Date of Report
October 29, 2024

Broker
PT Maybank Sekuritas Indonesia

Overview of Bank Negara Indonesia (BBNI)

Bank Negara Indonesia (BBNI) is a state-owned bank in Indonesia, primarily engaged in wholesale banking services. The institution plays a pivotal role in supporting Indonesia’s economic growth through its focus on loans for investment and working capital. BBNI is committed to expanding its deposit franchise and improving risk management, which has provided it with a sufficient buffer against economic challenges.

Investment Recommendation

Recommendation: Maintain BUY
Target Price: IDR 6,100
Current Price: IDR 5,500
This positive outlook stems from BBNI’s strategic focus on loan quality, the anticipated easing of funding costs due to expected interest rate cuts by Indonesia’s central bank, and BBNI’s robust asset quality.

Financial Highlights

BBNI reported steady profit growth, with a net profit of IDR 16.3 trillion for the first nine months of 2024, marking a year-on-year increase of 3.5%. Key drivers include a reduction in provisions (down 19.7% YoY) and a 14.9% increase in non-interest income, which offset a slight decrease in net interest income. Loan growth stood at 9.5% YoY, driven by strong corporate and consumer lending.

Key Financial Metrics

• Operating Income: IDR 64.3 trillion projected for FY24E
• Net Profit: IDR 22.2 trillion projected for FY24E
• Return on Equity (ROE): Expected to reach 15.3% by FY25E
• Loan Growth: 9.5% YoY in 9M24
• Deposit Growth: 3.0% YoY

Loan Quality and Asset Management

BBNI has made substantial progress in enhancing its loan quality, with loans at risk (LAR) and non-performing loans (NPLs) decreasing to 11.8% and 2.0%, respectively, in 9M24. The bank’s emphasis on corporate lending to highly rated entities has contributed to improved asset quality, which is expected to stabilize credit costs at around 1.0% for FY24/25E.

Transformation and Strategic Initiatives

BBNI continues to drive transformation by focusing on:

• Loan Expansion: Targeting quality over quantity to enhance asset stability.
• Digital Initiatives: Expanding digital banking channels to bolster customer acquisition and streamline operations.
• ESG Commitment: With a significant emphasis on sustainability, BBNI promotes environmentally friendly practices among corporate clients, particularly in palm oil financing. The bank’s sustainable financing portfolio reached 29.6% of total loans by FY22.

Risks and Challenges

While the outlook remains positive, BBNI faces certain risks, including:

• Opex and Loan Quality Risks: A sharp increase in operational expenses or deterioration in loan quality could adversely impact earnings.
• Competitive Pressures: Increased competition in the corporate lending space could pressure margins.
• Restructuring: Failure to successfully restructure large restructured loans may elevate credit costs.

ESG Performance

BBNI holds an ESG rating of “A” and actively encourages its corporate debtors to adhere to sustainable practices, especially in the palm oil industry. Additionally, the bank implements water conservation, energy-saving measures, and community development programs, underscoring its commitment to social and environmental sustainability.

Environmental, Social, and Governance (ESG) Highlights

• Environment: Reduction in paper usage, deployment of solar cells, and wastewater treatment initiatives.
• Social: 52% of the workforce comprises women, and 3,222 ATMs are accessible for individuals with disabilities.
• Governance: Strong government influence with a 60% ownership stake, and a high representation of independent commissioners on the board.

Market Position

BBNI remains a competitive player within Indonesia’s banking sector, with a projected Net Interest Margin (NIM) of 4.0% for FY24E. The bank maintains a robust CASA (current and savings account) ratio, which hovers around 70%, supporting sustainable NIM growth and contributing to BBNI’s resilient performance within the sector.

This summary is based on the comprehensive report from PT Maybank Sekuritas Indonesia dated October 29, 2024.