BBNI released its bank-only YTD Oct24 results with net profit of IDR18.1tn (+4% y-y), accounting for 85% of our FY24F projection, largely driven by management’s efforts to lower credit costs (CoC) (-21% y-y). At the operating level, we see some margin improvements that have resulted in bank-only NIMs hovering at ~4.4% in recent months (up from sub-4% in early months of 2024). We attribute these to: 1) improving asset yields (in part USD loan repricing of ~50bps in Oct24); and 2) a more prudent deposit base by releasing expensive excess corporate deposits (granted, this has resulted in rising LDR of 96% for the bank. These have translated into YTD NII of IDR32.3tn (-5% y-y). While this is lower on a y-y basis, the monthly NII growth trend has shown an upward trajectory. For Oct24, the bank has booked payment of ~IDR90bn from Waskita (WSKT, Not rated) as well as USD loan repricing of ~50bp.

Further out, with funding costs potentially stabilized, we expect steadier NIMs in 2025. This should translate into NII growth in 2025, in our view. Thereby, this should improve the earnings profile for the bank (from 2024’s, which has relied on lower CoC to drive up earnings).

On the balance sheet, BBNI booked loan growth of +9% y-y (+5% YTD). Deposits for the bank only rose by 3% y-y (-6% YTD), with growth mostly coming from savings accounts (+9% y-y / +4% YTD), resulting in an increase in the CASA ratio to 70.6% (+100bp y-y). With BBNI’s ongoing digital transformation, we expect that CASA ratio will remain elevated. The above translated to a loans-to-deposits ratio (LDR) of 96.1% in 3Q24 (+520bp y-y).

Please refer to the tables and charts that follow for more details on BBNI’s bank-only YTD Oct-24 results.

Post results, we maintain our Buy rating on the stock. If the latest NIM trend persists, we expect BBNI to deliver a better earnings profile in 2025 (thereby minimizing future earnings risks).

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. 2: BBNI - Margin trend %

Fig. 3: BBNI yield vs growth trends %

Fig. 6: BBNI LLR vs 12MMA WO %

Fig. 7: BBNI LLR %

Fig. 8: BBNI – ROAA trend (%)

Fig. 9: BBNI – ROAE trend (%)

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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Nicholas Santoso (nicholas.santoso@verdhana.id)

Erwin Wijaya (erwin.wijaya@verdhana.id)