Bank Mandiri (BMRI IJ)

1Q24 earnings slight miss on lower NIM and other operating income, offsetting strong loans growth

• BMRI posted muted net profit growth of 1% yoy (22% of our FY24 est) on 36bps lower NIM, lower recoveries and higher G&A exp.
• Despite expecting a better NIM, BMRI lowered its FY24 NIM guidance to 5-5.3% (vs. 5.3-5.5% prev.) as it remains cautious on liquidity.
• We maintain our Buy rating but with a lower TP of Rp7,400 (from Rp7,600) as we revise down our FY24F NP by 2%.

Lower-than-expected 1Q24 earnings on lower NIM and operating income

BMRI reported 1Q24 net profit of Rp12.7tr (+1% yoy, -21% qoq from 4Q23’s high base). The 1Q24 NP is slightly below our FY24F and the consensus at 21.9% and 21.7%, respectively. Net interest income still grew by 5% yoy supported by strong 19% loans growth (vs. the FY24 target of 13-15%), but partly offset by lower NIM. NIM declined to 5.0% (-36bps yoy) as the loan yield was flat at 8.5% but CoF increased by 48bps yoy. PPOP growth slowed to 1% yoy due to the declining other operating income (-1%) and higher opex (+7% yoy), resulting in NP growth of only 1%, despite the 3% lower provisions. 1Q24 CoC stood at 1.0%, inline with the management`s guidance for FY24F. 

Strong loans growth amid declining NIM to support growth

BMRI booked a loans balance of Rp1,435tr (+19% yoy, +3% qoq) supported by the mining, CPO, financial services, and manufacturing sectors. The corporate and commercial segments continued to drive the loans growth with 28% and 20% yoy growth, respectively. Despite the high 1Q24 loans growth, the management is retaining its loans growth target of 13-15% as it remains cautious on the liquidity and CoF outlook.

Liquidity remains as the biggest concern

Taking into account the higher-for-longer interest rates outlook, BMRI revised its FY24F NIM guidance from 5.3-5.5% to 5.0-5.3%. Nonetheless, it expects higher NIMs in the subsequent quarters from a higher loans yield, higher loan to earning asset portion, and higher liquidity to lower the CoF. However, we revise down our FY24F, taking into account the higher interest rate and 1Q24 results, resulting in lower NIM and a lower NP forecast.

Maintain BUY rating with a lower TP of Rp7,400

We lower our TP to Rp7,400 (from Rp7,600 prev.) to reflect our lower FY24F NP, while maintaining our CoE assumption at 10.3%. We retain our BUY rating on the bank’s attractive 21.2% ROE and c. 4% dividend yield. The downside risk to our NP forecast is normalization in recovery income while there is an upside if the bank can keep its CoF lower than our expectation.

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