Date: October 28, 2024
Broker: UOB Kay Hian
Company Overview
Bank Negara Indonesia (BBNI) is a state-owned financial institution primarily focused on corporate and small to medium-sized enterprise (SME) lending. Its shares trade under the ticker symbol BBNI IJ on the Indonesia Stock Exchange. As of the report date, the bank’s share price is IDR 5,650, with a target price set at IDR 6,560, implying an upside potential of 16.1%.
Key Shareholders
The Republic of Indonesia holds a majority 60% stake in BBNI, with the bank’s total market capitalization amounting to IDR 210.7 trillion (USD 13.48 billion). BBNI has a 52-week price range of IDR 4,300 to IDR 6,250.
Financial Performance – Q3 2024
BBNI’s Q3 2024 financial performance reflects steady growth in net profit, driven by improvements in net interest margin (NIM) and non-interest income.
- Net Profit: BBNI posted a Q3 2024 net profit of IDR 5.6 trillion, reflecting a 4.7% quarter-on-quarter (qoq) increase and a 3.0% year-over-year (yoy) rise. The growth was primarily fueled by a 40 basis points (bp) qoq NIM expansion and a 7.8% qoq increase in non-interest income.
- Operating Profit (PPOP): Pre-provision operating profit grew 7.1% qoq, driven by higher NIM and effective cost management.
- NIM: The NIM expanded by 40 bp to 4.4% due to improved loan yields and optimized cost of funds (CoF).
- Loan Growth: Loans increased by 9.5% yoy, with the corporate and consumer segments showing significant growth rates of 17.0% and 14.6% yoy, respectively.
Key Metrics
- Loan-to-Deposit Ratio (LDR): Increased to 95.5% due to effective balance sheet management through reserve requirement (RRR) incentives.
- NPL Ratio: Maintained at 2.0%, reflecting stable asset quality with a strong NPL coverage ratio of 284.2%.
- Cost of Fund (CoF): The CoF declined by 0.2% qoq to 2.6% due to increased stickiness in current and savings accounts.
- Credit Cost (CoC): Stable at 1.0%, reflecting asset quality improvements and reduced loan-at-risk (LaR) ratio, which fell to 11.8%.
Segment-Specific Loan Growth
- Corporate Loans: Increased by 17.5% yoy, with private sector companies constituting 72% of corporate loans.
- Consumer Loans: The consumer segment grew by 14.6% yoy, driven by strong demand for personal loans (+15.7% yoy) and mortgages (+13% yoy), which together make up 87% of the consumer loan portfolio.
- Small and Medium-Sized Loans: Declined due to a strategic focus on asset quality, with future recovery expected in 2025.
Operating Expenses and CIR
Operating expenses rose 7.7% qoq, largely due to an increase in personnel and general administrative costs. Consequently, the cost-to-income ratio (CIR) reached 44% in Q3 2024, driven by BBNI’s ongoing transformation efforts and infrastructure investments. Personnel expenses alone increased by 9% qoq.
Non-Interest Income
BBNI’s non-interest income surged by 14.6% yoy in Q3 2024, led by:
- Trading Income: Grew significantly by 50.8% yoy to IDR 2.3 trillion.
- Banking Fee Income: Up by 3.1% yoy, reflecting stable demand for banking services.
Strategic Initiatives and Digital Transformation
BBNI launched its digital banking platform, Wondr, which is intended to enhance the stickiness of its current and savings accounts (CASA). Approximately 70% of BBNI’s retail savings and 90% of its wholesale current accounts are sourced through digital platforms. This digital transformation is expected to further reduce CoF while increasing fee-based income.
Earnings and Dividend Forecast
The bank’s full-year 2024 net profit forecast aligns with expectations, with Q3 earnings representing 74% of the annual projection. BBNI maintains a stable dividend payout policy with a target payout ratio of 50%, providing a projected dividend yield of 5.2%.
Valuation and Recommendation
The broker maintains a Buy recommendation with a target price of IDR 6,560, derived using a Gordon Growth Model (GGM) with assumptions of a 15% return on equity (ROE), a 12.1% cost of equity, and a 5% long-term growth rate. BBNI’s current price-to-book (P/B) ratio of 1.2x is close to +1 standard deviation relative to its five-year historical average.
