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Bank Tabungan Negara Persero (BBTN IJ) (Neutral) - Earnings update; maintain Neutral, TP cut to IDR 980

Bank Tabungan Negara Persero (BBTN IJ) (Neutral) - Earnings update; maintain Neutral, TP cut to IDR 980

Banks EW 253 11th Mar, 2025

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Earnings update; maintain Neutral, TP cut to IDR 980

We revise earnings for FY25-26F by ~13-14% and introduce FY27F forecast year

We believe that small-to-mid-sized Indonesia banks will continue to face pressures from the major banks. Post FY24 results, BBTN demonstrated soft performance despite increased mortgage demand. The bank reported 4Q24 net profit (NP) of IDR925bn (+59% q-q; -22% y-y), bringing FY24 NP to IDR3.0tn (-14% y-y), below our estimate, which we attribute to the bank’s 20% y-y decline in 4Q24 PPOP to IDR1.9tn (but up 67% q-q). For 2025, management has guided loan and deposit growth of 7-8% and 8-9%, respectively. It expects credit cost (CoC) of 1.0-1.1% and gross NPL of below 3%. Longer term, we still like the bank’s prospects, particularly in providing mortgages to the mass-market segment. In our view, this is a long-term growth driver for BBTN. We maintain our Neutral rating on the stock with a revised TP of IDR 980 (from IDR1,550).

Earnings changes summary

We update our earnings projections for FY25F and FY26F, as well as add FY27F as a new forecast year. Our earnings changes are primarily driven by: 1) the current banking system conditions (tight liquidity); and 2) lower loan and deposit projections of ~-5-7% and ~-2%, respectively. Post adjustments, we project BBTN’s capital adequacy ratio (CAR) to be 17.6% (-80bp from prior projections) in FY25F. The implied ROAE for FY25F would be 10.7% (previously 12.0%).

Valuation and risks

Our new TP of IDR 980 is still based on DuPont analysis with key parameters: assuming a risk-free rate of 6.5% (up from 6.3%), equity risk premium of 7.8% (from 7.6%), beta of 1.3x (from 1.28x) and a CAR-adjusted ROAE of 12.07% (down from 14.13% due to lower earnings). Our new TP implies 0.39x 2025F P/B (vs current valuation of 0.3x). Upside/downside risks include better/worse-than-expected asset quality as well as better/less favorable government stimulus programs 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, both rated Buy.

Year-end 31 DecFY24FY25FFY26FFY27F
Currency (IDR)ActualOldNewOldNewOldNew
PPOP (bn)5,7549,9987,30510,9957,91708,296
Reported net profit (bn)3,0074,1423,6164,5543,93804,062
Normalised net profit (bn)3,0074,1423,6164,5543,93804,062
FD normalised EPS214.28295.15257.63324.50280.59289.42
FD norm. EPS growth (%)-14.211.820.29.98.93.1
FD normalised P/E (x)4.0–3.3–3.0–3.0
Price/adj. book (x)0.4–0.3–0.3–0.3
Price/book (x)0.4–0.3–0.3–0.3
Dividend yield (%)–––––––
ROE (%)9.512.010.712.010.710.3
ROA (%)0.70.80.70.80.70.7
Source: Company data, Verdhana estimates

Key data on Bank Tabungan Negara Persero

Profit and loss (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Interest income
28,281
29,542
32,659
34,723
36,783
Interest expense
-14,851
-18,049
-19,319
-20,682
-22,225
Net interest income
13,430
11,493
13,340
14,041
14,558
Net fees and commissions
1,096
1,072
1,152
1,238
1,331
Trading related profits
0
0
0
0
0
Other operating revenue
2,795
3,504
3,500
3,750
4,000
Non-interest income
3,891
4,576
4,652
4,988
5,331
Operating income
17,321
16,069
17,992
19,029
19,888
Depreciation
-490
-527
-526
-506
-513
Amortisation
0
0
Operating expenses
-4,538
-5,290
-5,599
-5,930
-6,286
Employee share expense
-4,142
-4,497
-4,562
-4,676
-4,793
Pre-provision op profit
8,152
5,754
7,305
7,917
8,296
Provisions for bad debt
-3,765
-1,981
-2,785
-2,994
-3,219
Other provision charges
0
0
Operating profit
4,386
3,773
4,520
4,922
5,077
Other non-op income
0
0
0
Associates & JCEs
0
0
Pre-tax profit
4,386
3,773
4,520
4,922
5,077
Income tax
-879
-766
-904
-984
-1,015
Net profit after tax
3,507
3,007
3,616
3,938
4,062
Minority interests
0
0
0
0
0
Other items
0
0
0
0
0
Preferred dividends
0
0
0
0
0
Normalised NPAT
3,507
3,007
3,616
3,938
4,062
Extraordinary items
0
0
Reported NPAT
3,507
3,007
3,616
3,938
4,062
Dividends
Transfer to reserves
3,507
3,007
3,616
3,938
4,062
Growth (%)
Net interest income
-10.4
-14.4
16.1
5.3
3.7
Non-interest income
127.6
17.6
1.7
7.2
6.9
Non-interest expenses
6.6
16.6
5.8
5.9
6.0
Pre-provision earnings
6.1
-29.4
27.0
8.4
4.8
Net profit
15.2
-14.2
20.2
8.9
3.1
Normalised EPS
15.2
-14.2
20.2
8.9
3.1
Normalised FDEPS
15.2
-14.2
20.2
8.9
3.1
Loan growth
12.6
8.4
8.0
8.0
7.9
Interest earning assets
9.1
7.0
9.8
7.8
7.8
Interest bearing liabilities
9.7
7.4
9.1
7.4
7.4
Asset growth
9.1
7.0
8.9
7.4
7.3
Deposit growth
8.6
9.2
8.3
7.5
7.5
Source: Company data, Verdhana estimates
Balance sheet (IDRbn)
As at 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Cash and equivalents
2,127
2,106
6,175
2,565
4,230
Inter-bank lending
0
0
Deposits with central bank
18,146
22,740
24,630
26,478
28,464
Total securities
41,177
61,014
60,538
65,538
65,538
Other int earning assets
32,763
10,610
20,949
25,949
30,949
Gross loans
333,698
357,973
384,821
413,682
444,709
Less provisions
-15,592
-13,057
-12,305
-11,496
-10,626
Net loans
318,106
344,916
372,516
402,186
434,082
Long-term investments
0
0
0
0
0
Fixed assets
8,118
9,176
7,471
7,149
6,819
Goodwill
0
0
0
0
0
Other intangible assets
0
0
0
0
0
Other non IEAs
18,313
19,053
19,053
19,053
19,053
Total assets
438,750
469,615
511,332
548,918
589,136
Customer deposits
349,584
381,654
413,383
444,387
477,716
Bank deposits, CDs, debentures
115
101
110
118
127
Other int bearing liabilities
51,147
48,667
55,934
59,655
63,654
Total int bearing liabilities
400,846
430,423
469,427
504,159
541,497
Non-int bearing liabilities
7,425
6,620
6,620
6,620
6,620
Total liabilities
408,271
437,043
476,047
510,779
548,117
Minority interest
0
0
0
0
0
Common stock
11,436
11,436
11,436
11,436
11,436
Preferred stock
0
0
Retained earnings
3,658
3,164
3,077
3,129
3,209
Reserves for credit losses
0
0
0
0
0
Proposed dividends
0
0
0
0
0
Other equity
15,385
17,972
20,772
23,573
26,374
Shareholders' equity
30,479
32,572
35,285
38,139
41,019
Total liabilities and equity
438,750
469,615
511,332
548,918
589,136
Non-perf assets
10,049
11,318
12,167
13,079
14,060
Balance sheet ratios (%)
Loans to deposits
95.5
93.8
93.1
93.1
93.1
Equity to assets
6.9
6.9
6.9
6.9
7.0
Asset quality & capital
NPAs/gross loans (%)
3.0
3.2
3.2
3.2
3.2
Bad debt charge/gross loans (%)
1.13
0.55
0.72
0.72
0.72
Loss reserves/assets (%)
3.55
2.78
2.41
2.09
1.80
Loss reserves/NPAs (%)
155.2
115.4
101.1
87.9
75.6
Tier 1 capital ratio (%)
15.6
15.5
15.6
15.7
15.8
Total capital ratio (%)
19.0
17.6
17.6
17.5
17.5
Per share
Reported EPS (IDR)
249.88
214.28
257.63
280.59
289.42
Norm EPS (IDR)
249.88
214.28
257.63
280.59
289.42
FD norm EPS (IDR)
249.88
214.28
257.63
280.59
289.42
DPS (IDR)
0.00
0.00
0.00
0.00
0.00
PPOP PS (IDR)
580.82
410.02
520.52
564.10
591.13
BVPS (IDR)
2,171.74
2,320.85
2,514.20
2,717.51
2,922.74
ABVPS (IDR)
2,171.74
2,320.85
2,514.20
2,717.51
2,922.74
NTAPS (IDR)
2,171.74
2,320.85
2,514.20
2,717.51
2,922.74
Valuations and ratios
Reported P/E (x)
3.4
4.0
3.3
3.0
3.0
Normalised P/E (x)
3.4
4.0
3.3
3.0
3.0
FD normalised P/E (x)
3.4
4.0
3.3
3.0
3.0
Dividend yield (%)
–
–
–
–
–
Price/book (x)
0.4
0.4
0.3
0.3
0.3
Price/adjusted book (x)
0.4
0.4
0.3
0.3
0.3
Net interest margin (%)
3.40
2.69
2.88
2.79
2.68
Yield on assets (%)
7.16
6.92
7.05
6.89
6.77
Cost of int bearing liab (%)
3.88
4.34
4.29
4.25
4.25
Net interest spread (%)
3.28
2.58
2.76
2.64
2.52
Non-interest income (%)
22.5
28.5
25.9
26.2
26.8
Cost to income (%)
52.9
64.2
59.4
58.4
58.3
Effective tax rate (%)
20.0
20.3
20.0
20.0
20.0
Dividend payout (%)
0.0
0.0
0.0
0.0
0.0
ROE (%)
12.4
9.5
10.7
10.7
10.3
ROA (%)
0.83
0.66
0.74
0.74
0.71
Operating ROE (%)
15.6
12.0
13.3
13.4
12.8
Operating ROA (%)
1.04
0.83
0.92
0.93
0.89
Source: Company data, Verdhana estimates
Company profilePT Bank Tabungan Negara (Persero) Tbk ("State Savings Bank"), trading as BBTN IJ, is an Indonesian commercial bank best known as a mortgage bank, Its products include banks accounts (savings, current, and time deposit), loans (consumer, corporate, and mortgage loans) and Sharia-compliant banking services.
Valuation MethodologyWe derive our TP of IDR 980 using Dupont methodology, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 1.3x, and a CAR-adj ROAE of 12.07%. We have also used 2025F book as reference. Our TP implies 0.39x FY25F P/B. The benchmark for the stock is the JCI.
Risks that may impede the achievement of the target priceUpside/downside risks include better/worse-than-expected asset quality as well as better/less favourable government stimulus program particularly for eligible borrowers and higher/lesser equity raising would translate into upside/downside risks on the stock.
ESGBBTN has initiated various programs to meet ESG commitments, mainly through its Corporate Social Responsibility Program and the Partnership and Community Development Program. BBTN implements a Sustainable Finance Action Plan that aligns with Sustainable Finance regulations; a part of the plan includes implementing ESG risk management for lending process and encouraging green finance products. The company also actively participates in the government’s Sustainable Development Goals, specifically through home ownership financing products. Further, BBTN carries out commitment to environmental safety by creating an environment-friendly infrastructure in its Headquarters area and implementing reforestation in all regional offices. BBTN implements various community social responsibility programs, including the Education and Financial Literacy Program and the Community Development Program. Additionally, BBTN implements GCG principles and carries out various programs and trainings to encourage fair operations, such as the Socialization Program for Increasing Awareness of Fraud.

Fig. 1: BBTN earnings forecast changes

Source: Company data, Verdhana estimates

 

Fig. 2: BBTN loan assumptions

Source: Company data, Verdhana estimates

 

Fig. 3: BBTN valuation

BBTN - TP derivationNEWOLDRemarks
Risk free rate %          6.5            6.3
Equity risk premium %          7.8            7.6
Beta          1.3          1.28
Cost of capital %      16.87        15.98
3-yr FY22-24F growth rate %        9.00        10.00
CAR-adj ROAE %      12.07        14.13
Target P/B x         0.39          0.69
Target price (IDR)         981        1,631Rounded to IDR980 (down from IDR1,650)
Target price's FY25F P/E        3.81          6.18
Target price's FY25F P/B        0.39          0.69
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
Neutral
Target price
Reduced from IDR 1,550
IDR 980
Closing price
7 March 2025
IDR 855
Implied upside+14.6%
Market Cap (USD mn)729.2
ADT (USD mn)1.7

Relative performance chart



Source: LSEG, Verdhana
M cap (USDmn)
729.2
Free float (%)
40.0
3-mth ADT (USDmn)
1.7
(%)
1M
3M
12M
Absolute (IDR)
-11.4
-29.3
-37.4
Absolute (USD)
-11.5
-31.3
-39.8
Rel to Jakarta Stock Exchange Composite Index
-9.8
-19.2
-27.4

Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

Tags: BANKS, BBTN, BBTN JK, BBTN IJ, Erwin Wijaya
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