Panin Bank (PNBN IJ) (Neutral) - We adjust FY25-26F earnings by ~11-12%

We adjust FY25-26F earnings by ~11-12%

Maintain Neutral and raise TP to IDR1,400 (from IDR1,325)

The Indonesia banking sector is likely to continue to face liquidity issues in 2025F, in our view. However, we believe that within the sector, major banks will continue to dominate. We expect mid-sized banks, such as PNBN, 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 higher TP of IDR1,400 (from IDR1,325).

Earnings changes summary

We update our earnings projections for FY25F and FY26F, as well as add FY27F as a new forecast year. For FY25F/26F, we raise earnings by ~11/12%, largely driven by lower provision expense (reflecting improving asset quality). In 4Q24, CoC for PNBN decreased to 241bp from 398bp in 4Q23. However, over the year, we note the bank’s funding costs have gradually increased (reflecting the overall tight liquidity in the banking system). On the balance sheet, we have reduced loans forecasts by 13-19% for FY25F-27F while deposit projections are expected to remain relatively flat, as major banks would continue to dominate.

Valuation and risks

We derive our new TP of IDR1,400 (from IDR1,325) based on the DuPont methodology, assuming a risk-free rate of 6.5%, an equity-risk premium of 7.8%, beta of 1.0x and a CAR-adjusted ROAE of 12.5% (all metrics unchanged), which implies a 2025F P/B of 0.6x and a 2025F P/E of 14.0x (compared with previous valuations of 0.6x and 15.4x, respectively). Upside/downside risks are improved/worsening economic trends, easing/tighter liquidity, and lower/rising bond yields, which would translate into higher/lower equity base due to potential marked-to-market losses, and/or lower/higher credit costs and opex growth.

Year-end 31 Dec	FY24		FY25F		FY26F		FY27F
Currency (IDR)	Actual	Old	New	Old	New	Old	New
PPOP (bn)	5,379	6,726	6,026	7,200	5,868	0	5,551
Reported net profit (bn)	2,738	2,159	2,416	2,301	2,557	0	2,579
Normalised net profit (bn)	2,738	2,159	2,416	2,301	2,557	0	2,579
FD normalised EPS	113.67	89.65	100.31	95.53	106.16		107.09
FD norm. EPS growth (%)	8.1	3.3	-11.8	6.6	5.8		0.9
FD normalised P/E (x)	12.1	–	13.8	–	13.0	–	12.9
Price/adj. book (x)	0.6	–	0.6	–	0.6	–	0.6
Price/book (x)	0.6	–	0.6	–	0.6	–	0.6
Dividend yield (%)	–	–	–	–	–	–	–
ROE (%)	5.4	4.1	4.5	4.2	4.6		4.4
ROA (%)	1.2	0.9	1.0	0.9	1.0		1.0

Source: Company data, Verdhana estimates

Key data on Panin Bank

Profit and loss (IDRbn)
Year-end 31 Dec	FY23	FY24	FY25F	FY26F	FY27F
Interest income	14,588	15,454	17,740	17,923	17,944
Interest expense	-5,382	-6,545	-6,790	-7,060	-7,307
Net interest income	9,206	8,909	10,951	10,863	10,637
Net fees and commissions	125	130	100	100	100
Trading related profits	150	145	0	0	0
Other operating revenue	2,302	1,913	1,000	1,000	1,250
Non-interest income	2,576	2,187	1,100	1,100	1,350
Operating income	11,783	11,096	12,051	11,963	11,987
Depreciation	-472	-515	-516	-528	-541
Amortisation
Operating expenses	-2,439	-2,642	-2,825	-2,749	-2,939
Employee share expense	-2,435	-2,559	-2,684	-2,817	-2,955
Pre-provision op profit	6,437	5,379	6,026	5,868	5,551
Provisions for bad debt	-2,758	-1,676	-2,801	-2,455	-2,108
Other provision charges
Operating profit	3,679	3,703	3,225	3,413	3,443
Other non-op income	96	-48	0	0	0
Associates & JCEs
Pre-tax profit	3,776	3,655	3,225	3,413	3,443
Income tax	-770	-788	-695	-736	-742
Net profit after tax	3,006	2,867	2,530	2,677	2,701
Minority interests	-474	-129	-114	-120	-121
Other items	0	0	0	0	0
Preferred dividends	0	0	0	0	0
Normalised NPAT	2,532	2,738	2,416	2,557	2,579
Extraordinary items	0	0	0	0	0
Reported NPAT	2,532	2,738	2,416	2,557	2,579
Dividends	0	0	0	0	0
Transfer to reserves	2,532	2,738	2,416	2,557	2,579
Growth (%)
Net interest income	-7.5	-3.2	22.9	-0.8	-2.1
Non-interest income	29.1	-15.1	-49.7	0.0	22.7
Non-interest expenses	12.4	8.4	6.9	-2.7	6.9
Pre-provision earnings	-6.2	-16.4	12.0	-2.6	-5.4
Net profit	-16.8	8.1	-11.8	5.8	0.9
Normalised EPS	-16.8	8.1	-11.8	5.8	0.9
Normalised FDEPS	-16.8	8.1	-11.8	5.8	0.9
Loan growth	7.8	0.9	-11.6	-1.8	-1.6
Interest earning assets	4.7	11.0	4.5	4.6	4.5
Interest bearing liabilities	4.6	9.7	4.3	4.3	4.3
Asset growth	4.5	9.9	4.1	4.2	4.2
Deposit growth	3.0	5.4	5.0	5.0	5.0
Source: Company data, Verdhana estimates

Balance sheet (IDRbn)
As at 31 Dec	FY23	FY24	FY25F	FY26F	FY27F
Cash and equivalents	1,298	1,810	1,900	1,995	2,095
Inter-bank lending	6,036	6,074	6,378	6,697	7,032
Deposits with central bank	7,870	9,287	9,751	10,239	10,751
Total securities	43,837	63,384	88,885	100,807	112,750
Other int earning assets	1,298	684	752	827	910
Gross loans	151,898	153,797	140,173	140,410	140,646
Less provisions	-11,442	-12,138	-14,987	-17,490	-19,646
Net loans	140,456	141,660	125,186	122,920	121,001
Long-term investments	766	776	853	938	1,032
Fixed assets	10,002	9,898	9,898	9,898	9,898
Goodwill	0	0	0	0	0
Other intangible assets	0	0	0	0	0
Other non IEAs	10,447	10,386	10,386	10,386	10,386
Total assets	222,010	243,959	253,991	264,708	275,855
Customer deposits	146,030	153,903	161,598	169,678	178,162
Bank deposits, CDs, debentures	18,685	26,766	26,849	26,782	26,715
Other int bearing liabilities	0	0	0	0	0
Total int bearing liabilities	164,716	180,669	188,447	196,460	204,876
Non-int bearing liabilities	3,982	7,220	7,458	7,485	7,514
Total liabilities	168,698	187,889	195,905	203,945	212,391
Minority interest	3,608	3,745	3,859	3,979	4,100
Common stock	2,409	2,409	2,409	2,409	2,409
Preferred stock
Retained earnings	36,751	39,633	41,535	44,093	46,672
Reserves for credit losses	0	0	0	0	0
Proposed dividends	0	0	0	0	0
Other equity	10,545	10,283	10,283	10,283	10,283
Shareholders' equity	49,705	52,324	54,227	56,784	59,364
Total liabilities and equity	222,010	243,959	253,991	264,708	275,855
Non-perf assets	4,275	4,158	3,855	8,074	12,307
Balance sheet ratios (%)
Loans to deposits	104.0	99.9	86.7	82.8	78.9
Equity to assets	22.4	21.4	21.4	21.5	21.5
Asset quality & capital
NPAs/gross loans (%)	2.8	2.7	2.8	5.8	8.8
Bad debt charge/gross loans (%)	1.82	1.09	2.00	1.75	1.50
Loss reserves/assets (%)	5.15	4.98	5.90	6.61	7.12
Loss reserves/NPAs (%)	267.6	291.9	388.8	216.6	159.6
Tier 1 capital ratio (%)	24.4	28.4	26.5	24.9	23.9
Total capital ratio (%)	27.1	30.5	28.2	26.5	25.4
Per share
Reported EPS (IDR)	105.11	113.67	100.31	106.16	107.09
Norm EPS (IDR)	105.11	113.67	100.31	106.16	107.09
FD norm EPS (IDR)	105.11	113.67	100.31	106.16	107.09
DPS (IDR)	0.00	0.00	0.00	0.00	0.00
PPOP PS (IDR)	267.24	223.31	250.19	243.62	230.45
BVPS (IDR)	2,063.50	2,172.25	2,251.25	2,357.40	2,464.49
ABVPS (IDR)	2,063.50	2,172.25	2,251.25	2,357.40	2,464.49
NTAPS (IDR)	2,063.50	2,172.25	2,251.25	2,357.40	2,464.49
Valuations and ratios
Reported P/E (x)	13.1	12.1	13.8	13.0	12.9
Normalised P/E (x)	13.1	12.1	13.8	13.0	12.9
FD normalised P/E (x)	13.1	12.1	13.8	13.0	12.9
Dividend yield (%)	–	–	–	–	–
Price/book (x)	0.7	0.6	0.6	0.6	0.6
Price/adjusted book (x)	0.7	0.6	0.6	0.6	0.6
Net interest margin (%)	4.69	4.21	4.81	4.56	4.27
Yield on assets (%)	7.43	7.29	7.79	7.53	7.21
Cost of int bearing liab (%)	3.34	3.79	3.68	3.67	3.64
Net interest spread (%)	4.09	3.50	4.11	3.86	3.56
Non-interest income (%)	21.9	19.7	9.1	9.2	11.3
Cost to income (%)	45.4	51.5	50.0	50.9	53.7
Effective tax rate (%)	20.4	21.6	21.6	21.6	21.6
Dividend payout (%)	0.0	0.0	0.0	0.0	0.0
ROE (%)	5.2	5.4	4.5	4.6	4.4
ROA (%)	1.17	1.18	0.97	0.99	0.95
Operating ROE (%)	7.6	7.3	6.1	6.1	5.9
Operating ROA (%)	1.69	1.59	1.30	1.32	1.27
Source: Company data, Verdhana estimates

Company profilePT Bank Pan Indonesia Tbk (doing business under the name PaninBank ) is a bank headquartered in Jakarta. In 1982, this bank became the first bank listed on the Jakarta Stock Exchange.

Valuation MethodologyWe derive our TP of IDR1,400 using DuPont analysis, using 2025F as a reference, and key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 1.0x and a CAR-adjusted ROAE of 12.5%. At our TP of IDR1,400, shares would trade 0.6x 2025F P/B and 14.0x 2025F P/E. The benchmark index for the stock is JCI Index .

Risks that may impede the achievement of the target priceUpside/downside risks are better/worsening macroeconomic development; higher/lower asset yields and thus NIMs; better/worse asset quality which would translate into lower/higher credit costs; and lower/higher opex increases

ESGPanin consistently implements corporate social responsibility activities as a form of the company's awareness towards the communities as well as appreciation towards customers who have made the company as a reliable partner on products offered. The Company social responsibilities are summed into efforts in (1 Community development: National CSR Roadshow, National Blood Donor Action, Financial Literacy, (2 environment protection: mangrove planting seeds, (3consumers protection: product responsibility.

Fig. 1: PNBN – Quarterly results

PNBN IDR bn	4Q23	2Q24	3Q24	4Q24	QoQ %	YoY %	YTD 23	YTD 24	YoY %
Int inc	3,621	3,721	3,847	4,070	5.8	12.4	14,600	15,474	6.0
Int exp	1,417	1,561	1,640	1,820	11.0	28.4	5,333	6,541	22.7
NII	2,204	2,160	2,208	2,250	1.9	2.1	9,267	8,933	(3.6)
Non-int inc	611	356	673	525	(21.9)	(14.1)	2,646	2,219	(16.2)
Total op inc	2,815	2,516	2,880	2,775	(3.7)	(1.4)	11,913	11,151	(6.4)
Non-int exp	1,344	1,416	1,549	1,184	(23.6)	(11.9)	5,381	5,704	6.0
PPOP	1,472	1,100	1,331	1,590	19.5	8.1	6,532	5,447	(16.6)
Provision expense	1,248	403	105	780	641.2	(37.5)	2,770	1,683	(39.2)
PBT	228	783	1,186	754	(36.4)	231.1	3,776	3,655	(3.2)
Net profit	173	625	930	443	(52.4)	156.7	3,006	2,738	(8.9)

Source: Company data, Verdhana research

Fig. 2: PNBN – Ratios

PNBN Ratios %	4Q23	2Q24	3Q24	4Q24	QoQ %	YoY %	YTD 23	YTD 24
Asset yield	8.6	8.5	8.6	8.6
COF	3.6	3.9	4.0	4.1
Spread	5.0	4.7	4.6	4.5
NIM	5.2	5.0	4.9	4.8
Risk-adj NIM	2.3	4.0	4.7	3.1
LDR	89	89	84	85
Loan yoy	7.5	6.3	6.6	(0.0)
Loan qoq	6.5	1.3	1.1	(0.1)
Deposit yoy	2.4	(0.6)	6.1	4.9
Deposit qoq	0.6	1.2	6.6	(0.5)
CASA	45	44	43	43
CIR	48	56	54	43
Cost of credit (bps)	398	127	33	241
CAR	32.4	32.2	34.1	34.5
ROAE	1.3	4.6	6.7	3.2
NPL	3.0	2.8	3.0	2.9
NPL Coverage	221	225	191	203
LLR	6.6	6.3	5.7	5.9
Sp mention loans	8.9	9.7	8.6	7.3
Restructured loans	17.0	13.9	13.3	12.9
LARs	19.7	17.0	15.9	15.3
LAR Cov	33.3	37.0	36.2	38.8
Loans	129,289	127,987	129,344	129,253	(0.1)	(0.0)	7.5	(0.0)
Deposits	145,221	143,543	153,081	152,370	(0.5)	4.9	2.4	4.9
- CA	12,011	11,486	12,087	12,394	2.5	3.2	(4.3)	3.2
- SA	53,755	51,012	53,726	52,650	(2.0)	(2.1)	5.5	(2.1)
- TD	79,455	81,045	87,268	87,326	0.1	9.9	1.4	9.9
Equities	49,705	50,799	52,162	52,324	0.3	5.3	4.9	5.3
Assets	222,010	219,219	230,588	243,959	5.8	9.9	4.5	9.9

Source: Company data, Verdhana research

Fig. 3: PNBN – Earnings forecast changes

Source: Company data, Verdhana estimates

Fig. 4: PNBN – Loans & deposits

Source: Company data, Verdhana estimates

Fig. 5: PNBN – Valuation

PNBN - Fair valuation	New	Remarks
Risk free rate %	6.5
Equity risk premium %	7.8
Beta (x)	1.0
Cost of equity %	14.3
Growth rate %	9.5
Sustainable ROAE %	12.5
Target P/B in 2025F (x)	0.6
Implied 2025F PER	14.0
Implied share price (IDR)	1,407	Rounded to IDR1,400 (up from IDR1,325)

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.

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Rating Table

Rating Remains	Neutral
Target price Increased from IDR 1,325	IDR 1,400
Closing price 6 March 2025	IDR 1,380
Implied upside	+1.4%
Market Cap (USD mn)	2,015.1
ADT (USD mn)	0.5

Relative performance chart

Source: LSEG, Verdhana

M cap (USDmn)	2,015.1
Free float (%)	15.1
3-mth ADT (USDmn)	0.5

(%)	1M	3M	12M
Absolute (IDR)	-22.7	-27.0	22.7
Absolute (USD)	-22.7	-29.1	17.9
Rel to Jakarta Stock Exchange Composite Index	-18.9	-16.6	32.4

Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

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

Panin Bank (PNBN IJ) (Neutral) - We adjust FY25-26F earnings by ~11-12%

We adjust FY25-26F earnings by ~11-12%

Key data on Panin Bank

Fig. 1: PNBN – Quarterly results

Fig. 2: PNBN – Ratios

Fig. 3: PNBN – Earnings forecast changes

Fig. 4: PNBN – Loans & deposits

Fig. 5: PNBN – 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

Panin Bank (PNBN IJ) (Neutral) - We adjust FY25-26F earnings by ~11-12%

Fig. 1: PNBN – Quarterly results

Fig. 2: PNBN – Ratios

Fig. 3: PNBN – Earnings forecast changes

Fig. 4: PNBN – Loans & deposits

Fig. 5: PNBN – Valuation

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