BBTN reported 4Q24 net profit (NP) of IDR925bn (+59% q-q; -22% y-y). This brought FY24 NP to IDR3.0tn (-14% y-y), below our estimates, which we attribute to the bank’s 20% y-y decline in 4Q24 PPOP to IDR1.9tn (but up 67% q-q) despite increased mortgage demand. Longer term, we continue to like the bank’s prospects, particularly its mass market mortgage segment which we think is a long-term growth driver for BBTN. We maintain our Neutral rating on the stock with TP of IDR1,550.

4Q24 results summary

• Net interest income (NII) reached IDR2.8tn (-2% q-q; -20% y-y), bringing FY24 NII to IDR11.7tn (-14% y-y) and accounting for 77% of our FY2024 estimates. We attribute the decline to higher interest expenses at IDR17.8tn (+22% y-y), which resulted in NIM of 2.9% (+20bp q-q; -60bp y-y). PPOP stood at IDR1.9tn (+67% q-q; -20% y-y), bringing FY24 PPOP to IDR5.9tn (-29% y-y) and accounting for 65% of our FY2024 projections. Net profit came in at IDR925bn (+59% q-q; -22% y-y) in the quarter, bringing FY24 NP to IDR3.0tn (-14% y-y) and accounting for 81% of our FY24 projections.

• On the balance sheet, loan growth was relatively flat q-q and +7% y-y, leading to total gross loans of ~IDR358bn in 4Q24. Deposits grew 3% q-q and 9% y-y to ~IDR382bn in the quarter. These resulted in a LDR of 93.8%.

Valuation and risks

Our TP of IDR1,550 is based on a DuPont analysis using 2024F book as a reference, assuming a risk-free rate of 6.3%, market risk premium of 7.6%, beta of 1.32x and a CAR-adjusted ROAE of 14.13%. Our TP implies 0.66x 2024F PBV (vs. current valuation of 0.42x). Upside/downside risks include better/worse-than-expected asset quality as well as better/less favorable government stimulus program, particularly for eligible borrowers, and higher/lesser equity raising would translate into upside/downside risks on the stock. We prefer major banks such as BBCA IJ and BMRI IJ, all rated Buy.

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. 

Erwin Wijaya (erwin.wijaya@verdhana.id)