Bank Neo Commerce (BBYB IJ)

1Q24 earnings beat: a profitable 1Q from lower provisions, ST challenges on NIM and disbursement


  • Driven by qoq lower provisions, BBYB recorded a positive 1Q24 net profit of Rp14bn, but at the expense of lower coverage.
  • 1Q24 NIM fell due to lower loans and resilient deposits (hence a sharply lower LDR) due to the absence of Akulaku Finance loans disbursement.
  • Maintain Buy rating with an unchanged TP of Rp600 with a low LDR and sufficient coverage to drive loans and earnings growth. 

Turning profitable in 1Q24 thanks to lower provisions

BBYB recorded net profits of Rp 14.2bn in 1Q24 (vs. net losses in both 1Q23 and 4Q23). Despite the 11% qoq lower NII and 17% qoq lower PPOP, BBYB reversed 4Q23 losses to profit thanks to lower provisions (-19% qoq). The lower provisions resulted in a lower CoC of 26.0% (from 29.9%). However, NPLs coverage fell to 142% (from 155%) and LaR coverage dropped to 32% (from 36%) as the NPLs ratio increased again (after falling in 4Q23) to 3.9%. 


Lower NIM caused by a lower LDR and lower EA yield

BBYB`s NIM fell to 18.7% in 1Q24 from 21.0% in 4Q23 as the LDR dropped from 78% to 65%. The lower LDR resulted from a resilient deposits balance which still grew 3% qoq despite the bank maintaining its savings and deposits rates (hence flat CoF) as the bank still faces a declining loans balance (-13% qoq to Rp9.4tr) due to the absence of new disbursement through Akulaku Finance. Aside from the LDR, the lower NIM also reflects a lower blended yield, as the bank started to pursue lower yield commercial loans, but with the expectation of better assets quality and a lower CoC. 


We maintain our FY24F net losses forecasts

Despite booking net profit of Rp14bn in 1Q24 (vs our FY24F net losses forecast and consensus estimate of Rp119bn and Rp24bn, respectively), we maintain our forecast as we still see ST challenges in earnings due to the limited disbursement through Akulaku Finance which inevitably will drag outstanding loan balances down. Upside to loan balances would come from the resumption in the disbursement of Akulaku Finance loans, collaboration with Lazada, and the currently low LDR (high deposits).


Maintain BUY despite the ST overhang in loans growth

We maintain our forecasts and valuation which use the 3-stage DDM. We retain our Buy rating with a TP of Rp600 (unchanged), as we see that the low LDR and resilient customer deposits should support loans growth expansion (driven by the resumption of Akulaku Finance loans and Lazada collaboration, expected by 2H24). Risks to our view include higher-than-expected NPLs and lower loan balances. 


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