Wednesday, April 2nd, 2025

Bank Tabungan Negara: Positioned for Strong Earnings Recovery Amid Strategic Asset Sales

Date: October 2, 2024
Broker: UOB Kay Hian


Company Overview

Bank Tabungan Negara (BBTN IJ) is a state-owned enterprise (SOE) bank specializing in mortgage loans.

Stock Data

  • Share Price: Rp1,465
  • Target Price: Rp1,740
  • Upside: +18.8%
  • Market Capitalization: Rp20,560.0 billion (approximately US$1,352.1 million)
  • Shares Issued: 14,034.4 million
  • 3-Month Average Daily Turnover: US$1.9 million
  • 52-Week High/Low: Rp1,600/Rp1,175

Financial Performance

  • Net Profit: BBTN’s net profit declined by 9.8% year-on-year (yoy) in the first eight months of 2024 (8M24) but is expected to recover strongly in the fourth quarter (4Q24).
  • Earnings Expectations: Most profits will be booked in 4Q24, with a projection of flat net profit growth for 2024 overall. Management anticipates strong earnings in 4Q24 driven by recovery income and a bulk asset sale of Rp1.5 trillion.

Key Developments

  • Asset Sales: BBTN plans to complete the sale of Rp1.5 trillion in bad assets in 4Q24. This move is projected to reduce the non-performing loan (NPL) ratio by approximately 49 basis points (bp).
  • Deposit Rate Cuts: The bank has commenced lowering its deposit rates by 50bp following the Bank Indonesia (BI) rate cut, which is expected to marginally reduce its cost of funds (CoF) in the second half of 2024 (2H24) and more significantly in 2025.
  • Loan Growth: Loan growth remained strong at 13.3% yoy in August 2024, exceeding management’s 13% growth target for the year.

Strategic Outlook

  • Non-Interest Income: Non-interest income grew by 26.4% yoy to Rp2.6 trillion in 8M24, accounting for 25% of total operating income, up from 19% in 8M23. Management expects to achieve Rp3 trillion to Rp4 trillion in non-interest income for 2024.
  • New Housing Program: The newly elected government targets a 3 million housing program with a new scheme for payment, potentially benefiting BBTN.

Earnings Revision/Risks

  • Earnings Revision: No revisions are made to earnings estimates despite the 8M24 performance being below expectations, as recovery from the asset sales is anticipated.
  • Risks: Potential risks include adverse macroeconomic developments, rupiah instability, geopolitical uncertainties affecting asset quality, and lower-than-expected loan growth.

Valuation/Recommendation

  • Valuation: Maintain a BUY recommendation with an unchanged target price of Rp1,740, based on a fair price-to-book (P/B) ratio of 0.62x.
  • Catalysts: Newsflow regarding the new housing subsidy scheme is expected to serve as a catalyst for BBTN’s share price, as it could lead to higher net interest margin (NIM) and loan ticket sizes under the new scheme.

BDMS Stock: Overreaction to Co-Pay Policies Creates Buying Opportunity

In-Depth Analysis of Healthcare Giants: BDMS, BH, BCH, CHG, and PR9 Date of Report: December 20, 2024 Broker: Maybank Securities (Thailand) PCL The healthcare sector in Thailand is experiencing a transformative phase, with significant...

Singtel Q2 Profits Jump 6.7%: Strong Optus Performance and Cost Discipline Drive Growth

Comprehensive Analysis of Regional Telecommunications Companies Comprehensive Analysis of Regional Telecommunications Companies Singapore Telecommunications (Singtel) Broker Name: UOB Kay Hian Date of Report: Thursday, 14 November 2024 Company Overview Singtel is a well-established telecommunications...

SingPost Shifts Strategy: Sells Australian Business for S$861 Million to Unlock Shareholder Value

Singapore Post (SingPost) is reversing its international expansion strategy by divesting its Australian businesses for A$1.02 billion (S$861 million) to Pacific Equity Partners, in a bold move to enhance shareholder value. This decision comes...