Bank Neo Commerce (BBYB IJ)
3Q25 Earnings Beat; Lower-than-expected Cost of Credits Offset Loan Book Contraction
- BBYB 3Q25 solid net profit of Rp188bn (+62% qoq) were driven by lower CoC of 13.2%, bringing 9M25 to Rp464bn, exceeding our FY25 est.
- Managements expect above-industry loan growth for FY26F driven by its digital lending and cautious stance in its commercial loans.
- We downgraded our rating to Hold with an unchanged TP of Rp400, as share prices have rallied 79% YTD and earnings growth will normalize.
9M25: Lower-than-expected CoC drove earnings
In 9M25, BBYB booked Rp464bn net profit (vs. Rp4bn in 9M24), exceeding our FY25 forecast on the back of a sharp CoC improvement to 15.8% (-848bps yoy). Despite the profitability gains, PPOP fell 18% yoy to Rp1.4tr as both NII and fee income declined. NIM compressed 115bps yoy to 15.0% as loans contracted 19% yoy, lowering LDR to 55%. While CIR edged up to 31.6%, opex efficiency remained intact, and asset quality improvements are expected to support earnings stability going forward despite soft loan growth.
3Q25: CoC driven earnings offsetting the loan contraction
BBYB delivered a solid 3Q25 performance with net profit reaching Rp188bn (+62% qoq), supported by a significantly lower CoC of 13.2% (-427bps qoq) that offset weaker PPOP (-6% qoq). NIM fell 110bps qoq to 14.1% as LDR declined to 55% following a 7% qoq drop in loan balance, while deposits grew modestly by 2% qoq. Rising opex (+13% qoq) led to a higher CIR of 35% as income remained muted. Asset quality improved, with NPL ratio down 18bps qoq to 2.9% and coverage up to 237%, while write-off ratio eased to 3.3% though LaR rose slightly to 11.5%.
Loan contraction bottoming with digital lending driven growth for FY26F
BBYB aims to stabilize NIM within the 14-15% range and maintain NPL below 3.5%, supported by enhanced underwriting and risk controls. Near-term loan balance will likely be maintained through end-2025, with growth resuming in FY26 at 12-15% yoy alongside new product launches in BNPL and digital lending.
Downgrade to Hold with an unchanged TP of Rp400
The strong earnings have driven share price to rally 79% YTD. We downgrade our rating to Hold with an unchanged TP of Rp400 based on 3-stage DDM as we see earnings growth momentum to moderate. We revised our 25/26/27F estimates by +63%/+37%/+66%, incorporating lower CoC but also lower loan growth. The downside risks to our view are higher delinquency risk, especially in the wholesale segment, and continuous loan book contraction and upside risk to our view is strong loan book expansion with steady asset quality.
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