BMRI released its bank-only Jul-24 results with monthly earnings of IDR4.6tn (-9% m-m / +3% y-y), bringing YTD Jul-24 headline profit to IDR29.2tn (+7% y-y), largely in line with our FY24F projection (considering that on a consolidated basis we would add 3-4% to the bank-only results). At the operating level, the bank’s headline Jul-24 NII stood at IDR6.5tn (+3% m-m / +1% y-y), bringing YTD NII to IDR43.1tn (+4% y-y). Overall funding costs appear to have stabilized on a m-m basis, with headline Jul-24 CoF standing at 2.5% (+20bp m-m / +40bp y-y), as we see generally stable liquidity (and potentially further improvement toward year-end with upcoming maturities of SRBIs in 4Q24). These have resulted in NIM of 4.8% (+20bp m-m / -60bp y-y), or YTD NIM of 4.7%. Meanwhile, Jul-24 PPOP was IDR6.3tn (-9% m-m largely due to salary adjustments as well as performance bonus payments), bringing YTD Jul-24 PPOP to IDR41.3tn (+6% y-y). Admittedly, monthly results can be volatile; thus, in this report, we also 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. More details on the results are shown in the tables/charts inside this report. Post results, we reiterate our Buy rating on the stock with a TP of IDR8.450.

Bank-only Jul-24 results summary

Jul-24 net interest income stood at IDR6.5tn (+3% m-m; +1% y-y), primarily from: 1) higher gross interest income of IDR9.5tn (+4% m-m; +10% y-y), and 2) lower credit costs of 70bp (vs 110bp in Jul-23). Meanwhile, Jul-24 PPOP declined to IDR6.3tn (-9% m-m; +8% y-y). Overall, the implied balance sheet ROAA stood at 3.1%, with balance sheet ROAE of 23.6%.

On the balance sheet, Mandiri booked loan growth of 23% y-y (+12% YTD Jul24), the highest growth among major banks. We think most of the growth came from the corporate/commercial/SME segments.Thus, we expect that the bank should see FY24F loan growth of ~20% – well ahead of our system-wide loan growth estimate of ~10-12%). We believe that demand for loans will remain elevated (hovering around 8-9% y-y for the system), with demand coming for working capital, capital investment as well as consumption purposes. During our recent meeting, BMRI’s CEO also suggested that future loan growth could continue to be well ahead of systemwide growth, reflecting the bank’s long-term aspiration to maintain, if not increase, its dominance. We think that at the current pace, the bank would cement its status as Indonesia’s largest bank as well as most profitable bank by 2026F (if not 2025F). Its already dominant status could position itself to further gains from projected BI rate cuts before the year-end.

Meanwhile, deposits for the bank also rose by 13% y-y (-1% m-m / +4% YTD), with growth coming mostly from Current Accounts (CA) and Savings Accounts (SA), resulting in a rising CASA ratio of 80.3% (+20bp y-y). This would represent the second-highest CASA ratio for Indonesian banks under our coverages. We attribute BMRI’s high CASA ratio to the bank’s growing transactional franchise. Also, this translated into LDR of 93.7% in Jul-24 (+790bp y-y), suggesting still relatively tight liquidity.

Valuation and risks

We derive our TP of IDR8,450 using DuPont methodology. Key parameters are a risk-free rate of 6.5%, an equity risk premium of 7.8%, a CAR-adjusted ROAE of 19.8% and beta of 1.03x. We have also used 2025F book as reference. Our TP implies a 2.5x FY25F P/B and a 12.4x FY24F P/E – compared to current price valuations of a 2.1x FY25F P/B and a 10.6x FY25F P/E. Key downside risks are worse-than-expected macroeconomic trends, government intervention, tight liquidity competition, and higher credit cost and opex growth.

Fig. 3: BMRI – NIM trend %

Fig. 4: BMRI – CoC vs estimated WO %

Fig. 5: BMRI – Y-Y growth comp %