We recently lowered our FY25F-27F earnings projections for Bank Mandiri (BMRI) by 2-9% primarily to reflect the challenging macroeconomic environment (slow money supply, tight liquidity and high credit risks). We believe these conditions will likely persist through the rest of 2025F, albeit we expect higher government spending in 2H25F in order to rejuvenate economic growth. Hence, it comes as no surprise to us when BMRI reported flat y-y YTD May-25 PPOP and profit of IDR27.9tn and IDR19.7tn, respectively. Given the above, we see limited catalysts for the stock in the near term. Having said this, on a long-term basis, we think BMRI will maintain its dominant position in the Indonesia banking sector.

Bank-only May-25 results summary

For May-25, net interest income stood at IDR6.3tn (-1% m-m and y-y), with gross interest income of IDR10.3tn (+3% m-m; +11% y-y), and gross interest expenses of IDR4.0tn (+9 m-m; +36% y-y). This brings YTD May-25 NII to IDR31.7tn (+4% y-y). Meanwhile, PPOP slipped slightly to IDR6.2tn (+21% m-m; -1% y-y), bringing YTD May-25 PPOP to IDR27.9tn (-1% y-y). In May-25, BMRI booked credit costs of IDR0.8tn (implying up 70bp vs up 80bp in May-24). This brings YTD May-25 CoC to IDR3.8tn (-6% y-y) – implying YTD CoC of 70bp (-20bp y-y). As a result, BMRI’s implied YTD NIM and risk-adjusted NIM stood at 4.3% (-30bp y-y) and 3.8% (-20bp y-y), respectively. So far, we have not seen any meaningful asset yield uplift despite still relatively tight liquidity in the banking system. Bank-only May-25 net profit reached IDR4.5tn (+26% m-m; -2% y-y), bringing YTD May-25 profit to IDR19.7tn (flat y-y). Overall, the implied balance sheet ROAA stood at 2.8%, with balance sheet ROAE of 23%.

On the balance sheet, BMRI booked loan growth of 14% y-y (flat YTD) while deposits grew 9% y-y (+6% YTD), with growth coming mostly from Time Deposits (TD) up 20% y-y / up 20% YTD. Current Account (CA) and Savings Account (SA) also grew 4% y-y (+5% YTD) and 8% y-y (-1% YTD), resulting in a CASA ratio of 77.6% and LDR of 93.0% (vs 88.8% in May-24). Loan-Loss-Reserve (LLR) stood at 3.0% (-60bp y-y / +10bp YTD). This suggests a better earnings profile for the bank (i.e., it does not have to rely on a lower LLR to boost profits).

Valuation and risks

Our TP of IDR7,300 is based on a DuPont analysis, with key parameters as follows: 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%. Our TP implies 2.3x FY25F P/B (vs current price valuation of 1.6x) and 12.2x FY25F P/E (vs current price valuation of 8.4x). Risks include worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

Fig. 2: BMRI – YTD y-y performance %

Fig. 3: BMRI – 12MMA CoC vs 12MMA WO %

Fig. 4: BMRI – LLR vs 12MMA WO %

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)