Indonesia major banks (BBCA IJ, BMRI IJ, BRIS IJ, BBNI IJ and BBRI IJ – all rated Buy) have published their bank-only YTD May-25 results. Overall, they delivered unexciting yet expected results, except for BBCA and BRIS. For our covered major banks, asset yields dipped slightly to 7.4% in May-25 (compared to 8.0% in Dec-24 and 7.5% in May-24), bringing YTD May-25 asset yield to 7.3% (-20bp y-y). Fortunately, funding costs have stabilized (although liquidity in the banking system remains tight), as evidenced by M2 growth of 4.9% as of May-25. Indeed, the average cost of fund (CoF) of the major banks has been hovering at ~2.4-2.7% (p.a.) for the past 12 months. With stable funding costs, we expect more stable net interest margins (NIMs) for our covered banks, which would lead to core earnings visibility (i.e., PPOP). As of May-25, the average monthly NIM of the major banks continued to show a stable trajectory of 5.0% (flat m-m; -30bp y-y). This, we believe, should result in some FY25F earnings improvement for our covered banks, thereby reducing downside risks (that may arise from loan downgrades).

Another area worth close monitoring would be asset quality. So far, write-off trends across banks have been stable. However, we think risks of higher credit costs may push credit costs higher across banks particularly when excess provisions during pandemic periods have been depleted.

We also think in the upcoming 1H25 results, we expect potentially a number of banks to revise down their loan growth guidance to reflect soft loan growth YTD May25.  

As highlighted in our previous notes, we believe BBRI (BBRI IJ, Buy) will continue to face the issue of maturing micro/ultra-micro loans. BBRI’s profit drop reflects persistently high estimated write-off rates and likely ongoing NPL formations. Indeed, we estimate BBRI’s 12MMA monthly write-off rate stood at ~3.6% in May-25. So far, it doesn’t seem to be abating, which would mean elevated credit costs (CoC) for BBRI. We think the two areas that witnessed high write-off rates and/or NPL formations rates were micro and small loan portfolios. Given the above, we think BBRI’s medium-term earnings growth trajectory will remain subdued. Our projected three-year (2024-27F) consolidated earnings CAGR is ~0.4%.

Based on the results of the major banks, BBCA (BBCA IJ, Buy) and BRIS (BRIS IJ, Buy) continue to be our preferred banking stocks.

Summary of May-25 results

Below is a summary of our covered major banks’ May-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 be largely unchanged, and these could become near-term earnings drivers for our covered banks.

1. YTD May-25 net iinterest income from major banks +3% y-y

   • BRIS +9% y-y
   • BBCA +7% y-y
   • BMRI +4% y-y
   • BBNI +3% y-y
   • BBRI -1% y-y

2. YTD May-25 PPOP from major banks -1% y-y

   • BBCA +13% y-y
   • BRIS +11% y-y
   • BBNI flat y-y
   • BMRI -1% y-y
   • BBRI -9% y-y

3. YTD May-25 CoC for major banks at 1.5% (-20bp y-y)

   • BBRI CoC of 3.2% (-70bp y-y) as BBRI continues writing off NPLs in small and/or micro segments
   • BRIS CoC of 1.1% (+20bp y-y)
   • BMRI CoC of 0.7% (-10bp y-y)
   • BBNI CoC of 1.0% (flat y-y)
   • BBCA CoC of 0.2% (-30bp y-y)

4. YTD May-25 implied risk-adjusted NIM for major banks at 4.0%

   • BBCA 5.8% (+30bp y-y) as NIM @ 5.9% (+10bp y-y)
   • BRIS 4.2% (-20bp y-y) as NIM @ 5.0% (-10bp y-y)
   • BMRI 3.7% (-60bp y-y) as NIM @ 4.2% (-60bp y-y)
   • BBRI 3.7% (+20bp y-y) as NIM @ 6.0% (-10bp y-y)
   • BBNI 2.9% (-10bp y-y) as NIM @ 3.7% (flat y-y)

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

   • BBCA +16% y-y; excluding subsidiary dividends, growth was ~8% y-y
   • BRIS +5% y-y
   • BMRI flat y-y
   • BBNI -1% y-y
   • BBRI -15% y-y

On the balance sheet, loan growth of the major banks, combined, was up +9% y-y (+2% YTD); BRIS, +15% y-y (+5 YTD); BMRI, +13% y-y (flat YTD); BBCA, +12% y-y (+3% YTD); BBNI, +7% y-y (-1% YTD); BBRI, +5% y-y (+4% YTD). In terms of LLR, BBRI remained at ~5.9% (down from 6.7% in May-24), followed by BBNI at ~5.0% (6.4%), BRIS at ~3.7% (4.0%), BBCA at ~3.6% (4.1%) and BMRI at ~3.0% (3.6%).

In terms of deposits, overall deposits were up +5% y-y (+4% YTD); for BMRI +9% y-y (+6%); BRIS +9% y-y (-3%); BBCA +6% y-y (+4%); BBRI +2% y-y (+5%); and BBNI +1% y-y (+1%). A deeper analysis shows that the more important Saving Deposits (compared with Current Accounts or Time Deposits) still recorded healthy growth of +6% y-y, with BMRI and BBNI posting the highest growth among major banks, at +8% y-y / BRIS +7% / BBRI +5% / BBCA +4%. Headline LDR for these banks remained at 89.7% in May-25 (a slight uptick from 85.8% in May-24).

Valuations and risks

BBCA – We derive our TP of IDR12,300 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 4.3x) and 26.7x FY25F P/E (vs current price valuation of 18.8x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BMRI – We derive our TP of IDR7,300 using 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 1.7x) and 12.2x FY25F P/E (vs current price valuation of 8.4x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BBRI – We derive our TP of IDR5,000 using DuPont analysis with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 9.3%, beta of 0.85x and a CAR-adjusted ROAE of 18.0%. Our TP implies 2.3x FY25F P/B (vs current price valuation of 1.9x) and 12.8x FY25F P/E (vs current price valuation of 10.2x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BBNI – We derive our TP of IDR6,100 using DuPont analysis with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 8.5%, beta of 1.0x and a CAR-adjusted ROAE of 16.5%. Our TP implies 1.3x FY25F P/B (vs current price valuation of 0.9x) and 10.7x FY25F P/E (vs current price valuations of 6.9x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BRIS – We derive our TP of IDR3,500 using DuPont analysis 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 18.0%. Our TP implies 3.2x FY25F P/B (vs current price valuation of 2.5x) and 21.3 FY25F P/E (vs current price valuation of 15.7x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

Fig. 1: M2 vs loan growth, y-y %

Fig. 3: Major banks loan growth charts

Fig. 4: Major banks deposit growth charts

Fig. 5: Major banks NII and PPOP

Fig. 6: Major banks CoC and NP

Fig. 7: BBCA – YTD y=y performance %

Fig. 8: BMRI YTD Y-Y Performance %

Fig. 9: BRIS – YTD y-y performance %

Fig. 10: BBNI – YTD y-y performance %

Fig. 11: BBRI – YTD y-y performance %

Fig. 15: Bank-only NIM %

Fig. 16: Major Banks – NIM vs LDR trends %

Fig. 17: BBCA – 12MMA CoC vs 12MMA WO %

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

Fig. 19: BBNI – 12MMA CoC vs 12MMA WO %

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

Fig. 21: BRIS – 12MMA CoC 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. 

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ANALYST CERTIFICATION
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Erwin Wijaya (erwin.wijaya@verdhana.id)