Steady business in FY24; predicting similar trajectory next year

BMRI posted decent FY24 performance, and we are thus led to expect that they will achieve their profit target by the end of the year. As of 10M24, BMRI posted 6.3% net profit growth, on the back of higher volume growth in both corporate and commercial businesses. Bear in mind however that such growth in a large volume implies a sacrifice of their NIM, as our ground check revealed that BMRI is slashing prices to score volume from its main competitors. NIM in 10M24 was around 4.7%, which was similar to 9M24 level. We do not expect to see any NIM expansion, at least until the beginning of the year, as another rate cut will not impact NIM. SRBI still loiters around 6.7% - 6.8%, 10Y bond yield also hovers at that level, indicating that despite a BI rate or around 6.0%, the market is still relatively comfortable with mid-6% level.

Temporary outflow - but earnings trajectory superior to that of BBRI

Recent weakness in BMRI share price followed a spiking bond yield and depreciating IDR; in fact, we also noted how the recent outflow was stimulated by profit-taking and potential uncertainty about the Danantara plan. While this is still far from a reality, we suspect it also adds risks to any potential of dividend payments, or any investment that Danantara would venture upon in the future. BMRI's net outflow over the past three months was around -IDR3.5 tn – only 1/10 of that of BBRI, at IDR33 tn. In terms of valuation, BMRI is relatively pricey, despite a recent turnoil in the market. However, its heftier valuation compared to BBNI and BBRI should be justified, as ROE is now superior compared to that of BBRI: they do not expect any shift in business structure, or improvement in funding structure. Therefore, we roll forward our valuation to FY25 and come up with new TP of IDR7,550 (prev. IDR 7,500) or 20% upside from the current price. Our new TP implies 2.2x FY25 BV or around +1SD valuation. Yes, it is pricey but with strong ROE and earnings growth, it remains a top pick among banks, and will benefit from a large rate cut.

BMRI - Ready to Roll in FY25

BMRI - Ready to Roll in FY25

Mardy H. Sutanto

PT Bank Mandiri Indonesia Tbk

12 December 2024 - 07.00am

BMRI - Ready to Roll in FY25

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