BMRI - Expecting 1H23 growth remain intact

BMRI booked a solid 5M23 earnings and we expect the result to overall helped 1H23 numbers to remain arrives within market expectation. We might see loan repricing to continue and thus could make the CoF transmission noise to get quitter, which at the end will positively impacting to BMRI’s NIM. We maintain our ‘23F PATMI for BMRI at +12.5% yoy, or considerably more conservative than consensus at 13.8% yoy. Maintain BUY with DDM-based TP of IDR6,110 (2.3x ‘23F P/B) while it is trading at 2.0x ‘23F P/B, or slightly above 10-year historical mean average of 1.9x. 5M23 PATMI grew 9.1% yoy BMRI reported another solid monthly earnings, whereas in 5M23 the bank net profit reached IDR18.5tn (18.8% yoy) driven by 12.4% yoy growth in net interest income, 13.7% yoy growth in PPOP and improving provisions by -6.4% yoy. On May23 stand alone, earnings grew by 9.1% yoy (5.7% mom) helped by 23.1% yoy growth in interest income, 8.2% yoy growth in PPOP and an inched-up provisioning by 2.1% yoy. Better NIM likely to continue Interest income seems to stay on its growth trajectory as we believe yield repricing likely to remain intact. New booking will act as an additional catalyst on the scenario that another transmission phase of higher cost of fund cost will take place. However, we expect motionless benchmark rate in the following months could muted such expectation. That said, we think with continuing new booking and manageable yield repricing could overall bring the increasing CoF noise to get quitter and thus should translated into a better NIM. Healthy loan growth with CASA improvement The bank continues to enjoy solid loan growth, whereas in May 23 total loan reached IDR964,459bn, or 10.4% yoy higher and surpassing our ‘23F loan growth for BMRI by 10bps. Worth noting that May23 growth is above industry loan growth at 9.3%yoy and 230bps stronger compared to the period of April 23. Year to date the growth is driven by investment segment loan. Management expects loan growth to arrive within the range of 10%-12% yoy. On deposits side, liquidity remain ample with total TPF in May23 grew by 12.8% yoy (TD grew by only 3.4% yoy) driven mainly by demand deposits growth (24.9% yoy), with improving CASA by 200bps to 78.1% from 76.1% in May22. 1H23 earnings could reach IDR21.9tn With its solid 5M23 earnings growth, we think our ‘23F 1H23 of IDR21.9tn for BMRI sounds achievable. Our 1H23 conservative earnings forecast is equal to around 47.5% of BMRI’s ‘23F and this is equal to approximately 3.9% lower compared to the average of 5yr hist 1H to FY (includes the effect from Covid in FY20). Using this figure, BMRI’s 1H23 earnings is likely to record a minimum growth of 8.83%yoy to around IDR21,9tn, ceteris paribus. Looks remain attractive and maintain our ‘23F earnings for BMRI Of the total bank under our coverage, BMRI year-to-date stock return was at 13.9% and below its peers such as BRIS (33.4%) and BBRI (18.9%). With the remaining upside potential of 14.2%, we think BMRI remain looks attractive. On the fundamental figures side, we still maintain our ‘23F for BMRI earnings growth at 12.5% yoy or around 1.33pts below consensus which more optimistic at 13.8% yoy. Aside from our expectation on another healthy net interest income growth which will be backed by loan repricing and controllable cost of fund, a steady provision as a result of continuing asset quality improvement should also helped the overall growth. Maintain BUY with Target Price of IDR6,110 Our intrinsic value is based on Gordon Growth Model with fair ‘23F P/B of 2.3x. BMRI is currently trading at 2.0x ‘23F P/B, or slightly above 10-year historical mean average of 1.9x. Risks to our call are: a) lower-than-expected loan growth, NIM and loan yield, b) higher than expected CoC and c) higher inflation, slowing economic activity and d) deteriorating asset quality.