Banking Sector - ‘25F solid earnings to continue

KBVS Update
Monday, 30 December 2024

Banking - ‘25F solid earnings to continue
(Maintain Overweight)

* The banking sector's intermediary function remains robust, with loan growth holding steady at a double-digit rate of 10.8% yoy. Looking ahead to 2025, we anticipate loan growth to remain healthy within the range of 10% to 11%. Total TPF grew at 6.3% yoy (KBVS ‘24F: 6.9% yoy). In ‘25F key for the trajectory of TPF growth will be significantly influenced by the movement of the SBRI yield.

* Domestic banks, excluding BBTN which has yet to disclose its Nov24 bank-only performance, continued to exhibit robust financial results. Aggregate earnings growth for the month reached a commendable 9.7% yoy, primarily propelled by BRIS impressive 21.5% yoy PATMI.

* The anticipated low-interest rate environment is poised to be a significant catalyst for continued NIM expansion in ‘25F, driving overall PATMI growth beyond ‘24 levels. We expect risk metrics to remain robust, with the CoC staying low.

* While the steady SRBI might pressure banks to manage their low funding costs, the potential for further benchmark rate cuts could offer additional support for a favourable borrowing cost environment. The impact of previous rate cuts on bank NIMs is anticipated to materialize as a key driver of 1Q25 earnings.

* The valuation of banks under our coverage remains attractive, underpinned by our assumption of a lower risk investment yield ratio. The upcoming Jan25 and Feb25 bank earnings releases will provide early insights into the sector's strong 1Q25 PATMI growth. We maintain an Overweight stance on the banking sector, with BBCA, BMRI, and BRIS (syariah banking) as our top picks.

Regards,
Akhmad Nurcahyadi - KBVS Research