Report Date and Broker Information
Date: October 29, 2024
Broker: PT Maybank Sekuritas Indonesia
Investment Summary
- Rating: Maintain BUY
- Target Price (TP): IDR6,100
- Current Share Price: IDR5,500
- Potential Upside: 16%
- Key Risks: Rising operating expenses and potential deterioration in loan quality.
Maybank has maintained its “BUY” rating on Bank Negara Indonesia (BBNI) with a target price of IDR6,100. This recommendation is based on expectations of steady net interest margin (NIM) improvements due to anticipated rate cuts by Bank Indonesia, which should reduce funding cost pressures and support margin growth.
Financial Performance Highlights
9M24 Financial Results
- Net Profit: IDR16.3 trillion (up 4.7% QoQ and 3.5% YoY), meeting 74% of Maybank and consensus forecasts for FY24.
- Net Interest Income: Decreased by 5.5% YoY, though showed a 7.1% improvement QoQ.
- Non-Interest Income: Increased by 14.9% YoY, contributing positively to overall earnings.
- Loan Growth: 9.5% YoY growth, driven by corporate lending (+15.1% YoY) and consumer lending (+14.6% YoY).
- Loan-Deposit Ratio (LDR): 95.3%, reflecting an increase in leveraged loans as deposit growth lagged.
Key Financial Ratios
- Net Interest Margin (NIM): Improved to 4.4% in 3Q24 from 4.0% in 2Q24.
- Return on Equity (ROE): Projected to reach 16% by FY26E.
- Loan at Risk (LAR): Decreased to 11.8% (from 14.4% in 9M23).
- Non-Performing Loans (NPL): Improved to 2.0%, down from 2.3% in 9M23.
- Credit Cost: Maintained at 1.0%, with provisions decreasing by 19.7% YoY.
Strategic Focus and Growth Outlook
Transformation and Asset Quality Enhancement
BBNI continues to focus on strengthening its loan quality, which has led to a significant reduction in loans at risk (LAR) and non-performing loans (NPLs). The strategic emphasis on higher-quality loans is expected to support sustainable long-term growth, despite a slight moderation in loan growth.
Projected Improvements in Net Interest Margin (NIM)
With Bank Indonesia’s expected rate cuts, BBNI is positioned for gradual NIM improvement through lower funding costs, with an expected rise to 4.0%/4.2% for FY24/25E. Higher LDR levels also provide potential for NIM expansion as funding costs ease.
Environmental, Social, and Governance (ESG) Initiatives
Environmental Efforts
- Sustainable Financing: 29.6% of BBNI’s loan portfolio is allocated to sustainable financing.
- Green Operations: Adoption of eco-friendly practices, such as solar cell installations and wastewater treatment facilities at branches.
Social Responsibility
- Female Workforce: Women constitute 52% of BBNI’s employees, with 30% holding management roles.
- CSR Activities: Support for education and social welfare programs, with an IDR100 billion community development fund in FY22.
Governance Standards
- Government Ownership: The Indonesian government holds a 60% stake, with special privileges related to governance, including BOD and BOC appointments.
- ESG Ratings: BBNI has an “A” rating in MSCI ESG Ratings, with a commitment to sustainable practices in its loan portfolio.
Risk Factors
Upside Factors
- Early Loan Settlements: Could strengthen cash flow and reduce loan book risk.
- Gains in Payroll Market Share: Expanding payroll business to support both loans and CASA growth.
- Continued Asset Quality Improvement: Sustains low credit costs, strengthening profit stability.
Downside Factors
- Loan Restructuring Challenges: Failure in restructuring loans could increase credit costs.
- Corporate Lending Competition: Heightened competition in the corporate segment may put pressure on profit margins.
Historical Price Performance and Peer Comparison
Recent Share Price Trends
The share price has shown resilience, reflecting positive investor sentiment toward BBNI’s improving fundamentals and recovery prospects.
Peer Comparison
Compared to its peers, BBNI trades at relatively lower P/BV multiples, while maintaining competitive ROE and loan quality metrics.
This comprehensive financial and operational overview of Bank Negara Indonesia (BBNI) provides a snapshot of the bank’s steady growth trajectory, bolstered by strategic transformations and an enhanced focus on asset quality.
