Bank BTPN Syariah (BTPS.IJ Rp 1,140; BUY TP Rp 1,300) 1Q25 Results: Better Asset Quality Supporting Earnings Growth Amid Asset Cleanup

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Bank BTPN Syariah (BTPS IJ)

1Q25 Results: Better Asset Quality Supporting Earnings Growth Amid Asset Cleanup

BTPS booked a net profit of Rp311bn in 1Q25 (+7% qoq, +18% yoy), driven by a lower CoC of 8.5% (-125bps qoq, -516bps yoy).
Despite the improving asset quality, the bank remained conservative in asset and earnings growth, retaining flat asset and earnings target.
Maintain Buy rating with a higher TP of Rp1,300. Key risk to our call includes changes in asset quality trend.

Bottom line supported by lower CoC

BTPS posted a net profit of Rp311bn in 1Q25 (+7% qoq, +18% yoy), slightly above our (29%) and consensus’ (27%) FY25F. The profitability growth was driven by the lower CoC of 8.5% in 1Q25 (-125bps qoq, -516bps yoy) with a sequential improvement in NPL and LaR ratio. NPL ratio dropped to 3.3% (from 3.7%) and LaR ratio dropped to 5.8% (from 6.6%) with higher NPL and LaR coverage, suggesting that overall NPL formation was getting better. Nonetheless, the management hinted that it will be more confident in asset quality if they see consistency in 2Q25.

Loan growth trajectory remained conservative

Post continuous loan contraction, BTPS booked 1% qoq NP growth (-6% yoy), which indicate that the bank is becoming slightly more confident in its loan disbursement. Management stated that it will become more comfortable in disbursement upon seeing 3 key metrics, i.e., attendance rate above 90%, on time payment above 95%, and 50% solidarity fund implementation. Hence, the flat loan growth target is maintained for now. As the bank continues to focus on collection and asset quality, the operating expenses remained stable at Rp575bn (flat qoq, +5% yoy), reflecting higher field officers.

Better-than-expected CoC but we expect sequential downtrend

In 1Q25, BTPS’s CoC stood at 8.5% (from 12.5% in FY24) better than our prev. FY25 estimates of 10.3%. We slightly lower out CoC est. to 9.7% to take into account the lower CoC in 1Q25, but we still expect sequential higher CoC in the coming quarter as we see the rising NPL cycle across segments in FY25F Indonesia banking sector.

Maintain Buy with a higher TP of Rp1,300

We raised our TP to Rp1,300 (from Rp1,200 prev.) reflecting a higher ROE for FY25F. We maintain our -1SD two-year avg. inverse CoE of 11.8%, reflecting concerns regarding asset growth, arriving at an FV PBV of 1.0x. Key risk is deteriorating asset quality.

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