Bank Danamon Indonesia (BDMN IJ) (Neutral) - Post-FY24 adjustments

Post-FY24 adjustments

Maintain Neutral with TP of IDR2,750 (from IDR3,300)

Post FY24 results, we reduce FY25-26F earnings by ~7-14%; maintain Neutral

We expect the Indonesia banking sector to continue to experience liquidity issues in 2025F. However, we believe that within the sector, major banks will continue to dominate. We expect midsized banks, such as BDMN, to experience declining market share (either in terms of loans, assets, or profit). Consequently, we adjust our earnings forecasts and reiterate our Neutral call on the stock with a lower TP of IDR2,750 (from IDR3,300).

Summary of earnings forecast changes

We update our earnings projections for FY25F and FY26F, as well as add FY27F as a new forecast year. Broadly, we have adopted more conservative earnings projections for BDMN, lowering earnings by 7-14%, primarily due to high funding costs (reflecting the overall tight liquidity in the banking system). We project headline profit to reach IDR3.2tn in FY25F (-7% from our previous projection) and IDR3.5tn in FY26F (-14% from our previous estimates). We expect reported ROAEs to decline to 6.2-6.4% in FY25-26F from our previous estimates of 6.6-7.4%. On the balance sheet, we assume gross loans of IDR205tn for FY25F and IDR220tn for FY26F (-2-5% compared to our previous projections). On the deposits side, we assume IDR166tn for FY25F and IDR178tn for FY26F (+4.5-5% compared to our previous projections). As a result, the bank’s implied LDR reaches 124% for FY25-26F.

Valuation and risks

We derive our TP for BDMN based on the DuPont methodology, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 1.20x, a terminal growth rate of 10.0% and a CAR-adjusted ROAE of 13.05%. At our TP, the implied valuation multiples would be 0.51x FY25F book and 8.4x FY25F P/E. Upside/downside risks are an improving/worsening macroeconomic environment, more/less excess liquidity leading to lower/higher funding costs, higher/lower loan growth, as well as an increase in operating costs and/or better/worse trends in credit quality, leading to lower/higher credit costs for the bank.

Year-end 31 Dec	FY24		FY25F		FY26F		FY27F
Currency (IDR)	Actual	Old	New	Old	New	Old	New
PPOP (bn)	8,410	9,694	8,876	10,971	9,537	0	10,430
Reported net profit (bn)	3,179	3,473	3,215	4,060	3,475	0	3,852
Normalised net profit (bn)	3,179	3,473	3,215	4,060	3,475	0	3,852
FD normalised EPS	325.30	355.38	328.94	415.45	355.53		394.11
FD norm. EPS growth (%)	-9.3	2.8	1.1	16.9	8.1		10.9
FD normalised P/E (x)	7.4	–	7.4	–	6.8	–	6.1
Price/adj. book (x)	0.5	–	0.4	–	0.4	–	0.4
Price/book (x)	0.5	–	0.4	–	0.4	–	0.4
Dividend yield (%)	5.2	–	4.7	–	4.8	–	5.1
ROE (%)	6.3	6.6	6.2	7.4	6.4		6.8
ROA (%)	1.4	1.4	1.3	1.6	1.3		1.3

Source: Company data, Verdhana estimates

Key data on Bank Danamon Indonesia

Profit and loss (IDRbn)
Year-end 31 Dec	FY23	FY24	FY25F	FY26F	FY27F
Interest income	20,210	22,789	23,502	24,996	26,721
Interest expense	-4,994	-7,184	-7,292	-7,925	-8,520
Net interest income	15,216	15,605	16,210	17,071	18,201
Net fees and commissions	3,733	3,936	4,283	4,603	4,948
Trading related profits	221	381	400	425	425
Other operating revenue	306	310	325	375	375
Non-interest income	4,260	4,627	5,008	5,403	5,748
Operating income	19,476	20,231	21,218	22,474	23,949
Depreciation	-387	-492	-524	-606	-687
Amortisation	0	0	0	0	0
Operating expenses	-4,779	-4,930	-5,249	-5,579	-5,892
Employee share expense	-6,141	-6,400	-6,569	-6,752	-6,941
Pre-provision op profit	8,170	8,410	8,876	9,537	10,430
Provisions for bad debt	-3,667	-4,491	-4,939	-5,309	-5,707
Other provision charges	0	0	0	0	0
Operating profit	4,503	3,919	3,937	4,228	4,723
Other non-op income	-88	-57	0	0	0
Associates & JCEs	0	0	0	0	0
Pre-tax profit	4,415	3,862	3,937	4,228	4,723
Income tax	-1,036	-893	-904	-977	-1,082
Net profit after tax	3,380	2,970	3,033	3,251	3,640
Minority interests	-154	-112	-118	-127	-138
Other items	278	321	300	350	350
Preferred dividends	0	0	0	0	0
Normalised NPAT	3,504	3,179	3,215	3,475	3,852
Extraordinary items
Reported NPAT	3,504	3,179	3,215	3,475	3,852
Dividends	-1,156	-1,226	-1,113	-1,125	-1,216
Transfer to reserves	2,348	1,953	2,102	2,350	2,636
Growth (%)
Net interest income	7.8	2.6	3.9	5.3	6.6
Non-interest income	8.4	8.6	8.2	7.9	6.4
Non-interest expenses	5.8	3.2	6.5	6.3	5.6
Pre-provision earnings	8.8	2.9	5.5	7.5	9.4
Net profit	6.1	-9.3	1.1	8.1	10.9
Normalised EPS	6.1	-9.3	1.1	8.1	10.9
Normalised FDEPS	6.1	-9.3	1.1	8.1	10.9
Loan growth	19.9	7.8	8.3	6.0	6.0
Interest earning assets	13.5	10.3	6.8	6.8	7.0
Interest bearing liabilities	14.1	13.2	7.1	7.5	7.5
Asset growth	11.9	9.5	6.6	6.9	7.0
Deposit growth	10.8	8.8	10.0	7.5	7.5
Source: Company data, Verdhana estimates

Balance sheet (IDRbn)
As at 31 Dec	FY23	FY24	FY25F	FY26F	FY27F
Cash and equivalents	2,362	2,468	3,091	7,916	13,280
Inter-bank lending	11,166	6,088	6,255	6,438	6,640
Deposits with central bank	5,035	6,382	7,020	7,722	8,495
Total securities	3,261	12,693	12,693	12,693	12,693
Other int earning assets	16,318	18,699	17,764	16,876	16,032
Gross loans	172,859	186,429	204,695	220,047	236,550
Less provisions	-8,900	-9,745	-13,265	-17,155	-21,443
Net loans	163,959	176,684	191,430	202,892	215,107
Long-term investments	81	80	88	114	143
Fixed assets	2,161	2,483	1,986	2,130	2,193
Goodwill	0	0	0	0	0
Other intangible assets	0	0	0	0	0
Other non IEAs	16,963	16,758	17,977	19,325	20,775
Total assets	221,305	242,335	258,305	276,109	295,360
Customer deposits	138,412	150,569	165,626	178,048	191,402
Bank deposits, CDs, debentures	3,032	4,205	4,625	4,972	5,345
Other int bearing liabilities	15,040	22,308	19,348	20,799	22,359
Total int bearing liabilities	156,484	177,082	189,600	203,820	219,106
Non-int bearing liabilities	14,861	13,427	14,769	15,877	17,068
Total liabilities	171,345	190,509	204,369	219,697	236,174
Minority interest	723	758	876	1,002	1,140
Common stock	5,996	5,996	5,996	5,996	5,996
Preferred stock	0	0	0	0	0
Retained earnings	35,236	37,200	39,193	41,542	44,178
Reserves for credit losses	0	0	0	0	0
Proposed dividends	0	0	0	0	0
Other equity	8,005	7,872	7,872	7,872	7,872
Shareholders' equity	49,237	51,068	53,060	55,410	58,045
Total liabilities and equity	221,305	242,335	258,305	276,109	295,360
Non-perf assets	3,070	26,946	28,967	31,139	33,475
Balance sheet ratios (%)
Loans to deposits	124.9	123.8	123.6	123.6	123.6
Equity to assets	22.2	21.1	20.5	20.1	19.7
Asset quality & capital
NPAs/gross loans (%)	1.8	14.5	14.2	14.2	14.2
Bad debt charge/gross loans (%)	2.12	2.41	2.41	2.41	2.41
Loss reserves/assets (%)	4.02	4.02	5.14	6.21	7.26
Loss reserves/NPAs (%)	289.9	36.2	45.8	55.1	64.1
Tier 1 capital ratio (%)	26.3	25.0	24.4	24.0	23.6
Total capital ratio (%)	53.8	51.2	50.1	49.3	48.5
Per share
Reported EPS (IDR)	358.51	325.30	328.94	355.53	394.11
Norm EPS (IDR)	358.51	325.30	328.94	355.53	394.11
FD norm EPS (IDR)	358.51	325.30	328.94	355.53	394.11
DPS (IDR)	118.26	125.48	113.86	115.13	124.44
PPOP PS (IDR)	835.93	860.48	908.12	975.84	1,067.17
BVPS (IDR)	5,037.74	5,225.08	5,428.95	5,669.35	5,939.02
ABVPS (IDR)	5,037.74	5,225.08	5,428.95	5,669.35	5,939.02
NTAPS (IDR)	5,037.74	5,225.08	5,428.95	5,669.35	5,939.02
Valuations and ratios
Reported P/E (x)	6.8	7.4	7.4	6.8	6.1
Normalised P/E (x)	6.8	7.4	7.4	6.8	6.1
FD normalised P/E (x)	6.8	7.4	7.4	6.8	6.1
Dividend yield (%)	4.9	5.2	4.7	4.8	5.1
Price/book (x)	0.5	0.5	0.4	0.4	0.4
Price/adjusted book (x)	0.5	0.5	0.4	0.4	0.4
Net interest margin (%)	8.00	7.34	7.03	6.93	6.91
Yield on assets (%)	10.63	10.72	10.19	10.14	10.14
Cost of int bearing liab (%)	3.40	4.31	3.98	4.03	4.03
Net interest spread (%)	7.23	6.41	6.21	6.12	6.12
Non-interest income (%)	21.9	22.9	23.6	24.0	24.0
Cost to income (%)	58.1	58.4	58.2	57.6	56.4
Effective tax rate (%)	23.5	23.1	23.0	23.1	22.9
Dividend payout (%)	33.0	38.6	34.6	32.4	31.6
ROE (%)	7.3	6.3	6.2	6.4	6.8
ROA (%)	1.67	1.37	1.28	1.30	1.35
Operating ROE (%)	9.4	7.8	7.6	7.8	8.3
Operating ROA (%)	2.15	1.69	1.57	1.58	1.65
Source: Company data, Verdhana estimates

Company profilePT. Bank Danamon Indonesia Tbk. (BDMN) operates as a domestic private bank, which offers a wide range of services in consumer banking, private banking, corporate banking, international operations & trade finance, treasury & foreign exchange, and financial services. In 2002, BDMN started its activities based on Syariah principles. In 2003, BDMN was acquired by Asia Financial (Indonesia) Pte. Ltd., a consortium of Fullerton Financial Holding, a fully owned subsidiary of Temasek Holdings, and Deutsche Bank AG, which took a majority controlling stake. BDMN was listed on Indonesia Stock Exchange in 1989 under Main Board. The bank was founded in 1956 and based in Jakarta, Indonesia.

Valuation MethodologyOur TP of IDR2,750 is derived based on Dupont analysis with a risk-free rate 6.5%, an equity risk premium 7.8%, a CAR-adjusted ROAE of 13.05%, and a beta of 1.2x. At our TP, the implied valuation multiples would be 0.52x FY25F book and 8.4x FY25F P/E. The benchmark index for this stock is the JCI

Risks that may impede the achievement of the target priceKey upside/ downside risks include 1) better/worsening macro developments, 2) higher/ lower loan growth, 3) higher/lower asset yields, 4) lower/ higher deposit rates and 5) lower/ higher NPLs (and, hence, provision charges).

ESGBDMN has initiated various programs to meet ESG commitments, mainly through its Corporate Social Responsibility Program and the Partnership and Community Development Program. BDMN 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, BDMN carries out commitment to environmental safety by creating an environment-friendly infrastructure in its Headquarters area and implementing reforestation in all regional offices. BDMN implements various community social responsibility programs, including the Education and Financial Literacy Program and the Community Development Program. Additionally, Bdmn 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: BDMN – Quarterly results

BDMN IDRmn	4Q23	1Q24	2Q24	3Q24	4Q24	QoQ %	YoY %	YTD-24	YTD-23	YoY %
Int income	5,344,408	5,525,326	5,655,515	5,782,758	5,825,336	0.7	9.0	22,788,935	20,210,346	12.8
Int expense	1,361,817	1,533,338	1,677,115	1,821,391	1,858,269	2.0	36.5	6,890,113	4,737,862	45.4
NII	3,982,591	3,991,988	3,978,400	3,961,367	3,967,067	0.1	(0.4)	15,898,822	15,472,484	2.8

Non-int inc	1,319,423	1,066,644	1,133,197	1,233,436	1,193,451	(3.2)	(9.5)	4,626,728	4,260,095	8.6
Total op. inc	5,302,014	5,058,632	5,111,597	5,194,803	5,160,518	(0.7)	(2.7)	20,525,550	19,732,579	4.0

Non-int exp	2,975,849	2,724,842	3,021,741	3,128,635	3,057,315	(2.3)	2.7	11,932,533	11,334,258	5.3
PPOP	2,326,165	2,333,790	2,089,856	2,066,168	2,103,203	1.8	(9.6)	8,593,017	8,398,321	2.3
Prov	1,019,595	1,216,650	1,242,846	927,457	965,755	4.1	(5.3)	4,352,708	3,705,793	17.5

PBT	1,306,570	1,117,140	847,010	1,138,711	1,137,448	(0.1)	(12.9)	4,240,309	4,692,528	(9.6)
Net income	942,959	831,246	623,621	846,853	877,615	3.6	(6.9)	3,179,335	3,503,882	(9.3)

Total assets	221,304,532	226,561,617	231,916,439	240,383,677	242,334,540	0.8	9.5	9.5	11.9
Gross loans	171,414,271	176,781,788	180,418,986	181,348,508	183,476,475	1.2	7.0	7.0	19.1
Provisions	8,960,742	9,266,136	9,435,716	9,203,393	9,102,139	(1.1)	1.6	1.6	10.0
Net loans	162,453,529	167,515,652	170,983,270	172,145,115	174,374,336	1.3	7.3	7.3	19.6
Deposits	138,411,812	140,872,634	143,598,564	146,441,863	150,569,469	2.8	8.8	8.8	10.8
CASA	71,749,081	68,376,238	65,630,310	63,578,453	62,286,451	(2.0)	(13.2)	(13.2)	(9.4)
TD	66,662,731	72,496,396	77,968,254	82,863,410	88,283,018	6.5	32.4	32.4	45.7
Equities	49,236,617	48,823,939	49,341,578	51,239,994	51,067,632	(0.3)	3.7	3.7	5.1

Source: Company data, Verdhana research

Fig. 2: BDMN – Quarterly ratios

Ratios %	4Q23	1Q24	2Q24	3Q24	4Q24
Yield	10.7	10.6	10.6	10.5	10.4
COF	3.7	3.9	4.2	4.4	4.4
Spread	7.0	6.7	6.4	6.1	6.0
NIM	8.0	7.7	7.4	7.2	7.1
LDR	123.8	125.5	125.6	123.8	121.9
Loan yoy	19.1	18.7	14.1	11.6	7.0
Loan qoq	5.5	3.1	2.1	0.5	1.2
Deposit yoy	10.8	14.1	14.9	14.1	8.8
Deposit qoq	7.8	1.8	1.9	2.0	2.8
CASA ratio	51.8	48.5	45.7	43.4	41.4
CIR	56.1	53.9	59.1	60.2	59.2
CAR	27.5	26.1	25.9	26.1	26.2
ROAE	7.7	6.8	5.1	6.7	6.9
LARs	10.0	10.2	9.9	9.4	8.6
NPL	1.1	1.1	1.0	0.9	0.9
LLR	5.2	5.2	5.2	5.1	5.0
NPL Cov	247	247	251	262	280
CoC bps	244	280	278	205	212

Source: Company data, Verdhana research

Fig. 3: BDMN – Earnings forecast changes

Source: Company data, Verdhana estimates

Fig. 4: BDMN – Loan assumptions

Source: Company data, Verdhana estimates

Fig. 5: BDMN – Valuation

BDMN Dupont TP derivation	New	Remarks
Risk-free rate Rf %	6.50
Equity risk premium k %	7.80
Beta x	1.20
Cost of equity COE %	15.86
Growth %	10.00
CAR-Adj ROAE %	13.05
FY25F PB x	0.52	Using FY25F book
Implied target price IDR	2,720	Rounded to IDR2,750 (Old IDR3,300)
FY25F PER x	8.4

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.

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.

Rating Table

Rating Remains	Neutral
Target price Reduced from IDR 3,300	IDR 2,750
Closing price 7 March 2025	IDR 2,420
Implied upside	+13.6%
Market Cap (USD mn)	1,437.4
ADT (USD mn)	0.1

Relative performance chart

Source: LSEG, Verdhana

M cap (USDmn)	1,437.4
Free float (%)	5.9
3-mth ADT (USDmn)	0.1

(%)	1M	3M	12M
Absolute (IDR)	-4.0	-5.5	-16.0
Absolute (USD)	-4.1	-8.1	-19.3
Rel to Jakarta Stock Exchange Composite Index	-2.4	4.6	-6.0

Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

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

Bank Danamon Indonesia (BDMN IJ) (Neutral) - Post-FY24 adjustments

Post-FY24 adjustments

Key data on Bank Danamon Indonesia

Fig. 1: BDMN – Quarterly results

Fig. 2: BDMN – Quarterly ratios

Fig. 3: BDMN – Earnings forecast changes

Fig. 4: BDMN – Loan assumptions

Fig. 5: BDMN – Valuation

Rating Table

Relative performance chart

Research Analysts

yudi Administrator

Bank Central Asia BBCA IJ - Buy - Solid YTD Jul-24 results

Bank Rakyat Indonesia -BBRI IJ- Buy - Towards more commercial micro

Bank Negara Indonesia BBNI IJ - Buy - Operating 1H24 results were below

Bank Rakyat Indonesia -BBRI IJ- Buy - YTD Jul-24 bank only results - steady progress

Bank Rakyat Indonesia -BBRI IJ- Buy - ROAE uptrend on positive micro trends

Bank Central Asia -BBCA IJ- Buy - Steady growth reiterate Buy new TP IDR13200

Bank Danamon Indonesia (BDMN IJ) (Neutral) - Post-FY24 adjustments

Fig. 1: BDMN – Quarterly results

Fig. 2: BDMN – Quarterly ratios

Fig. 3: BDMN – Earnings forecast changes

Fig. 4: BDMN – Loan assumptions

Fig. 5: BDMN – Valuation

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