Bank Negara Indonesia (BBNI IJ): Building on Quality

Maybank Sekuritas Indonesia reiterates its BUY recommendation for Bank Negara Indonesia (BBNI IJ) with a target price of IDR 6,100, reflecting an upside potential of 33%. The recommendation is underpinned by a target multiple of 1.3x FY25E P/BV. Despite FY24 earnings slightly missing expectations due to higher-than-expected provisions, the bank’s growth outlook remains stable.

Earnings Performance

BBNI reported FY24 net profit of IDR 21.5 trillion, marking a 2.6% year-on-year growth but an 8.2% sequential decline. The result achieved 97% of both Maybank’s and consensus estimates. The slight miss was primarily attributed to increased provisions in Q4 2024, which rose 50% quarter-on-quarter to IDR 2.8 trillion. However, the net interest margin (NIM) improved to 4.5%, driven by a focus on cheaper funding sources.

Loan Growth

The bank’s loan portfolio expanded by 11.6% year-on-year in FY24, surpassing expectations of 9.8% growth. The growth was led by private corporates (+20.4%), corporate SOEs (+11.1%), mortgages (+14.6%), and personal loans (+13.8%). However, lending to small and medium enterprises (SMEs) contracted by 10.8% and 2.0%, respectively. BBNI plans to strengthen its SME segment in FY25 by leveraging the business ecosystems of its corporate clients.

Loan Quality and Provisions

Non-performing loans (NPLs) improved significantly, declining to 2.0% in FY24 from 2.8% in FY22. BBNI’s prudent approach is expected to keep NPLs stable at 1.90% and 1.80% for FY25E and FY26E, respectively. Credit costs are projected to remain manageable at around 1.03% and 1.07% over the same period.

Key Risks

Potential risks include a sharp rise in operational expenses, sudden deterioration in loan quality, and prolonged funding competition that could pressure NIM improvement.

Peer Comparisons: Insights and Recommendations

Bank Syariah Indonesia (BRIS IJ)

Bank Syariah Indonesia is rated as a BUY with a target price of IDR 3,600, representing an upside potential of 24.1%. The bank’s P/BV ratio is 3.1x, with an ROE of 16.4% and an ROA of 1.9%. Its strong fundamentals and market positioning make it a compelling investment opportunity in the Islamic banking sector.

Bank Rakyat Indonesia (BBRI IJ)

Bank Rakyat Indonesia is also rated as a BUY with a target price of IDR 5,400, offering a 24.7% upside. The bank boasts a P/BV ratio of 2.0x, with an ROE of 19.4% and an ROA of 3.2%. Its robust performance is driven by its dominance in the microfinance sector.

Bank Mandiri (BMRI IJ)

Bank Mandiri receives a BUY rating with a target price of IDR 8,000, indicating a 27.5% upside. The bank’s P/BV ratio stands at 2.2x, complemented by a stellar ROE of 22.5% and an ROA of 2.7%. It remains one of the top-performing banks in Indonesia.

Bank Central Asia (BBCA IJ)

Bank Central Asia is rated as a BUY with a target price of IDR 11,675, reflecting a 21.3% upside. With a P/BV ratio of 4.6x, an ROE of 21.7%, and an ROA of 3.8%, BBCA is a leader in Indonesia’s banking sector, known for its operational efficiency and strong customer base.

Bank CIMB Niaga (BNGA IJ)

Bank CIMB Niaga receives a BUY rating with a target price of IDR 2,400, offering a 36.8% upside. Its P/BV ratio is 0.8x, with an ROE of 13.5% and an ROA of 2.0%. The bank’s valuation presents a significant upside, making it an attractive investment opportunity.

Conclusion

Maybank Sekuritas Indonesia’s comprehensive analysis highlights the strong investment potential in Bank Negara Indonesia and its peers. The focus on loan growth, improved margins, and stable asset quality makes these banks attractive options in the Indonesian banking sector. Investors are encouraged to consider these recommendations while being mindful of the associated risks.