Sector Update / Banks / Click here for full PDF version
Author: Jovent Muliadi ;Anthony
- Aggregate big 4 bank-only profit only grew +1% yoy in Jan25 (below vs. cons' estimates of +6%) largely due to (at -58% yoy).
- 's weak earnings were attributed to steep increase in CoC but will subside in coming months (link). We also upgrade to Buy.
- We are turning more bullish on the sector post the adjustment on the earnings expectation and valuation. is our top pick.
Weak Jan25 bank-only results largely on ; the rests were in-line
Aggregate big 4 banks bank-only earnings grew +1% yoy to Rp12.4tr in Jan25, falling short vs. +6% of consensus FY25F estimates, primarily due to steep drop in 's earnings at -58% yoy. led in PPOP growth at +12% yoy, while SOE banks recorded modest growth of 1-6% yoy. Overall loan and deposit growth stood at +12% yoy and +5% yoy - with has both the strongest loan (+19% yoy) and deposit growth (+15% yoy).
: robust PPOP ; spike in CoC due to seasonal factor
bank-only profit reached Rp4.7tr in Jan25 (+6% yoy) and relatively in-line with FY earnings expectation of c.7%. PPOP was robust at +12% yoy supported by NII growth of +7% yoy and benign opex at +2% yoy. However, provision surged by +204%, leading to a higher-than-expected CoC of 0.8% (vs. FY guidance of c.0.3%) but this was more due to seasonal factor of Chinese NY holiday falls in month-end.
: steep drop in Jan25 results due to spike in provision
bank-only profit dropped by -58% yoy to Rp2tr in Jan25 due to steep increase in provision by +341% yoy, or equal to 5.7% CoC (vs. guidance of 3.0-3.2%). Meanwhile, PPOP still grew by +6% yoy. We believe Jan25 numbers is the peak of provisioning and expect the overall CoC to improve in subsequent months, in-line with gradual improvement in net downgrades. We upgrade BRI to Buy post its Jan25 results (link).
: improving liquidity shall reduce the concern post FY24 results
bank-only profit of Rp4tr in Jan25 (+4% yoy) was in-line. PPOP was up by +3% yoy supported by strong NII at +11% yoy (NII was c.5% throughout 2024) but was offset by opex (+23% yoy) amid its decision to do front loading. At the same time, its LDR improved to 93.6% in Jan25 from 98.6% with grew at 15% yoy (TD at 18% yoy) -refer to our previous note that highlighted its priority will be no longer in lending but funding.
: in-line, but driven by lower provision; weak PPOP
bank-only profit rose by +10% yoy to Rp1.6tr in Jan25, in-line with consensus estimate of +9%. However, still similar like 2024, the earnings was primarily driven by drop in provision at -21% yoy; PPOP growth was marginal at +1% yoy. NII growth was modest at +2% yoy but this was offset by +7% yoy increase in opex. Overall loan grew by +10% yoy but deposit was flat yoy, pushing the LDR up to 96.8% in Jan25 (vs. 87.7% in Jan24).
Upgrade to Overweight; our top pick is
Overall banks have dropped by -31% since Sep24 and -16% in Feb25 alone, we believe that current valuation of 2x P/B and 11x P/E (vs. 10Y average of 2.3x P/B and 14.8x P/E) are attractive; at the same time, we think most of the overhangs i.e. earnings, formation of Danantara and currency have been priced-in. Risks are AGM and currency which usually the weakest in 2Q.
Sumber : IPS