BBTN - Inline 1Q24 earnings

KBVS update
Tuesday, 30 April 2024

BBTN - Inline 1Q24 earnings     
(Maintain BUY; TP: IDR 1,770)

* BBTN 1Q24 earnings growth at 7.4% yoy to IDR860 bn, mainly driven by robust interest income (14.9% yoy) coupled with manageable cost of credit. In all, first quarter PATMI arrives in line with ours and the market forecast at a run-rate of 22.4%/22.3% vs. the 5-year average of 24.3%.

* Total loan robust growth (14.8% yoy) was backed by solid subsidized mortgage demand (12.3% yoy) and arrives 380 bps higher compared to the upper range of ‘24F management guidance of 10–11%. Total third-party funds grew 11.9% yoy. We expect the bank to successfully execute its funding strategy. Management expects the switching from the high CoF TD to the lower CoF TD segment to continue. As such, we might see a softer cost of funds, which overall will benefit BBTN’s NIM expansion.

* The bank saw another asset quality improvement, with NPL gross 53bps healthier to 3.0%, or considerably in line with ‘24F BBTN’s NPL expectation of <3%. NPL coverage recorded 692bps stronger yoy, with loans at risk consistently making a positive progress.

* We like several of BBTN’s 2024 strategy initiatives, such as: (1) improving CASA and transforming the bank into a transactional bank; (2) expanding towards high-yield loans; and (3) accelerating new digital banking capabilities, which overall will support the ‘24F net profit growth target, in our view.

* Maintain BUY, TP of IDR1,770. Our GGM approach for BBTN 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