Major Indonesia banks (BBCA/BMRI/BBRI/BBNI/BRIS) have published their bank-only Feb-25 results, which broadly showed decent results. Specifically, asset yields have improved while funding costs have stabilized (although liquidity in the banking system stays tight). Indeed, the average monthly cost of funding (CoF) of these major banks has been hovering at ~2.4% (p.a.). With stable funding costs, we expect more stable net interest margins (NIMs) for these banks, which would make better core earnings visibility (i.e., PPOP). And alongside the potential SRBI gross maturities in 2Q25F of ~IDR287tn, we anticipate limited liquidity risks in the system (giving rooms for better earnings visibilities for these banks). Combined with BI’s likely stable rates, we think the funding costs of major banks remained stable in 1H25F. As of Feb-25, the average monthly NIM of major banks continued to show a stable trajectory of 5.0%. This should result 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, BMRI, BRIS and BBCA continue to be our preferred banking stocks. These banks have continued to see superior loan growth (primarily driven by its corporate customers as well as better funding costs, particularly for saving deposits). Indeed, they have also demonstrated most visible growth in saving deposits. These reflect its successful strategy to capture business downward 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 Feb-25 results

Below is a summary of major banks’ Feb-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

1. YTD Feb-25 net interest income from major banks +2% y-y

- BRIS +8% y-y

- BMRI +7% y-y

- BBCA +6% y-y

- BBNI +2% y-y

- BBRI -2% y-y

2. YTD Feb-25 PPOP from major banks flat y-y

- BRIS +14% y-y

- BBCA +9% y-y

- BMRI +4% y-y

- BBNI +1% y-y

- BBRI -7% y-y

3.YTD Feb-25 CoC for major banks at 1.7% (-20bp y-y)

- BBRI CoC of 4.4% (flat y-y) — as BBRI continues writing off NPLs in small and/or micro segments

- BRIS CoC of 1.1% (+10bp y-y)

- BBNI CoC of 0.8% (-30bp y-y)

- BMRI CoC of 0.7% (-20bp y-y)

- BBCA CoC of 0.4% (flat y-y)

4. YTD Feb -25 implied risk-adj NIM for major banks at 3.9%

- BBCA 5.4% (+30bp y-y) as NIM @ 5.4% (flat y-y)

- BBRI 4.1% (+230bp y-y) as NIM @ 6.4% (+20bp y-y)

- BRIS 3.9% (-50bp y-y) as NIM @ 4.6% (-40bp y-y)

- BMRI 3.4% (-40bp y-y) as NIM @ 4.0% (-60bp y-y)

- BBNI 3.0% (+10bp y-y) as NIM @ 3.5% (-10bp y-y)

5. YTD Feb -25 profits for major banks flat y-y

- BRIS +10% y-y

- BBNI +8% y-y

- BBCA +8% y-y

- BMRI +6% y-y

- BBRI -18% y-y

On the balance sheet, loan growth was up +12% y-y (flat YTD); for BMRI +18% y-y (flat YTD); for BRIS +16% y-y (+1% YTD); for BBCA +14% y-y (+1% YTD); for BBNI +10% y-y (-3% YTD); for BBRI +5% y-y (flat YTD). In terms of LLR, BBRI maintained at ~6.0% (down from 6.9% in Feb-24), followed by BBNI at ~5.2% (6.9%), BRIS at ~3.7% (4.1%), BBCA at ~3.6% (4.2%) and BMRI at ~3.0% (3.8%).

On deposits, overall deposits were up +6% y-y; for BMRI +17% y-y; for BRIS +10% y-y; for BBCA +4% y-y; for BBNI +1% y-y; and for BBRI -1% y-y. A closer examination shows that the more important Saving Deposits (than Current Account or Time Deposits) still recorded healthy growth of +8% y-y with BMRI posting the highest growth of +15% y-y / BBNI +10% / BRIS +10% / BBCA +6% / BBRI +3%. Headline LDR for these banks remained at 89.7% in Feb-25 (a slight uptick from 84.7% in Feb-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. 2: Loan growth – Feb-25 y-y %

Fig. 3: Loan growth – YTD Feb-25 %

Fig. 4: Deposit growth – Feb-25 y-y %

Fig. 5: Deposit growth – YTD Feb-25 %

Fig. 6: NII YTD – Feb-25 y-y %

Fig. 7: PPOP – YTD Feb-25 y-y %

Fig. 8: CoC – YTD Feb-25 y-y %

Fig. 9: NP – YTD Feb-25 y-y %

Fig. 10: BBCA – YTD y-y performance %

Fig. 11: BMRI – YTD y-y performance %

Fig. 12: BBRI – YTD y-y performance %

Fig. 13: BBNI – YTD y-y performance %

Fig. 14: BRIS – YTD y-y performance %

Fig. 15: BBCA – LLR vs 12MMA WO %

Fig. 16: BBCA – 12MMA CoC vs 12MMA WO %

Fig. 17: BMRI – LLR vs 12MMA WO %

Fig. 18: BMRI – 12MMA CoC vs 12MMA WO %

Fig. 19: BBRI – LLR vs 12MMA WO %

Fig. 20: BBRI – 12MMA CoC vs 12MMA WO %

Fig. 21: BBNI – LLR vs 12MMA WO %

Fig. 22: BBNI – 12MMA CoC vs 12MMA WO %

Fig. 23: BRIS – LLR vs 12MMA WO %

Fig. 24: BRIS – 12MMA CoC vs 12MMA WO %

Fig. 25: Dividend yield

Fig. 27: Balance sheet summary

Fig. 29: Bank-only NIM %

Fig. 30: Major banks – NIM vs LDR trends %

Fig. 31: Major banks – NIM vs LDR trends

Fig. 32: BRIS – NIM vs LDR (RH) trends %

Fig. 33: Bank-only CoC %

Fig. 34: CoF comparison %

Fig. 35: 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. 

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Erwin Wijaya (erwin.wijaya@verdhana.id)