Major Indonesia banks (BBCA/BMRI/BBRI/BBNI/BRIS) have published their bank-only Jan-25 results, which broadly showed mixed results. Specifically, asset yields have improved while funding costs have stabilized (although liquidity in the banking system has remained tight). Indeed, the average monthly cost of funding (CoF) of these major banks has been hovering at ~2.6% (p.a.). With stable funding costs, we expect more stable net interest margins (NIM) for these banks, which would result in better core earnings visibility (i.e., PPOP). And alongside the potential SRBI net maturities in 1H25F of ~IDR210tn, we anticipate some liquidity injection in the banking sector (albeit some of these maturies may be the unwinding of arbitrage). Combined with BI’s likely stable rates, we think the funding costs of major banks could remain stable IN 1H25F. As of Jan-25, the average monthly NIM of major banks continued to show a stable rate of 5.2%. We believe this should be reflected in some FY25F earnings improvement for these banks, thereby reducing downside risks (that may arise from loan downgrades).

Based on the results of these major banks, BBCA, BMRI and BRIS continue to be our preferred banking stocks. These banks have continued to see superior loan growth (primarily driven by their corporate customers as well as better funding costs, particularly for saving deposits). Indeed, they have also demonstrated the most visible growth in saving deposits. These reflect its successful strategy to capture business from downstream value chains with low funding costs.

We believe BBRI needs to “clean up” its excess lending made in 2022-23, mainly in the mass-market segments (ultra-micro / micro / Permodalan Nasional Madani [PNM, unlisted]), and more write-offs are expected in 2025-26F. However, we believe that the pace and amount of these write-offs should moderate as the bank and its subsidiaries continue to tighten their underwriting criteria before CoC normalizes to a level of ~2.8-3.0% from 2028F onwards (higher-for-longer than management expectations).

Summary of Jan-2025 results

Below is a summary of major banks’ Jan-25 results. While we still see largely tight liquidity in the banking system, we have seen a more stable funding cost trend (hence NIMs). While still in the early days, we think near-term funding costs could remain largely unchanged, and these could become near-term earnings drivers for banks.

YTD Jan-25 net interest income from major banks +2% y-y

• BMRI +11% y-y

• BBCA +7% y-y

• BBNI +2% y-y

• BBRI -8% y-y

YTD Jan-25 PPOP from major banks +3% y-y

• BBCA +12% y-y

• BMRI +3% y-y

• BBNI +1% y-y

• BBRI -2% y-y

YTD Jan-25 CoC for major banks at 2.1% (+100bp y-y)

• BBRI CoC of 5.6% (+360bp y-y) — as BBRI continues writing off NPLs in small and/or micro segments

• BBCA CoC of 0.8% (+50bp y-y)

• BBNI CoC of 0.8% (-30bp y-y)

• BMRI CoC of 0.5% (-20bp y-y)

YTD Jan-25 implied risk-adjusted NIM for major banks at 3.7%

• BBCA 5.5% (-10bp y-y) as NIM @ 6.0% (+20bp y-y)

• BMRI 4.1% (flat y-y) as NIM @ 4.5% (-10bp y-y)

• BBNI 3.2% (+20bp y-y) as NIM @ 3.8% (flat y-y)

• BBRI 2.3% (-300bp y-y) as NIM @ 6.2% (-50bp y-y)

YTD Jan-25 profit for major banks -15% y-y

• BBNI +10% y-y

• BBCA +6% y-y

• BMRI +4% y-y

• BBRI -58% y-y

On the balance sheet, loan growth was up +12% y-y; for BMRI +18% y-y; for BBCA +15% y-y; for BBNI +10% y-y; for BBRI +5% y-y. In terms of LLR, BBRI maintained at ~6.0% (down from 6.5% in Jan-24), followed by BBNI at ~5.1% (6.9%), BBCA at ~3.7% (4.3%) and BMRI at ~3.0% (3.8%).

On deposits, overall deposits were up +4% y-y; for BMRI +15% y-y; for BBCA +2% y-y; for BBNI flat y-y; and for BBRI -2% y-y. A closer examination shows that the more important saving deposits (compared with current accounts or time deposits) still recorded healthy growth of +7% y-y, with BMRI posting the highest y-y growth of +13% / BBNI +10% / BBCA +5% / BBRI +3%. Headline LDR for these banks remained at 90.3% in Jan-25 (a slight uptick from 85.1% in Jan-24).

Valuations and risks

BBCA — We derive our TP of IDR12,600 using DuPont analysis with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 0.8x and a CAR-adjusted ROAE of 24.5%. Our TP implies 5.4x FY25F P/B (vs current price valuation of 4.2x) and a FY25F P/E of 26.0x (vs current price valuation of 21.0x). Key downside risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BMRI — We derive our TP of IDR7,600 based on a DuPont analysis, assuming a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 11.0%, beta 1.05x and a CAR-adjusted ROAE of 19.5%. We also use 2025F book as reference. The implied multiples at our TP are 2.3x 2025F book and 12.4x 2025F earnings (compared to current multiples of 2.5x and 13.7x, respectively). Key risks to our view are worsening macroeconomic trends, unfavorable regulatory changes, tighter liquidity competition (which would increase funding costs), worsening credit quality (which would raise credit costs), and higher opex.

BBRI — Our TP of IDR5,000 is based on DuPont analysis, with a risk-free rate of 6.5%, an equity risk premium of 7.8%, ROE growth of 9.3%, a beta of 0.85x and a CAR-adjusted ROAE of 18.0%. We also use 2025F book value as a reference. The implied multiples at our TP are 2.3x 2025F BVPS and 12.5x 2025F EPS. Downside risks include worsening macroeconomic trends, unfavorable regulatory changes and tighter liquidity competition which could increase funding costs. Changes in management may affect the bank’s write-off policies and thus, credit costs. This would ultimately affect the bank’s near-term earnings, in our view.

BBNI — We derive our TP of IDR6,250 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 1.3x 2025F book and 10.6x 2025F earnings (compared to current multiples of 1.0x and 8.1x, 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.

BRIS – We derive our TP of IDR3,800 using DuPont methodology, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 1.2x and a CAR-adjusted ROAE of 18.1%. We have also used 2025F book value in deriving our TP. Our TP implies a FY25F P/B of 3.4x and a FY25F P/E of 21.5x. Risks are worsening macroeconomic trends, unfavorable regulatory changes, tighter liquidity competition that could increase funding costs, worsening credit quality that could raise credit costs, material management changes, and/or persistently high opex.

Fig. 1: Gross SRBI maturities

Fig. 2: Net liquidity

Fig. 4: Loan growth – Jan-25 y-y %

Fig. 5: Loan growth – YTD Jan-25 %

Fig. 6: NII YTD – Jan-25 y-y %

Fig. 7: PPOP – YTD Jan-25 y-y %

Fig. 8: CoC YTD Jan-25 y-y %

Fig. 9: NP – YTD Jan-25 y-y %

Fig. 10: Bank-only NIM %

Fig. 14: Bank-only NIM %

Fig. 15: Major banks – NIM vs LDR trends %

Fig. 16: Major banks – NIM vs LDR trends

Fig. 17: BRIS – NIM vs LDR (RH) trends %

Fig. 18: Bank-only CoC %

Fig. 19: CoF comparison %

Fig. 20: Bank-only LLR %

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)