BBTN - Eyes further Islamic Banking consolidation after BVS acquisition

BBTN - Eyes further Islamic Banking consolidation after BVS acquisition Bank Tabungan Negara (BBTN) has announced its intention to explore further acquisitions in the Islamic banking sector, following the completion of its acquisition of Bank Victoria Syariah (BVS). This move aligns with the Indonesian government's push for consolidation within the Islamic banking industry. BTN President Director Nixon L.P. Napitupulu stated that the BVS acquisition is the first step in this direction. While future acquisitions are possible, the immediate focus will be on spinning off and developing BTN Syariah. Napitupulu projects that BTN Syariah's assets could reach IDR100 tn within three years, driven by strong demand for Islamic home financing, which currently accounts for 20-25% of mortgages in the low-income segment. Despite this ambitious target, BTN Syariah still faces a significant gap in assets compared to the industry leader, Bank Syariah Indonesia (BSI), which reported assets of IDR371 tn as of September 2024. (Source : Kontan) Comment : Post the spin off, the entry of a strong player single entity like BTN Syariah Banking rather than just unit businesses into the Islamic banking sector will likely intensify competition, benefiting consumers with more choices and potentially driving innovation. The consolidation trend in the Islamic banking sector could lead to the emergence of stronger, more efficient players, capable of better serving the growing demand for sharia-compliant financial products. The bank strategic moves in the Islamic banking sector demonstrate its strong effort to become a major player in this growing market. BTN's emphasis on organic growth, coupled with its strategic leverage of existing strengths in the housing finance sector, positions the bank favorably for future success, enabling it to effectively compete within the market currently dominated by BSI. Maintain BUY BBTN with 12M GGM-based TP of IDR1,770 (0.5x ‘245 P/B).