Bank Tabungan Negara (BBTN.IJ Rp1,095; BUY TP Rp1,300) FY26 Outlook: Higher Volume and Lower CoC to Offset the Potentially Lower Earning Assets Yield

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Bank Tabungan Negara (BBTN IJ)

FY26 Outlook: Higher Volume and Lower CoC to Offset the Potentially Lower Earning Assets Yield

We forecast FY26F net profit of Rp3.2tr (+3.9% yoy) for BBTN, supported by robust loan growth (+9.8% yoy) and lower CoC.
We see potential NIM upside from KUR housing programs but asset quality risks might arise given its nascent stage.
Maintain Buy rating with a lower TP of Rp1,300. Risks to our view include weaker asset quality and stagnant CoF.

Net profit growth to be driven by robust loan growth and lower CoC

In FY26F, we expect loan growth to increase to 9.8% from 7.8% in FY25F, with LDR being broadly stable at 92.9% (vs. FY25F: 92.2%). Although we estimate a 25bps lower CoF, we forecast a 22bps decline in NIM in FY26F, reflecting a 40bps lower EA yield. This follows the absence of the one-off accounting adjustment applied at the start of FY25, which had temporarily lifted yields, hence, we expect EA yield to normalize in FY26F. We project a lower CoC of 1.2% (vs. FY25F: 1.6%) in FY26F and anticipate net profit of Rp3.2tr (+3.9% yoy). Consequently, we expect ROE to soften slightly to 8.9% (vs. FY25F: 9.2%).

Potential upside in BBTN’s housing KUR scheme

Housing KUR (demand side) faces a fixed 6% interest rate, with a 5-year subsidy period and subsidy rates of 10% for loans of Rp10-100mn and 5.5% for loans of Rp100-500mn with expected CoC at around 80bps and insurance premiums of around 1.75% that are excluded from yield calculations. Housing KUR (supply side) faces 6% interest rate with 5% rate subsidy and expects a CoC of 1.5%. Funding for KUR housing is fully sourced from BBTN, implying the bank’s normal CoF applies. If executed correctly, these could provide positive upside for BBTN given their higher NIM of 5.5-11% vs YTD’s NIM of 3.8%. Given the uncertainty, we have yet to bake them into our forecasts.

Stable growth outlook but asset quality risks linger

Mgmt guides loan growth to be at 10-11% in FY26F, excluding KPP loans. Mgmt also expects CoC to ease to 1.0-1.1% in FY26F from 1.6-1.7% in FY25F. However, asset quality risks persist, particularly in non-subsidized mortgages, the bank’s rapid corporate loan expansion, and potential KUR housing loans.

Maintain Buy with a lower TP of Rp1,300

We revised our FY25/26F earnings forecasts by -1.3%/+7.8% to factor in a higher CIR but a lower CoC for FY26F. We maintain our Buy rating with a lower TP of Rp1,300 after rolling forward our valuation to FY26F. Our TP is based on a GGM approach, using a 14.8% 5-year avg. CoE and an FY26F ROE of 8.9%, which yields an implied FV PBV of 0.5x. Key risks to our call include weaker asset quality in the wholesale segment and a stagnant CoF.

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