BBNI released its FY24 results with a net profit of IDR21.5tn (+3% y-y), broadly in line with our projection of IDR21.3tn. At the operating level, margin improvements resulted in NIM of ~4.5% in 4Q24 – compared to 4.4% in 3Q24 and a low of 3.9% in 1Q24. However, this slight NIM improvement was due to subsidy payments as well as further increases in LDRs to 96.3%. Adjusting for these, the normalized NIM would be ~4.2%, which is reflected in the uptick in funding costs to 3.1% (~+10bp q-q/~+60bp y-y). We attribute this to still-tight liquidity in the banking system.

In 1H25, we think overall liquidity will remain tight despite BI’s recent benchmark rate cut. Meanwhile, changes in the government’s new export proceeds repatriation rule may help stabilize the IDR and potentially improve liquidity, but we do not think it would be material. Thus, BBNI’s NIMs in 1H25 may hover around 4.1-4.4%.

Still, as we have argued in our recent notes, we see a fundamental improvement in major Indonesia banks’ earnings profiles in 2025 vs 2024. Specifically, while liquidity remains tight, we do not think it is worsening. Thus, broad NIMs for banks in 2025F may remain stable (not decline like in recent years), in part because broad loan growth will likely be lower in 2025F vs 2024. At the same time, we also see broadly stabilizing (and in some cases declining) write-off rates (though in BBNI’s case it shows a slight uptick).  

In 4Q24, we note an increase in credit costs (CoC) to 1.4% vs ~1.0% in 9M24. The increase in CoC appears to match the slight increase in write-offs. However, overall, in 4Q24, LLR remained low at 5.0% (we interpret it as provision release) vs 5.6% in 3Q24 and 6.8% in 4Q23. Among the major Indonesia banks, BBNI recorded the biggest decline in LLR in 2024.

On the balance sheet, BBNI booked loan growth of +11.6% y-y (+5.6% q-q) in 4Q24. Deposits were flat y-y as the bank focused more on cheaper funding deposits. The above translated into a loans-to-deposits ratio (LDR) of 96.3% in 4Q24 (+1080bp y-y/+80bp q-q) – highest amongst major banks. Higher LDRs may have also boosted NIMs for the bank, we think.

Asset quality largely improved with NPLs at 2.0% in 4Q24 (and LARs at 10.3%, down from 13.0% in 4Q23). LAR coverage stood at 48.3%, down from 52.3% in 4Q23. But LLR is now down to 5.0% (in 4Q24) from 6.8% in 4Q23 and 5.6% in 3Q24. Furthermore, unless write-off rates decline from ~2.0% p.a. towards 1.25-1.50%, we think CoC may have to go higher in 2025 vs 2024. This could be one of the key risks for the stock, we think.

(Please refer to inside tables / charts for more details on BBNI’s FY24 results.)

Post results, we retain our Buy rating on the stock.

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.

Fig. 4: BBNI – elevated WO but lower LLR %

Fig. 5: BBNI Lower CoC than WO => Lower LLR %

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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Erwin Wijaya (erwin.wijaya@verdhana.id)