Overview of Bank Negara Indonesia (BBNI)

Bank Negara Indonesia (BBNI) is a state-owned financial institution primarily focusing on corporate and SME loans. It remains an integral player in Indonesia’s banking sector, with a market capitalization of Rp173,432.5 billion (approximately US\$10.65 billion). The bank’s commitment to corporate and consumer segments has been pivotal in driving its loan growth and profitability.

Q4 2024 Performance Highlights

BBNI exhibited a mixed performance in Q4 2024. While its net profit dipped by 8.2% quarter-on-quarter (QoQ), the full-year 2024 net profit grew by 2.7% year-on-year (YoY) to Rp21.5 trillion, aligning with both internal and market projections. The bank’s pre-provision operating profit (PPOP) showed resilience with a 7.9% QoQ growth, supported by robust loan growth and improved net interest margins (NIM).

Key Financial Metrics

• Net Interest Income: Rp40,480 billion in 2024, reflecting a 1.9% drop YoY.
• Non-Interest Income: Rp24,035 billion, a 10.2% YoY increase, driven by recovery income and trading activities.
• Total Operating Expenses: Grew by 6.9% YoY, with digitalization and transactional expenses contributing significantly.
• Net Profit Margin: Stable at 4.2% for 2024.
• Loan-to-Deposit Ratio (LDR): Increased to 96.3% in December 2024 from 85.7% a year earlier.

Loan Growth and Segment Insights

BBNI’s total loan portfolio grew by 11.6% YoY to Rp775.9 trillion in 2024. The corporate and consumer segments were the primary growth drivers, expanding by 17.6% YoY and 14.5% YoY, respectively. The corporate segment accounted for 56.8% of total loans, with private companies dominating this category at 74%.

Corporate Loans

Corporate loans grew impressively by 20.4% YoY, driven by higher demand from private corporations. This segment contributed 42.2% to the total loan portfolio in December 2024.

Consumer Loans

Consumer loans increased by 14.5% YoY, with mortgages growing by 13.8% YoY and personal loans by 14.6% YoY.

Challenges in the Small Loans Segment

The small loans segment faced a contraction, declining by 10.8% YoY. However, the medium segment showed recovery, with a 4.2% QoQ loan growth in Q4 2024.

Provisioning and Asset Quality

BBNI increased its credit cost (CoC) by 50 basis points in Q4 2024, reflecting a 50% QoQ growth in provision expenses. The bank wrote off bad loans amounting to Rp18.7 trillion, primarily due to exposure to Sritex and higher provisioning for the small segment. Despite these challenges, the non-performing loan (NPL) ratio remained stable at 2.0%, supported by a 12% YoY decline in loans at risk.

Non-Interest Income Growth

Non-interest income surged by 10.2% YoY to Rp16.3 trillion in 2024. Key contributors included:

• Recovery Income: Grew by 19.8% YoY to Rp6.0 trillion.
• Trading Activities: Jumped by 39% YoY.

This segment accounted for 25% of the bank’s total operating income, underscoring its significance in the revenue mix.

Operational Efficiency and Digital Initiatives

Operating expenses rose by 17% QoQ in Q4 2024 but remained manageable for the full year. The bank’s digitalization efforts, including the launch of its digital app “Wondr” in July 2024, played a pivotal role in driving operational efficiency and savings growth. Savings accounts grew by 11% YoY to Rp257.5 trillion, enabling the bank to rely less on expensive funding sources.

Outlook and Earnings Revision

BBNI has guided for stable or slightly lower NIM in 2025 due to uncertainty around rate cuts and tighter liquidity. The bank expects loan growth to remain robust at 8-10% in 2025, supported by its strong corporate and consumer segments.

UOB Kay Hian revised its 2025/2026 net profit estimates downward by 3% due to a lower NIM assumption (trimmed by 10-12 basis points). However, the bank’s profitability prospects remain strong, with net profit projected to grow by 10.7% in 2025 to Rp23.4 trillion.

Valuation and Recommendations

UOB Kay Hian maintains a BUY recommendation for BBNI but has lowered the target price to Rp5,700 from Rp6,560. The new target price is based on a fair price-to-book (P/B) ratio of 1.2x, factoring in a revised return on equity (ROE) assumption of 14.5% and a cost of equity of 12.5%.

At its current price of Rp4,650, BBNI offers an attractive upside of 22.6% and a dividend yield of 6-8% based on its planned payout ratio of 55-60%. The stock is trading at 1.0x forward P/B, making it a compelling investment in the financial sector.