BMRI posted consolidated 1H25 results with a profit of IDR11.3tn (-15% q-q; -19% y-y), registering ~46% of our FY25F projection. During 2Q25, the bank observed persistently tight liquidity in the banking sector, while loan repricing remained slow on competition for high-quality borrowers as well as asset recoveries in the prior year. The bank also recorded a lower Secured Overnight Funding Rate (SOFR) trend, which affected USD lending rates. Although the ministry of finance (MoF) had offered a financial stimulus of ~IDR200tn for state-owned enterprise (SOE) banks, we do not expect liquidity in the banking sector to immediately and significantly improve for the remainder of 2025F. Still, within the Indonesia banking sector, the bank is one of our top picks, given that BMRI has the second-lowest funding costs in the sector – primarily reflecting the bank’s growing importance as a transactional bank.

A key highlight of the results was an increase in the bank’s non-interest expense from IDR15.5tn in 1Q25 to IDR18.3tn in 2Q25 (+18% q-q; +41% y-y) / +29% YTD. Management attributed a large chuck of the jump to promotion and other expenses in 2Q25. On the flip side, the bank’s provisioning expense declined from IDR3.6tn in 1Q25 to IDR2.6tn in 2Q25 (-27% q-q; -20% y-y) / -9% YTD, which reflects improving assets quality as evidenced by declining LAR from 7.8% in 2Q24 and 7.4% in 1Q25 to 7.1% in 2Q25.

During the call, BMRI management revised the bank’s guidance for FY25. Loan growth is now expected to be ~8-10% (down from previously 10-12%); NIM has also been revised down from 5.0-5.2% to 4.8-5.0% and CoC is now guided at 0.8-1.0% in FY25 from 1.0-1.2% previously. These revisions are owing to the soft macroeconomic conditions (subdued loan demand and tight liquidity).

2Q25 results summary

· Net interest income came in at IDR26.5tn (+2% q-q; +4% y-y), bringing 1H25 NII to IDR52.4tn (+5% y-y) – implying ~49% of our FY25F projection. This brings NIM to 5.0% (+20bp q-q; -10bp y-y), in-line with the guidance of ~4.8-5.0%.

· PPOP reached IDR18.0tn (-17% q-q; -20% y-y), bringing 1H25 PPOP to IDR39.7tn (-9% y-y) – implying ~45% of our FY25F projection. Credit costs (CoC) were settled at 60bp (-30bp q-q and y-y). Overall CoC is slightly better than the guidance for FY25 of ~0.8-1.0% (or 80-100bp).
· Profit came in at IDR11.3tn (-15% q-q; -19% y-y), bringing 1H25 profit to IDR24.5tn (-8% y-y) – representing ~46% of our FY25F projection. This brings ROAE to 15.4% (-220bp q-q; -470bp y-y) – still healthy, in our view. We expect profit growth to slow in 2025F given current macroeconomic conditions.
· On the balance sheet, BMRI reported loan and deposit growth of +11% y-y, respectively. Loan growth was predominantly from commercial (+18% y-y), micro (+12% y-y) and corporate (+10% y-y). CASA ratio remained elevated at 74% (+140bp q-q; -100bp y-y) and LDR at 92.8% (-250bp q-q; +30bp y-y). BMRI has one of the largest transactional franchises. Indeed, encouragingly, Savings Accounts (SA) (the cheapest funding cost) continued to rise +9% y-y in the quarter, while Current Accounts (CA) rose by +10% y-y due to Danantara placement.

Overall asset quality remained healthy, with loans-at-risk (LAR) at 7.1% (-30bp q-q; -70bp y-y) and coverage ratio at 54.7%, bringing LLR (Loan-Loss-Reserve) to 3.0% (-10bp q-q; -40bp y-y). Headline Capital Adequacy Ratio (CAR) stood at 19.4% (+90bp q-q; -70bp y-y).

Valuation and risks

We derive our TP of IDR6,500 using DuPont analysis with key parameters as follow: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 11.0%, beta 1.08x and a CAR-adjusted ROAE of 19.0%. Our TP implies 2.1x FY25F P/B (vs 1.5x currently) and 11.3x FY25F P/E (vs 8.1x currently). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

Fig. 1: BMRI— 1H25 summary %