at 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Cash and equivalents
11,207
13,710
7,985
8,385
9,013
Inter-bank lending
0
0
0
0
0
Deposits with central bank
65,256
51,669
46,497
48,821
52,483
Total securities
178,215
188,575
152,735
125,855
116,086
Other int earning assets
78,817
23,782
42,789
44,349
46,806
Gross loans
695,085
775,872
845,700
930,270
1,023,297
Less provisions
-47,158
-38,685
-40,414
-43,070
-46,791
Net loans
647,927
737,187
805,286
887,200
976,506
Long-term investments
564
637
724
724
724
Fixed assets
27,765
30,408
29,751
28,988
28,118
Goodwill
0
0
0
0
0
Other intangible assets
0
0
0
0
0
Other non IEAs
76,913
83,838
86,550
90,871
97,676
Total assets
1,086,664
1,129,806
1,172,318
1,235,194
1,327,412
Customer deposits
810,730
805,511
845,786
888,076
954,681
Bank deposits, CDs, debentures
23,679
47,414
49,785
52,274
56,194
Other int bearing liabilities
47,878
60,631
46,678
48,932
52,482
Total int bearing liabilities
882,287
913,555
942,249
989,281
1,063,358
Non-int bearing liabilities
49,644
49,064
51,517
54,093
58,150
Total liabilities
931,931
962,619
993,766
1,043,374
1,121,507
Minority interest
4,602
4,729
4,935
5,141
5,346
Common stock
9,055
9,055
9,055
9,055
9,055
Preferred stock
0
0
0
0
0
Retained earnings
107,236
118,664
129,823
142,885
156,764
Reserves for credit losses
0
0
0
0
0
Proposed dividends
0
0
0
0
0
Other equity
33,841
34,739
34,739
34,739
34,739
Shareholders' equity
150,131
162,458
173,617
186,679
200,558
Total liabilities and equity
1,086,664
1,129,806
1,172,318
1,235,194
1,327,412
Non-perf assets
14,836
15,267
16,641
18,305
20,136
Balance sheet ratios (%)
Loans to deposits
85.7
96.3
100.0
104.8
107.2
Equity to assets
13.8
14.4
14.8
15.1
15.1
Asset quality & capital
NPAs/gross loans (%)
2.1
2.0
2.0
2.0
2.0
Bad debt charge/gross loans (%)
1.32
1.06
1.15
1.15
1.15
Loss reserves/assets (%)
4.34
3.42
3.45
3.49
3.52
Loss reserves/NPAs (%)
317.9
253.4
242.9
235.3
232.4
Tier 1 capital ratio (%)
21.5
20.2
19.8
19.4
18.9
Total capital ratio (%)
23.2
21.7
21.3
20.8
20.3
Per share
Reported EPS (IDR)
560.62
575.47
586.94
643.68
1,387.94
Norm EPS (IDR)
560.62
575.47
586.94
643.68
1,387.94
FD norm EPS (IDR)
560.62
575.47
586.94
643.68
1,387.94
DPS (IDR)
196.39
280.31
287.74
586.94
643.68
PPOP PS (IDR)
937.59
933.75
988.55
1,082.97
2,346.47
BVPS (IDR)
4,025.25
4,355.74
4,654.95
10,010.31
10,754.58
ABVPS (IDR)
4,025.25
4,355.74
4,654.95
10,010.31
10,754.58
NTAPS (IDR)
4,025.25
4,355.74
4,654.95
10,010.31
10,754.58
Valuations and ratios
Reported P/E (x)
8.5
8.3
8.1
7.4
3.4
Normalised P/E (x)
8.5
8.3
8.1
7.4
3.4
FD normalised P/E (x)
8.5
8.3
8.1
7.4
3.4
Dividend yield (%)
4.1
5.9
6.0
12.3
13.5
Price/book (x)
1.2
1.1
1.0
0.5
0.4
Price/adjusted book (x)
1.2
1.1
1.0
0.5
0.4
Net interest margin (%)
4.50
4.23
4.28
4.53
4.62
Yield on assets (%)
7.16
7.35
7.55
7.76
7.83
Cost of int bearing liab (%)
2.94
3.47
3.64
3.63
3.62
Net interest spread (%)
4.22
3.88
3.91
4.13
4.21
Non-interest income (%)
31.6
34.6
34.0
32.0
30.8
Cost to income (%)
44.3
46.0
45.1
44.1
43.3
Effective tax rate (%)
17.7
18.5
18.5
18.5
18.5
Dividend payout (%)
35.0
48.7
49.0
45.6
46.4
ROE (%)
14.6
13.7
13.0
13.3
13.4
ROA (%)
1.98
1.94
1.90
1.99
2.02
Operating ROE (%)
18.0
17.0
16.2
16.5
16.5
Operating ROA (%)
2.44
2.40
2.36
2.47
2.50
Source: Company data, Verdhana estimates
Company profilePT Bank Negara Indonesia (Persero) Tbk or Bank Negara Indonesia (English: State Bank of Indonesia), is an Indonesian state-owned bank. It has branches primarily in Indonesia, but it can also found in Seoul, Singapore, Hong Kong, Tokyo, London and New York. It is the fourth-largest bank of Indonesia in terms of assets.
Valuation MethodologyWe derive our TP of IDR6,250 using DuPont methodology, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, and a CAR-adjusted ROAE of 16.5%. We also use FY25F book value as reference. Our TP implies 1.3x FY25F PB and 10.6xFY25F PER . The benchmark for the stock is JCI.
Risks that may impede the achievement of the target priceDownside risks include worse-than-expected macroeconomic trends, government intervention, tight liquidity competition, and/or higher credit cost and opex growth.
ESGBNI’s sustainable finance policy translates into a commitment to further develop BNI as a financial institution which: 1. Delivers excellent performance and services to all customers, 2. Boosts investment value for investors, 3. Establishes the best working conditions for employees, 4. Shows concern for the environment and the community, 5. Enforces good corporate governance in the context of sustainable finance. At BNI, the implementation of sustainable finance begins with the planning laid out in the Annual Work Plan, which is periodically evaluated and reported to all related stakeholders. BNI also plans and arranges the Sustainable Finance Action Plan (RAKB) which serves as the basis of BNI’s application of sustainable finance between 2020 and 2022, and has been presented to OJK through Letter No. DIR/585 dated 28 November 2019. In particular, in terms of BNI’s sustainable finance performance, BNI issues policies, imposes implementation strategy, and organizes constant evaluation and improvement.
Fig. 1: BBNI earnings changes and new forecast year

Source: Company data, Verdhana estimates

 

Fig. 2: BBNI balance sheet assumption

Source: Company data, Verdhana estimates

 

Fig. 3: BBNI loan classification

Source: Company data, Verdhana estimates

 

Fig. 4: BBNI valuation

Bank Negara Indonesia - TP Derivation
 2025FRemarks
 Risk free rate %            6.5 
 Equity risk premium %            7.8 
 Beta x            1.0 
 Cost of capital % 14.5% 
 Growth rate (2-yr Cagr) % 8.5%Down from 10.0%
 CAR-adj ROAE % 16.5% 
 Target P/B x            1.3 
 Implied target price (IDR)        6,252Rounded to IDR6,250 (down from IDR6,600)
 BVPS FY25F (IDR)        4,655Using FY25F book as reference
 Implied PER 25F          10.7 
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
Buy
Target price
Reduced from IDR 6,600
IDR 6,250
Closing price
31 January 2025
IDR 4,770
Implied upside+31.0%
Market Cap (USD mn)10,808.8
ADT (USD mn)15.2

Relative performance chart

Source: LSEG, Verdhana
M cap (USDmn)
10,808.8
Free float (%)
40.0
3-mth ADT (USDmn)
15.2
(%)
1M
3M
12M
Absolute (IDR)
9.7
-9.1
-17.0
Absolute (USD)
8.3
-12.5
-19.7
Rel to Jakarta Stock Exchange Composite Index
9.2
-3.0
-15.7

Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

Tags: Banks, BBNI, BBNI JK, BBNI IJ, Erwin Wijaya
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