Bank Negara Indonesia (BBNI IJ)
Inline 2Q24 results: improving NIM supported by strong loan growth, higher LDR, and contained CoC
- Supported by a 12% yoy loan growth, BBNI reported 2Q24 NP of Rp5.4tr, bringing its 1H24 NP to Rp10.7tr (+4% yoy), inline.
- The management revised up its loan growth target to 10-12% and lowered CoC target to c. 1%, but expects a lower NIM of >4.0% in FY24.
- Maintain Buy rating with a lower TP of Rp6,700 based on inverse GGM with a CoE of 10.1% (5-year mean) and FY24F ROE of 13.8%.
Inline 1H24 NP amid lower yoy NIM
BBNI booked 1H24 net profit of Rp10.7tr (+4% yoy), with lower provisions (-22% yoy) offsetting the lower pre-provision operating profit (PPOP, -5% yoy). 1H24 net profit forms 49% and 48% of our and consensus' FY24 forecasts, and thus is inline. Consolidated NIM stood at 4.0% in 1H24 (down from 4.5% in 1H23), caused by an increase in CoF to 3.1% (+73bps yoy) and a flattish EA yield. Although 2H24 indicates better NIM, BBNI lowered its FY24 NIM guidance from >4.5% to >4.0%. The improvement in NIM will be supported by lower CoF and a flattish loan yield as competition in lending markets remains tight.
Sequential improvement in NIM partly due to the high LDR
Loans grew 5% to Rp727tr (+12% yoy) in 2Q24, faster than 1Q24’s growth of 10% yoy, while deposits declined by 1% qoq to Rp772tr (+1% yoy). This resulted in a higher LDR of 94% in 2Q24, up from 89% in 1Q24, partly contributing to its higher NIM. Management raised its loan growth target to 10-12% yoy in FY24, up from 9-11% previously.
Solid overall asset quality amid the potential downgrade in SME loan
CoC remained robust at 1.0% in 1H24 (-39bps yoy), and the bank expects no further negative surprises, as wholesale and consumer loan quality remained safe, as the new credit scoring system has yielded better quality. However, the bank highlighted that around Rp9.6tr (12% of SME loans) in the SME segment could be downgraded to NPLs. The Majority (73%) of the high-risk loans were originated pre-FY22, and 45% of them are KUR loans, which are fully insured.
Maintain BUY rating with a slightly lower TP of Rp6,700
We slightly adjusted our TP from Rp6,800 to Rp6,700 on the back of a lower ROE to 13.8% from 14.0% previously, while retaining our implied CoE at 10.1% (5-year mean) and LTG of 3%. We retain our BUY rating as the bank is still trading below its fair valuation and is one of the beneficiaries of a lower interest rate environment. Risks to our view are delayed rate cut and deteriorating asset quality.
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