BBNI - Expecting 1H23 growth to remain solid

Continuing solid monthly result should become as a solid foundation to 1H23 earnings and as a good start to entering 2H23 period. We expect steady loan demand will reinforce top line growth, while more muted CoF hikes should overall buttress NIM improvement, aside from our expectation on stable CASA improvement. We expect BBNI’s 1H23 earnings at IDR10.2tn or 15.8% yoy. Maintain BUY on BBNI with TP of IDR11,160 (1.4x ‘23F P/B), while it’s trading at 1.1x ‘23F P/B, or slightly below its 10-yr historical mean at 1.2x. Continuing solid monthly result BBNI noted strong bank only net profit growth at 15.9%yoy in 5M23 to IDR15.1tn and around 19bps higher compared to the same period in 4M23 of 14.9%yoy. Higher PATMI was driven by 18.1%yoy growth in interest income, benefited from the loan yield repricing. Despite transmission benchmark rate has made BBNI’s cost of fund mounting, net interest income remain arrives at a higher growth rate vs 4M23. On monthly basis, interest income growth at 23.1%yoy mainly driven by more working days compared to April23. Meanwhile, a 299bps higher interest expenses in May23 to 5.7%mom it is a natural trend when new booking and deposits grew in parallel, in our view. Expecting 1H23 earnings growth at 15.8% yoy 5M23 bank only earnings formed 41.6% of our ‘23F for BBNI net profit, or approximately 39.3% versus consensus figures and 156bps higher vs 4M23. We think BBNI should continue to book another solid result in Jun23 and thus will overall made 1H23 PATMI growth will remain arrives within ours and consensus expectation. Even assuming 2Q23 PATMI is flattish which is unlikely, cumulative 1H23 growth will remain strong at 18.6%yoy or accounted 51.5% of ‘23F (consensus: 48.6%). We forecast BBNI’s 1H23F to arrive at IDR10.2tn, equal to 15.8% yoy (50.2% vs ‘23F) and around 4.5% more conservative compared to consensus 1H23F at IDR10.7tn (20.9% yoy and 52.5% vs ‘23F ‘cons). Improving loan growth with continuing ample liquidity Loan grew by 5.9%yoy in May23, inched up by 1.2% mom to IDR629.4tn and 74bps higher compared to 4M23 growth of 5.2% yoy. We view loan demand to continue solid and better in 3Q23. Our ‘23F loan growth for BBNI around 9% is within the range of management guidance at 7%-9% yoy. On the liabilities side, liquidity remain ample with TPF growth amounting IDR735.3tn, recorded 271bps higher to 10.1% yoy versus in a month earlier at 7.4% yoy (4M23). We like demand deposit solid growth at 18.4% yoy and weakening TD growth to 9.5% yoy which brought CASA to continue on its growth trajectory and reached IDR512.76tn or 10.4% yoy. Key metrics remain intact On key metrics performance, BBNI’s NIM stood at 4.64% 6bps higher mom from 4.58% in 4M23 and within initial management guidance for 2023 at 4.5%-4.7%, while cost of credit of 1.34% is 16bps better than BBNI’s guidance which expect to book CoC at below 1.5% this year. We also like manageable CIR which came 3bps lower mom to 42.7% and continuing improving CASA (14bps higher to 69.7 which in turn will underpin BBNI margin. ‘23F PATMI growth at 10.8% yoy (consensus 15.2% yoy) With the ongoing new loan booking expectation, steady loan repricing and more muted benchmark rate hikes transmission to BBNI’s cost of fund, we might witness to see NII growth to stay on track and thus will overall help NIM to arrive within the similar rate with last year. Likewise for steady noninterest income growth and manageable CIR which likely to support PPOP, while manageable asset quality will generate softened provisions and overall underpinned 2023 earnings. We expect BBNI’s ‘23F PATMI growth at 10.8% yoy (‘23F consensus figures at 15.2% yoy). Maintain BUY with target price of IDR11,160 We also like BBNI effort to manage sufficient provisions for its coll 4 and 5, such as WSKT which noted around IDR8tn from total loan has been set aside around 55% in May, or 150bps higher vs Mar23 position. Our target price is based on Gordon Growth Model-derived fair P/B of 1.4x. BBNI is currently trading at 1.1x ‘23F P/B, or slightly above its 10-year historical mean at 1.2x. Risks to our call are: a) lower-than-expected loan growth, NIM and loan yield, b) higher than expected credit cost and c) higher inflation, slowing economic activity and d) deteriorating asset quality.