On track to meet our FY24F projections despite weak operating results
BBNI has released its bank-only YTD Aug-24 results, which suggest limited operating improvements for the bank. Headline Aug-24-only profit reached IDR1.7tn (-12.4% m-m / +12.7% y-y), bringing YTD Aug-24 profit to IDR14.2tn (+4% y-y), which was largely in line with our FY24F projection (considering consolidated numbers). For the remaining 2024F, we see limited room for funding costs to head lower given the still-generally tight liquidity in the system, although we could see reduction in SRBI loans outstanding. We also think that in the near term, the market may perceive better benefits for BBNI from potential interest rate cuts. In our opinion, it is likely to be minimal, as we expect the system’s liquidity to remain tight. Given that we also believe other large banks may grow loans and deposits faster, we expect them to continue to garner a larger deposit share (relative to BBNI). We also notice inferior loan growth for BBNI which, in the longer term, would make it harder to compete with major peers. Hence, in the longer term, we continue to prefer BBCA, BMRI, and BBRI over BBNI (in preferred order).
At the operating level, the bank’s headline Aug-24 NII of IDR3.4tn may trigger concern (as it suggests a decline of 4.3% m-m, although on a y-y basis it is a 2.6% improvement). Fortunately, the bank’s funding costs appear to have stabilized on an m-m basis, with headline Aug-24 CoF standing at 2.9% (flat m-m / +30bp y-y). This brought down NII to IDR3.4tn (-4.3% m-m / +2.6% y-y), implying NIM of 4.3% (-20bp m-m / -20bp y-y). Still, in our view, the stabilized funding costs should pave the way for the bank to record better operating results.
Headline PPOP for Aug-24 was IDR2.7tn (-7.0% m-m / +2.0% y-y), bringing YTD Aug-24 PPOP to IDR21.7tn (-5% y-y). However, in our opinion, the bank still needs to keep its credit costs (CoC) elevated to beef up its loan-loss-reserve (LLR) to accommodate excess lending it has made, particularly during the Covid period. The increase in CoC is necessary to accommodate some loan downgrades. CoC in Aug-24 was at 1.1% (bringing YTD Aug-24 CoC to 1.0%). The bank has an LLR of 5.7% (a decline y-y but flat m-m). Given that the level of CoC is consistently below the bank’s loan write-offs, we believe that BBNI may have to increase its provisioning. Admittedly, monthly results can be volatile; thus, in this report, we look at the bank’s 12-month moving average (12MMA) to give us a better understanding of the bank’s latest trends in several areas. Further details on the results are shown in the following tables/charts inside this report.
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. 1: BBNI monthly results
BNI - Monthly IDRbn
Aug-23
Jul-24
Aug-24
M-M
Y-Y
YTD-24
YTD-23
Y-Y
% of FY24F
FY24F
Gross Interest Income
5,015
5,589
5,409
-3.2%
7.9%
42,466
40,475
5%
59%
71,388
Gross Interest Expenses
1,717
2,055
2,025
-1.4%
18.0%
16,904
13,039
30%
64%
26,574
NII
3,298
3,534
3,384
-4.3%
2.6%
25,562
27,436
-7%
57%
44,814
PPOP
2,678
2,936
2,730
-7.0%
2.0%
21,698
22,842
-5%
62%
34,889
Provision exp
840
549
652
18.7%
-22.4%
4,511
6,158
-27%
52%
8,716
Net profit
1,511
1,944
1,704
-12.4%
12.7%
14,221
13,635
4%
67%
21,348
Comprehensive profit
1,186
2,533
2,609
3.0%
119.9%
14,699
13,115
12%
YTD loan growth
1.5%
4.5%
3.3%
Y-Y loan growth
8.4%
11.1%
9.0%
M-M loan growth
0.8%
0.4%
-1.1%
YTD deposit growth
-5.7%
-8.0%
-7.0%
Y-Y deposit growth
7.1%
2.4%
3.6%
M-M deposit growth
-0.1%
-3.1%
1.1%
Asset yield (annualised)
6.8%
7.0%
6.8%
COF (annualised)
2.6%
2.9%
2.9%
NIM (annualised)
4.4%
4.4%
4.3%
4.0%
4.5%
Credit cost (annualised)
1.6%
0.9%
1.1%
1.0%
1.4%
Risk-adj NIM
2.9%
3.5%
3.2%
3.3%
3.5%
LDR
90.6%
97.4%
95.3%
LLR
7.5%
5.7%
5.7%
CASA ratio
70.2%
71.0%
70.1%
Monthly CIR
41.5%
44.3%
44.6%
B/S ROAE (annualised)
13.2%
15.9%
13.7%
B/S ROAA (annualised)
1.9%
2.3%
2.0%
Loan-to-CASA
128.1%
136.6%
137.5%
Source: Company data, Verdhana research
Fig. 2: BBNI Balance sheet
BBNI - B/S IDRbn
Aug-23
Jul-24
Aug-24
M-M
Y-Y
YTD-24
YTD-23
Total assets IDRbn
946,920
1,020,252
1,024,613
0.4%
3.5%
-2.3%
-5.1%
Gross Loans IDRbn
652,012
718,663
710,480
-1.1%
10.1%
3.3%
1.5%
LLR IDRbn
48,816
41,166
40,350
-2.0%
-17.4%
-14.0%
-2.7%
Net loans IDRbn
603,196
677,497
670,130
-1.1%
12.3%
4.5%
1.8%
Deposits
719,503
737,509
745,262
1.1%
-1.6%
-7.0%
-5.7%
- CA IDRbn
281,741
285,126
283,145
-0.7%
-5.8%
-17.5%
-10.3%
- SA IDRbn
223,236
238,803
239,565
0.3%
4.3%
3.7%
-7.7%
- TD IDRbn
214,526
213,580
222,552
4.2%
-2.1%
-2.2%
3.7%
CASA IDRbn
504,977
523,929
522,710
-0.2%
-1.4%
-9.0%
-9.2%
Equities IDRbn
137,554
147,793
150,406
1.8%
11.6%
3.1%
4.4%
Other EAs
170,661
162,376
169,141
4.2%
-18.2%
-22.2%
-20.9%
Other EAs as % of total EAs
19.2
17.1
17.8
12MMA Other EAs % of total EAs
21.8
19.5
19.0
Source: Company data, Verdhana research
INVESTMENT RATINGS
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