Bank Tabungan Negara (BBTN.IJ Rp1,170; BUY TP Rp1,500) Pioneering Financial Inclusion Through the New Govt. Housing Program; Reinitiate with Buy rating

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Bank Tabungan Negara

Pioneering Financial Inclusion Through the New Govt. Housing Program; Reinitiate with Buy rating

Aligned with the government housing program, BBTN is poised to capture growth in the subsidized mortgage segment.
We believe the newly proposed scheme may lift BBTN’s NIM, as we expect the rising EA yield to outpace the rising CoF.
We re-initiate coverage with a BUY rating and an inverse CoE GGM-based TP of Rp1,500, implying a fair value PBV of 0.6x.

The most benefitted from rates cut

Compared to its banking peers, BBTN has one of the highest portions of time deposits in its third-party funds, which are more sensitive to changes in benchmark rates. As of 9M24, BBTN’s TD comprises 49% of total deposits compared to the other big 6 banks’ average of 30%. Despite our expectation of a 75bps rate cut by the end of FY25F, we expect BBTN’s CoF to increase to 4.4% in FY25F (+25bps yoy), as we believe tight liquidity might persist amid higher funding needs for FLPP.

Higher subsidized mortgage growth from new housing program

To support the government’s new housing program, 3mn housing, BBTN is proposing a new FLPP scheme, where the banks will contribute 50% of the funding. This will reduce the burden on the FLPP budget, which was set at Rp18.8tr (+4% yoy) for FY25F, as the govt’s portion will drop from 75% to 50%. Assuming this scheme is implemented, we expect BBTN's subsidized mortgage to reach Rp209tr by FY25F (+16% yoy), up from our FY24F estimate of Rp179tr (+11% yoy).

Potential NIM upside from the newly proposed FLPP scheme

Aside from having a higher contribution to the FLPP funding, BBTN has also proposed increasing the subsidized mortgage rate to 7% (from 5%) and prolonging the tenor to 30 years (from 20 years). According to our calculation, this will result in a similar monthly payment, hence reducing the risk of delinquency. In this scheme, we expect the EA yield to increase to 7.4% (from 7.0%). We forecast a modest improvement in NIM, from 2.8% to 2.9%, as we expect higher funding needs to cause CoF to increase to 4.5% from 4.2%.

Re-initiate coverage with a BUY rating with a TP of Rp1,500

We re-initiate our coverage with a BUY rating and a TP of Rp1,500, which is based on a 5-year inverse CoE GGM-based model with CoE of 14.2%, LTG of 3%, and FY25F RoE of 9.7%, implying a fair value PBV of 0.6x. Risks to our call include the bank’s ability to increase its FLPP lending rate, manage the increase in its CoF to improve NIM, and maintain its loan quality under control amid the higher loan growth rate.

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