Bank Negara Indonesia (BBNI IJ) - 1Q24: higher other operating income and lower provisions offset lower NIM from a higher CoF

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Bank Negara Indonesia (BBNI IJ)

1Q24: higher other operating income and lower provisions offset lower NIM from a higher CoF

BBNI booked 1Q24 NP of Rp5.4tr (+2% yoy, +3% qoq) supported by higher other op. income and lower provisions, offsetting the lower NIM.
To boost NIM going forward, the bank aims to reprice its loans and reduce its exposure to high-rate USD time deposits.
Maintain Buy rating with a TP of Rp6,800 (unchanged). Key catalysts are NIM recovery and a steady CoC.

Lower NII (and NIM) caused by a higher CoF

BBNI booked 1Q24 NP of Rp5.4tr (+2% yoy, +3% qoq), in line with our forecast (at 24.3% of FY24F est) but slightly below the consensus (at 22.5%). The bank reported lower 1Q24 NII of Rp9.4tr (-10% yoy, -7% qoq) as NIM fell to 4.0% (1Q23/4Q23: 4.7/4.4%) due to an increase in the CoF to 3.2% (1Q23/4Q23: 2.3/2.6%). The higher CoF was driven by USD deposits (+40bps), while IDR deposits increased by a smaller rate (+20bps). To minimize the impact of the high USD TD rate, which could reach 6.8%, the bank has issued US$500mn (c. Rp800tr) of bonds with a coupon of 5.3%, which is part of the US$2bn re-tap bond.

1Q24 NP growth supported by other operating income and lower provisions

Offsetting the lower NIM, BBNI’s other operating income grew to Rp5.1tn (+16% yoy), albeit still 20% lower than 4Q23’s high base, while provisions fell to Rp1.7tn (-19% yoy, -30% qoq). The 1Q24 CoC of 1.0% ( -34bps yoy, -45bps qoq) was supported by the release of the corporate segment provisions at -0.6% in 1Q24 (vs -0.7% in 1Q23) and a lower CoC in the consumer and small enterprise segments.

Aiming to increase NIM while maintaining a low CoC

To support earnings, BBNI will continue to maximize fee-based income and achieve a lower CoC (at c. 1%). Concurrently, to bring NIM closer to the current guidance of 4.5% vs 4.0% in 1Q24 (no new guidance yet), the bank aims to reprice its loans (c. Rp30-50tn) by 50bps in 2Q24 and lower its USD deposit rate, partly backed by the USD bond issuance and less aggressive USD loan disbursement. To maintain a low CoC, the bank aims for stricter loans disbursement to the SME segment, while continuing to maintain assets quality in the consumer and corporate segments.

Maintain Buy rating with an unchanged TP

We keep our FY24-25F forecast and valuation unchanged (CoE: 10.1%, FY14F RoE: 14%). Hence, our FV PBV is maintained at 1.5x and we keep our Buy rating on the stock. Risks to our view are a persistently high CoF, failure to reprice loans, and higher NPL.

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