Bank Jago (ARTO IJ)
3Q25 Earnings Miss on CoF Pressure; Signs of Improvement from Sep25 Onward
- ARTO booked NP of Rp72bn in 3Q25 (+8% qoq, +101% yoy), pressured by higher CoF, bringing 9M25 below est. at Rp199bn (+132% yoy).
- ARTO’s CoF rose 35bps qoq to 4.5% on tightened liquidity but CoF improved 5bps in Sep25 and continuing in MTD Oct25.
- We maintain our Buy rating but lowered our FY25-27F est. to account for higher CoF, resulting in a lower TP of Rp3,100.
9M25: Robust earnings amid CoF pressure and higher CoC
In 9M25, ARTO’s net profit reached Rp199bn (+132% yoy), below ests. at 69%/73% of our/cons FY25F. NIM rose to 8.5% (+134bps yoy), offsetting a higher CoC of 4.0% (+251bps yoy), consistent with ARTO’s higher-risk lending strategy. CASA ratio fell to 48% (-845bps yoy) and CoF rose to 4.5%, though management indicated easing pressure from Sep25 onward. CIR improved to 58% (-2,007bps yoy) as stronger NIM and fee income offset higher opex. NPL and LaR remained manageable at 0.4% and 5.9%, respectively.
3Q25: Affected by higher CoF and operating costs despite robust income
ARTO booked Rp72bn net profit in 3Q25 (+8% qoq, +101% yoy), showing solid annual growth, though monthly momentum slowed due to higher CoF. NIM rose 20bps qoq to 8.3%, supported by higher EA yield that offset a 35bps CoF rise, reflecting reduced insurance coverage. Loans grew 9% mom and deposits 7% mom, pushing LDR to 98%, with GOTO-related loans at 20-21% and new direct lending at 4-5%. Fee-based income rose 15% qoq and 53% yoy, though this also lifted opex. Opex remained high at Rp424bn (+4% qoq, +22% yoy), mainly from manpower and IT costs.
Remain cautiously optimistic in direct lending and better CoF
Management guides FY25F loan growth at 35–40%, with CoF expected to improve further in 4Q25. CoC is guided to stay below 4%, while opex growth remains above 20% before easing to mid-teens longer term. CIR is targeted below 60% in 2025F and below 40% over time. Risk-adjusted NIM should improve in FY26F, driven by direct lending and lower CoF. ARTO plans to expand retail offerings through insurance and gold-related products.
Maintain Buy with a lower TP of Rp3,100
We maintain our Buy rating on ARTO, supported by a robust loan growth outlook, solid asset quality, and better margin for 2H25. We lowered our FY25/26/27F estimates by 4.2/6.6/1.1% to account for higher CoF, lowering our TP to Rp3,100, 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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