Bank Mandiri (BMRI IJ)

Inline 2Q24/ 1H24 earnings on resilient NIM, with intact sound asset quality

 

  • BMRI reported 1H24 net profit of Rp26.6tr (+5% yoy) supported by 20% loan growth and lower CoC, offsetting the lower NIM.
  • Mgmt revised its FY24 loan growth target from 13-15% to 16-18% while maintaining its CoC target at 1.0-1.2%.
  • Maintain Buy rating with an unchanged TP of Rp7,400 based on 10.3% CoE (5-year avg.) and 20.9% FY24F ROE, implying 2.4x FY24F PBV.

 

Inline 2Q24 earnings supported by resilient qoq NIM in 2Q24

BMRI reported consolidated net profit of Rp26.6tr in 1H24 (+5% yoy), in line with our estimate of Rp26.5tr, representing 47% and 48% of our and the consensus FY24 estimates respectively. NIM declined to 5.0% (-48bps yoy) in 1H24 as loan yield fell to 8.4% (-15bps yoy) and CoF rose to 2.7% (+48bps yoy). However, on a qoq basis, NIM was relatively flat at 5.0%, despite a 7bps qoq decline in loan yield to 8.4%. This was supported by relatively flat CoF at 2.7% (+3bps qoq), made possible by a 65bps qoq increase in CASA to 75.0%.

 

The Livin App: gateway to improve CoF

BMRI saw an increase in its Livin app users to 25.6mn (+35.8% yoy) which boosted transaction value (98% of retail transactions were done via the app in 1H24). This translated into transaction frequencies, value, and fee-based income. Fee based income generated by the Livin app reached Rp1.2tr in 1H24 (+26.4% yoy). The development of the Livin app translated to an increase in savings deposits (+13.4% yoy, +3.2% qoq) as well, which allowed the CoF to remain flat qoq during a period of rising interest rates. Going forward, the higher usage of Livin merchant, which has 2mn users in its first year since launch, may offer further support for BMRI`s CASA retention.

 

Robust asset quality supporting bottom line

Aside from the resilient NIM and high CASA ratio, BMRI’s earnings were supported by its asset quality, as reflected in an NPL ratio of 1.2% in 1H24 (flat qoq vs. 1.6% in 1H23) and a LaR ratio of 7.8% in 1H24 (-67bps qoq, -258bps yoy). The strong asset quality drove the CoC down to 0.9% in 2Q24 from 1.0% in 1Q24 and 1.3% in 2Q23.

 

Maintain Buy rating with an unchanged TP of Rp7,400

We tweaked our forecasts to reflect higher loan growth, lower NIM and lower CoC post 2Q24 earnings. Our TP remains at Rp7,400 as our FY24F NP forecasts is relatively unchanged at Rp56.8tr (+3% yoy), while we also maintain our CoE assumption at 10.3%. We reiterate our Buy rating on the bank’s attractive 20.9% ROE and c. 4% dividend yield. Downside risks to our view are lower-than-expected loan yield and deteriorating asset quality.

 

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