Did BBNI ignore the drop in the BBRI share price?

All SOE banks seem to have been overwhelmed by the recent stampede of foreign investors
out of the Indonesian market, undoubtedly a result of a lack of clarity in the direction of our
Indonesian economy. In a previous BBRI report, the severely impaired purchasing power –
particularly among working-class Indonesians, was fingered as the driver of a recent dramatic
outflow; for BBNI we assume it was more the result of weak earnings growth and lower market
capitalization of banks. BBNI 10M24 financials were not that much different from its 9M24
performance: bank NIM looked relatively compressed, at around 4.1% in 10M24, while in
consolidated numbers, NIM was at around 4.4%. However, a lower NIM (one hovering between
4.1% - 4.4%) has most probably been well-priced-in by market, as BBNI NIM has been stuck in
this range, a victim of tighter LDR and less aggressive strategy over the past 18 months.
Nevertheless, BBNI is probably better off compared to BBRI, as BBNI strategy aimed for
corporate and commercial, where we assume growth will be still available, compared to
consumer segment, which will likely suffer from poor purchasing power. The impact of a higher
January 2025 VAT is still in “nowhere-land”, and we await an assessment on how this policy will
impact the consumer.

Risk-adjusted NIM might be better on paper, compared to that of BBRI

The one bright point about BBNI over the past twelve months is its dramatic improvement in
credit quality. NPL, at around 2.0%, stayed stable over the past three quarters, and credit cost
held fast as well. With a potential upside from an improved NIM, and volume from loan growth,
we can expect risk-adjusted NIM to be in recovery mode, as it was up 40 bps in 9M24, to 3.4%.
However, concern continues that a nasty surprise from a big account like Sritex could impede
BBNI recovery. BBNI has frankly been less aggressive during the past two years, and we see no
change in management; we are however confident that they can hold costs down. In terms of
valuation, BBNI PB was relative to trading bound range, with a PB multiple already close to 1.2x
for FY25. We thus revise our forecast for BBNI FY25 upward, on better risk-adjusted NIM,
higher corporate loan growth volume, steady credit cost and more confidence in management.
We therefore upgrade our BUY call, with new TP of IDR6,200, from (prev. TP of IDR6,050),
implying 28% upside from current price. We also foresee K-Shape recovery continuing and
tend to favor corporate segment over ultra-micro or micro.

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