BBTN - Below than expected 9M24 result

KBVS Update
Monday, 2 December 2024

BBTN: Below than expected 9M24 result     
(Maintain BUY; GGM TP: IDR1,530)

* BBTN just relesed its (limited review) Jan-Sept24 results (28/11/24). 9M24 earnings were below expectations (58.9%/60.9% vs 66.1%), primarily due to elevated funding costs. Net profit declined 10% yoy, despite solid Non-II (21.1% yoy) *and a significant 53.9% yoy reduction in provisions.

* On the asset side, loan growth remained robust at 11.9% yoy, driven by both subsidized and non-subsidized mortgages. Non-housing loans, in particular, exhibited strong growth of 29.2% yoy. We expect the execution of Government Housing Program next year will bring meaningful support to the stronger top line growth in 2025. Total TPF grew strong at 14.5% yoy to IDR 370,751bn (came in around 250bps higher than the new ‘24F BBTN target of 11%-12% yoy) supported by a 25.9% yoy increase in Current Account, boosting the CASA ratio to 51%.

* On key performance metrics, NIM continued under pressure and as expected recorded lower yoy figure (to 2.9% vs. 3.8% in 9M23). We expect the upcoming lower benchmark rate environment to bring significant impact to a softer borrowing cost and thus will help NIM to record a much higher figure. On risk metrics, NPL declining to 3.2% and CoC improving to 0.5%, beating BBTN’s ‘24F new guidance.

* A key driver for BBTN's better performance in 2025 will be a reduction in borrowing cost, in our view. To achieve this, the bank is strategically shifting its deposit mix, prioritizing middle-tier institutions with lower funding costs. This proactive approach has already yielded positive results, with the proportion of deposits from middle-tier institutions increasing significantly to 29.5% in 9M24, compared to 19.8% at the beginning of the year.

* Maintain BUY. Our GGM approach for BBTN's fair value pegged at ‘25F P/B of 0.5x while currently it is trading at 0.4x’25F P/B, or slightly above its -2SD of the historical mean of 0.3x.

Regards,
Akhmad Nurcahyadi - KBVS Research Team