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

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 31^st Jan 2025) from 7.253% (as of 27^th 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 Dec	FY24		FY25F		FY26F		FY27F
Currency (IDR)	Actual	Old	New	Old	New	Old	New
PPOP (bn)	34,826	38,083	36,870	41,828	40,392	0	43,759
Reported net profit (bn)	21,464	22,857	21,891	25,121	24,007	0	25,883
Normalised net profit (bn)	21,464	22,857	21,891	25,121	24,007	0	25,883
FD normalised EPS	575.47	612.83	586.94	673.53	643.68		1,387.94
FD norm. EPS growth (%)	2.7	7.1	2.0	9.9	9.7		115.6
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 (%)	13.7	13.5	13.0	13.7	13.3		13.4
ROA (%)	1.9	1.9	1.9	1.9	2.0		2.0

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
	2025F	Remarks
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)	6,252	Rounded to IDR6,250 (down from IDR6,600)
BVPS FY25F (IDR)	4,655	Using 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

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

FY24 earnings review, TP adjustment

Key data on Bank Negara Indonesia

Fig. 1: BBNI earnings changes and new forecast year

Fig. 2: BBNI balance sheet assumption

Fig. 3: BBNI loan classification

Fig. 4: BBNI valuation

Rating Table

Relative performance chart

Research Analysts

yudi Administrator

Bank Central Asia BBCA IJ - Buy - Solid YTD Jul-24 results

Bank Rakyat Indonesia -BBRI IJ- Buy - Towards more commercial micro

Bank Negara Indonesia BBNI IJ - Buy - Operating 1H24 results were below

Bank Rakyat Indonesia -BBRI IJ- Buy - YTD Jul-24 bank only results - steady progress

Bank Rakyat Indonesia -BBRI IJ- Buy - ROAE uptrend on positive micro trends

Bank Central Asia -BBCA IJ- Buy - Steady growth reiterate Buy new TP IDR13200

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

Fig. 1: BBNI earnings changes and new forecast year

Fig. 2: BBNI balance sheet assumption

Fig. 3: BBNI loan classification

Fig. 4: BBNI valuation

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