Banking Sector Update 20 Oct 2023

KBVS Update
Friday, 20 Oct 2023

Banking - A solid ground to finish the year strong
(Maintain Overweight)

-    The fact that 8M23 bank-only earnings for Banks under our coverage grew 17.6% yoy to IDR117.4 tn provide cushion for an in-line 9M23 earnings achievement.

- Bank only loan growth accelerated by 11% yoy to IDR4,038.5tn in Aug ‘23 and 209bps higher than the industry loan growth of 8.9% yoy to IDR6,710 tn.

- We believe room to manage healthy NIM remain intact. Banks are continuously eyeing for higher yielding assets while at the same time steadily repricing loan yield and soften the cost of fund pressure. That said, Banks’ NIM expansion is expected to continue (Aug ‘23 NIM expanded by 14bps yoy at 4.87%).

- BBCA has released its 9M23, earnings grew 25.8% yoy above ours and consensus expectation at 79.5%/78.5% (vs 5yrs average of 72.7%). Loan growth was 12.3% yoy beating our forecast and outperforming BI and OJK forecasts' for the industry.

- Maintain OW for Banking sector, with BBRI and BBNI as our top picks. With such solid earnings and healthy key metric figures in 8M23, 3Q23 will become another good quarter for banks under our coverage. Despite all the headwinds, we remain positive on banking asset quality outlook and thus will play important role for both 3Q23 and 4Q23 earnings growth delivery.

Regards,
Akhmad Nurcahyadi - KBVS Research team