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Bank Negara Indonesia - BBNI IJ -Buy- Rolling forward valuation to 2025F

Bank Negara Indonesia - BBNI IJ -Buy- Rolling forward valuation to 2025F

Banks NS EW 522 20th Sep, 2024

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Rolling forward valuation to 2025F

Reiterate Buy with a revised TP of IDR6,600 (from IDR6,100)

BBNI’s YTD Jul-24 results suggest minor operating improvement for the bank. We believe that BBNI is on track to meet our FY24F earnings projections (taking into account its consolidated numbers). Hence, we roll forward our valuation to 2025F book value, and subsequently raise our TP to IDR6,600 (from IDR6,100). In addition, in view of our expectations of BI cutting interest rate and issuing fewer Bank Indonesia Rupiah Securities (SRBI), BBNI should register lower funding costs (and hence potentially better NIM trends or at least minimize NIM risk). On the back of the aforementioned attributes, we retain our Buy rating on the stock with a higher TP of IDR6,600 (rolling forward to 2025F book).

Valuation and risks

We derive our new 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% (all unchanged). We also use 2025F book as reference, rolling forward from 2024F currently. 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.

Year-end 31 DecFY23FY24FFY25FFY26F
Currency (IDR)ActualOldNewOldNewOldNew
PPOP (bn)34,97035,02335,02338,08338,08341,82841,828
Reported net profit (bn)20,90921,34821,34822,85722,85725,12125,121
Normalised net profit (bn)20,90921,34821,34822,85722,85725,12125,121
FD normalised EPS560.62572.38572.38612.83612.83673.53673.53
FD norm. EPS growth (%)15.32.12.17.17.19.99.9
FD normalised P/E (x)10.2–10.0–9.3–8.5
Price/adj. book (x)1.4–1.3–1.2–0.6
Price/book (x)1.4–1.3–1.2–0.6
Dividend yield (%)3.4–4.4–4.5–9.7
ROE (%)14.613.713.713.513.513.713.7
ROA (%)2.01.91.91.91.91.91.9
Source: Company data, Verdhana estimates

Key data on Bank Negara Indonesia

Profit and loss (IDRbn)
Year-end 31 Dec
FY22
FY23
FY24F
FY25F
FY26F
Interest income
60,880
68,325
71,388
76,934
83,641
Interest expense
-18,008
-25,390
-26,574
-28,612
-31,181
Net interest income
42,872
42,935
44,814
48,322
52,460
Net fees and commissions
9,738
10,120
10,169
11,137
12,251
Trading related profits
2,929
2,199
1,930
1,930
1,930
Other operating revenue
5,933
7,494
7,494
7,494
7,494
Non-interest income
18,600
19,812
19,592
20,561
21,674
Operating income
61,472
62,747
64,407
68,882
74,134
Depreciation
-2,250
-2,305
-2,436
-2,543
-2,649
Amortisation
0
0
0
0
0
Operating expenses
-12,353
-12,639
-12,343
-12,557
-12,780
Employee share expense
-12,456
-12,834
-14,605
-15,700
-16,877
Pre-provision op profit
34,413
34,970
35,023
38,083
41,828
Provisions for bad debt
-11,514
-9,196
-8,716
-9,944
-10,938
Other provision charges
0
0
0
0
0
Operating profit
22,899
25,773
26,307
28,139
30,889
Other non-op income
-384
-134
-134
-134
-134
Associates & JCEs
0
0
0
0
0
Pre-tax profit
22,515
25,640
26,173
28,006
30,756
Income tax
-4,205
-4,534
-4,628
-4,952
-5,438
Net profit after tax
18,310
21,106
21,545
23,054
25,318
Minority interests
-170
-197
-197
-197
-197
Other items
0
0
0
0
0
Preferred dividends
0
0
0
0
0
Normalised NPAT
18,140
20,909
21,348
22,857
25,121
Extraordinary items
0
0
0
0
0
Reported NPAT
18,140
20,909
21,348
22,857
25,121
Dividends
-2,725
-7,325
-9,409
-9,607
-10,286
Transfer to reserves
15,415
13,585
11,939
13,250
14,835
Growth (%)
Net interest income
8.1
0.1
4.4
7.8
8.6
Non-interest income
14.7
6.5
-1.1
4.9
5.4
Non-interest expenses
6.5
2.3
-2.3
1.7
1.8
Pre-provision earnings
10.8
1.6
0.2
8.7
9.8
Net profit
66.4
15.3
2.1
7.1
9.9
Normalised EPS
66.4
15.3
2.1
7.1
9.9
Normalised FDEPS
66.4
15.3
2.1
7.1
9.9
Loan growth
12.0
8.7
9.5
10.4
10.3
Interest earning assets
7.0
6.0
8.4
10.0
10.0
Interest bearing liabilities
6.1
4.4
8.1
10.0
10.0
Asset growth
6.7
5.5
8.1
9.7
9.8
Deposit growth
5.5
5.4
10.0
10.0
10.0
Source: Company data, Verdhana estimates
Balance sheet (IDRbn)
As at 31 Dec
FY22
FY23
FY24F
FY25F
FY26F
Cash and equivalents
13,448
11,207
10,420
11,462
12,608
Inter-bank lending
0
0
0
0
0
Deposits with central bank
82,922
65,256
60,671
66,738
73,412
Total securities
166,478
178,215
230,807
252,140
276,698
Other int earning assets
67,491
78,817
52,301
56,373
60,852
Gross loans
646,188
695,085
757,642
833,407
916,747
Less provisions
-50,334
-47,158
-47,874
-49,819
-52,757
Net loans
595,854
647,927
709,768
783,588
863,990
Long-term investments
609
564
724
724
724
Fixed assets
26,549
27,765
27,329
26,786
26,137
Goodwill
0
0
0
0
0
Other intangible assets
0
0
0
0
0
Other non IEAs
76,485
76,913
83,185
91,492
100,630
Total assets
1,029,837
1,086,664
1,175,205
1,289,303
1,415,050
Customer deposits
769,269
810,730
891,803
980,984
1,079,082
Bank deposits, CDs, debentures
23,027
23,679
26,046
28,651
31,516
Other int bearing liabilities
52,867
47,878
35,470
38,874
42,619
Total int bearing liabilities
845,163
882,287
953,319
1,048,509
1,153,217
Non-int bearing liabilities
44,476
49,644
54,609
60,070
66,077
Total liabilities
889,639
931,931
1,007,928
1,108,578
1,219,294
Minority interest
4,382
4,602
4,798
4,995
5,192
Common stock
9,055
9,055
9,055
9,055
9,055
Preferred stock
0
0
0
0
0
Retained earnings
94,060
107,236
119,584
132,834
147,669
Reserves for credit losses
0
0
0
0
0
Proposed dividends
0
0
0
0
0
Other equity
32,701
33,841
33,841
33,841
33,841
Shareholders' equity
135,816
150,131
162,479
175,729
190,564
Total liabilities and equity
1,029,837
1,086,664
1,175,205
1,289,303
1,415,050
Non-perf assets
18,161
14,836
13,259
14,585
16,043
Balance sheet ratios (%)
Loans to deposits
84.0
85.7
85.0
85.0
85.0
Equity to assets
13.2
13.8
13.8
13.6
13.5
Asset quality & capital
NPAs/gross loans (%)
2.8
2.1
1.8
1.8
1.8
Bad debt charge/gross loans (%)
1.78
1.32
1.15
1.19
1.19
Loss reserves/assets (%)
4.89
4.34
4.07
3.86
3.73
Loss reserves/NPAs (%)
277.1
317.9
361.1
341.6
328.8
Tier 1 capital ratio (%)
18.8
21.5
21.4
21.0
20.7
Total capital ratio (%)
20.6
23.2
23.1
22.7
22.4
Per share
Reported EPS (IDR)
486.36
560.62
572.38
612.83
673.53
Norm EPS (IDR)
486.36
560.62
572.38
612.83
673.53
FD norm EPS (IDR)
486.36
560.62
572.38
612.83
673.53
DPS (IDR)
73.05
196.39
252.28
257.57
551.55
PPOP PS (IDR)
922.66
937.59
939.02
1,021.07
1,121.47
BVPS (IDR)
3,641.43
4,025.25
4,356.32
4,711.58
10,218.66
ABVPS (IDR)
3,641.43
4,025.25
4,356.32
4,711.58
10,218.66
NTAPS (IDR)
3,641.43
4,025.25
4,356.32
4,711.58
10,218.66
Valuations and ratios
Reported P/E (x)
11.7
10.2
10.0
9.3
8.5
Normalised P/E (x)
11.7
10.2
10.0
9.3
8.5
FD normalised P/E (x)
11.7
10.2
10.0
9.3
8.5
Dividend yield (%)
1.3
3.4
4.4
4.5
9.7
Price/book (x)
1.6
1.4
1.3
1.2
0.6
Price/adjusted book (x)
1.6
1.4
1.3
1.2
0.6
Net interest margin (%)
4.79
4.50
4.38
4.33
4.27
Yield on assets (%)
6.80
7.16
6.98
6.89
6.81
Cost of int bearing liab (%)
2.19
2.94
2.90
2.86
2.83
Net interest spread (%)
4.60
4.22
4.09
4.03
3.97
Non-interest income (%)
30.3
31.6
30.4
29.8
29.2
Cost to income (%)
44.0
44.3
45.6
44.7
43.6
Effective tax rate (%)
18.7
17.7
17.7
17.7
17.7
Dividend payout (%)
15.0
35.0
44.1
42.0
40.9
ROE (%)
14.0
14.6
13.7
13.5
13.7
ROA (%)
1.82
1.98
1.89
1.85
1.86
Operating ROE (%)
17.6
18.0
16.8
16.6
16.9
Operating ROA (%)
2.30
2.44
2.33
2.28
2.28
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 IDR6,600 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 1.4x FY25F PB and 10.7xFY25F PER . The benchmark for the stock is JCI.
Risks that may impede the achievement of the target priceDownside risks include worsening macroeconomic trends, unfavorable regulatory changes, and tighter liquidity competition, and worsening credit quality, and higher opex.
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 - valuation methodology

Bank Negara Indonesia - Fair valuation
 2025FRemarks
 Risk free rate %          6.5 
 Equity risk premium %          7.8 
 Beta x          1.0 
 Cost of capital % 14.2% 
 Growth rate (2-yr Cagr) % 8.5% 
 CAR-adj ROAE % 16.5% 
 Target P/B x          1.4 
 Implied target price (IDR)       6,587Rounded up to IDR6,600 (from IDR6,100)
 Implied BVPS FY25F (IDR)       4,712Using FY25F book as reference
 Implied FY25F PER         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.


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Rating Table

Rating
Remains
Buy
Target price
Increased from IDR 6,100
IDR 6,600
Closing price
18 September 2024
IDR 5,700
Implied upside+15.8%
Market Cap (USD mn)13,729.2
ADT (USD mn)18.1

Relative performance chart


Source: LSEG, Verdhana

M cap (USDmn)
13,729.2
Free float (%)
40.0
3-mth ADT (USDmn)
18.1
(%)
1M
3M
12M
Absolute (IDR)
7.5
32.3
21.9
Absolute (USD)
10.0
41.4
22.2
Rel to Jakarta Stock Exchange Composite Index
2.2
16.0
9.0

Research Analysts

Nicholas Santoso (nicholas.santoso@verdhana.id)

Erwin Wijaya (erwin.wijaya@verdhana.id),

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