Bank Jago (ARTO.IJ Rp 1.870; BUY TP Rp 3,300) 2Q25 Earnings Miss, Despite Record Profit on Lower Provisions; Margin Pressure Persists

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Bank Jago (ARTO IJ)

2Q25 Earnings Miss, Despite Record Profit on Lower Provisions; Margin Pressure Persists

ARTO posted 2Q25 net profit growth of +11% qoq/ +136% yoy, resulting in 1H25 NP of Rp127bn (+154% yoy), but below our/cons ests.
maintains its +30% loan growth guidance and expects a delayed impact from rate cuts to bring CoF lower in 2H25.
We maintain our Buy rating but lowered our FY25-27F est. to account for higher CoF, resulting in a lower TP of Rp3,300.

Record Profit Amid Margin Pressure and Lower Provisions

ARTO booked a record-high quarterly net profit of Rp67bn (+11% qoq, +136% yoy) in 2Q25, supported by an 18% qoq decline in provisions, which offset a 10% qoq drop in PPOP due to compressed NIM. NIM declined to 8.1% from 8.9% in 1Q25, as CoF rose on the back of a lower CASA ratio and a shift toward TDs. EA yield also softened as the bank prioritized higher quality lending, which in turn improved CoC to 3.5% from 4.7% in 1Q25. Meanwhile, CIR rose to 60.1%, driven by lower NII and higher IT opex, although this still marked a significant yoy improvement from 77.2% in 2Q24.

Strong PPOP Growth, but 1H25 Earnings Miss Estimates

Despite reporting Rp127bn in 1H25 net profit (+154% yoy), earnings fell short of our and consensus est. (42% of FY25F). Nonetheless, PPOP surged 218% yoy, driven by strong NII and robust fee income. NIM rose to 8.6% in 1H25 from 7.3% in 1H24, supported by an increase in loan yield to 14.1%. CIR improved to 58.2% as income growth outpaced the 21% yoy rise in opex, which was driven by increased transaction volume and IT investment.

Solid Growth Outlook Backed by Digital Initiatives and Loan Momentum

ARTO maintains its +30% loan growth guidance, with solid 2Q25 loan and deposit growth of 37% yoy (+6% qoq) and 51% yoy (+5% qoq), respectively. Mgmt. expects CoF to trend lower in 2H25 following rate cuts, though the impact may be delayed. Continued improvement in CoC will depend on disciplined credit quality management. Performance will also hinge on monetizing new digital features such as GoPay Deposito, FX-linked debit cards, and digital asset custody. While risks remain around cost pressures and funding, we believe ARTO’s structural initiatives and scalable platform continue to position it well for long-term growth.

Maintain Buy with a TP of Rp3,300

We maintain our Buy rating on ARTO, supported by robust loan growth outlook, solid asset quality, and better margin for 2H25. We lowered our FY25/26/27F estimates by 4.7/4.1/3.4% to account for higher CoF, lowering our TP to Rp3,300, based on a 3-stage DDM, with an LTG assumption of 8.0% and a CoE of 10.0%. Risks to our view include higher CoF and higher CoC.

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