Bank Jago (ARTO IJ)
4Q24 earnings: Higher Earnings from Higher Loan Yield Offset the Higher CoF and CoC
- ARTO posted 4Q24 net profit growth of +19% qoq/ +93% yoy, resulting in FY24 NP of Rp129bn (+78% yoy), above our est. but in line with cons.
- In FY25, management continues to aim for >30% loan growth, a lower CIR, but guides for a higher CoC and NPL ratio from FY24’s low base.
- We tweaked our LT projection to account for lower loan growth and higher CoC, resulting in a lower TP of Rp2,500; maintain Buy rating.
Robust 4Q24 on higher NIM offsetting the higher CoC
ARTO booked net profit of Rp43bn in 4Q24 (+19% qoq, +93% yoy), bringing its FY24 net profit to Rp129bn (+78% yoy), above our estimate (105%). The robust earnings were driven by a higher NIM of 7.9% in 4Q24 (+114bps qoq, -28bps yoy) as the bank reduced its insurance coverage to 75% from 100% previously. Consequently, CIR improved to 63.3% (-1,417bps qoq, -1,825bps yoy), but CoC also rose to 3.1% in 4Q24 (+175bps qoq, +131bps yoy). LDR fell to 94% as of 4Q24 from 102% as of 3Q24 as loans grew lower (+3% qoq) than deposits (+11% qoq) as the bank strategically increased its liquidity buffer through a higher TD rate. The higher TD rate caused CoF to rise 37bps qoq to 3.7% (+74bps yoy).
Different FY25 trend compared to FY24
With less influence from Sharia lending and lower coverage on insured loans, we expect ARTO’s higher NIM and higher CoC trend to continue in FY25F. This should contrast with FY24 results, which saw lower NIM (-225bps) and CoC (-167bps). GTF-related loans contributed 22-23% of total loans, and this is expected to remain unchanged in FY25F as the bank will continue to grow its loans through its other partnerships and direct lending.
Continuing positive momentum in FY25F
Supported by its newly launched direct lending for consumers and SMEs, ARTO is aiming at 30% loan growth in FY25F (vs. FY24’s 36%), CIR at a max 60% (FY24’s 74%), CoC of a max 4.0% (FY24’s 2.0%), NPL of a maximum of 1% (FY24’s 0.24%), and LDR below 100% (FY24’s 94%). We trimmed our FY25/26F net profit by 4.2/11.4% to reflect the FY24 results and FY25 guidance.
Maintain Buy with a lower TP of Rp2,500
We tweaked our LT projection to account for lower loan growth and higher CoC, resulting in a lower TP of Rp2,500 (from Rp3,900 prev.), which is based on a 3-stage DDM, with an LTG assumption of 8.0% and a CoE of 10.0%. We maintain our Buy rating on ARTO on the back of its robust loan growth and asset quality. Risks to our view are higher CoF and higher CoC.
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