BBTN - Below than expected 1H24 result

KBVS Update
Thursday, 1 Aug 2024

BBTN – Below than expected 1H24 result
(Maintain BUY; TP: IDR1,770)

* BBTN net interest income dropped 7% yoy caused by continuing transmission benchmark interest rate. Top line growth was softer to 10.7% yoy vs. 14.9% yoy in last quarters largely driven by one-off reversal accrued interest from one of the commercial loans amounting to IDR 250bn. In overall 1H24 net profit came in below ours and street forecast ‘24F numbers for BBTN.

* Robust loan growth continues; it grew 14.4% yoy (‘24F guidance: 10%-11% yoy, KBVS ‘24F: 10% yoy) to IDR 352,06bn. Total third-party deposits grew 16.64% yoy to IDR 16.6% yoy (1H24 guidance: 8%-9% yoy), primarily due to 23.2% yoy of TD growth. Demand deposit growth still arrives at double-digit growth of 14.63% yoy, albeit flat compared to last quarter.

* On key risk metrics, all figures were improving. Management kept its ‘24F guidance for loan and customer deposit growth (10%-11% and 8%-9% yoy). We believe provisions will remain at a low level in the remaining quarters. Our main focus is on cost of funds. The reason behind this are continuing challenging macro environments and stiffer competition among banks in the high-interest environment that remain intact. On this backdrop we might see the bank record another stronger growth in high funding costs, which could significantly impact net profit growth.

* Maintain BUY, TP of IDR1,770. Our GGM approach for BBTN's fair value pegged at ‘24F P/B of 0.6x, while currently it is trading at 0.4x’24F P/B, or slightly above its -2SD of the historical mean of 0.3x.

Regards,
Akhmad Nurcahyadi - KBVS Research team