Bank BTPN Syariah (BTPS IJ)
FY24 Results: in line net profit with improving asset quality trend
- BTPS booked a net profit of Rp1.1tr in FY24 (-2% yoy), with CoC of 12.6% (FY23: 16.0%), in line with our and consensus FY24 estimates.
- 4Q24 NP improved to Rp291bn (+33% qoq, +278% yoy) as CoC decreased to 9.7%; mgmt. expects CoC to be single digit in FY25F.
- Maintain Buy rating with an unchanged TP of Rp1,200. Key risk to our call includes changes in asset quality trend.
In line FY24 net profits supported by lower CoC amid lower lending balance
BTPS recorded a net profit of Rp1.1tr in FY24 (-2% yoy), in line with our (101% of FY24F) and consensus (99%) estimates. BTPS’s CoC improved to 12.6% in FY24 from FY23’s high base of 16.0%, despite seeing write-offs increasing to Rp1.7tr in FY24, up from Rp1.5tr in FY23. NPL rose from 2.9% in FY23 to 4.0% in FY24, while coverage shrank from 363% to 242%. On the other hand, the LaR ratio improved from 12.4% to 7.0%, and coverage increased from 86% to 137%. This trend could indicate that most of the LaR fell to NPL, while new loan disbursements had better quality.
Improved CoC and write-off sequentially
BTPS posted a net profit of Rp291bn in 4Q24 (+33% qoq, +278% yoy from a low base), driven by lower CoC. After peaking at 23.7% in 4Q23, BTPS’s CoC decreased to 9.7% in 4Q24 (3Q24: 14.7%), which we believe was due to the better quality of newly disbursed loans, as shown by the improved LaR ratio.
The LaR ratio declined to 7.0% from 8.1%. Gross write-offs improved from ~Rp500bn in 1Q24 and 2Q24 and ~Rp350bn in 3Q24, decreasing to ~Rp300bn in 4Q24.
FY25 guidance: conservative on growth with higher focus on asset quality
The management is still prioritizing asset quality and is comfortable with flat loan growth for FY25. Thanks to the implementation of Solidarity fund and better new loan quality, the bank expects the 4Q24's CoC to be maintained and is eyeing CoC of below 10% and stable NPL coverage at ~240% in FY25F. Management also indicates that they are looking for a new growth engine from synergy with SMBC corporate and consumer loan, and new customer line, i.e., upper ultra micro, with ticket size of up to 25 million with soft collateral model.
Maintain Buy with an unchanged TP of Rp1,200
BTPS's share price has increased by 13% since our upgrade (vs. peers' 1%) which we believe is justified given the cheap valuation of 0.7x PBV and bottoming out asset quality. We maintain our -1SD 2-year avg. inverse CoE of 11.8%, reflecting concern on asset growth, arriving at FV PBV of 0.9x. Risks to our view are deteriorating asset quality of newly disbursed loans.
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