Menu
3Q23 review: +13.5% YoY earnings growth on mixed volume/quality improvement
The big-4 banks have reported their 3Q23 financial statements, with (consolidated) net profit growth of +13.5% YoY (+4.0% QoQ). It is worth highlighting that BMRI’s bottom line was the only one beating ours and cons (the other three reported in line numbers), supported by its low credit cost of 0.96%, lower than the bank’s previous guidance (1.1-1.3%). The big-4’s solid net profit growth was driven mainly by two factors: better loan growth and lower provision expenses. The largest drops in provision expenses were reported by BMRI (-63.6% YoY) and BBNI (-12.9% YoY), while BBRI was the only one reporting an increase in its Cost of Credit (CoC) in 3Q23, which was consistent with an uptick in its NPL ratio as the bank had recently downgraded some Covid-19 restructured loans and some debtors affected by El-Nino to NPL. Regarding loan growth, the big-4 banks reported (consolidated) loan growth of 11.8% YoY and 3.7% QoQ in 3Q23, driven mainly by consumer (+13.3% YoY) and corporate loans (+13.1% YoY). Despite the liquidity tightening in the banking sector, the big-4 banks were still able to book higher NIM in 3Q23 (+17bps QoQ and +16bps YoY), supported by the increase in loan yield, especially in the corporate segment, which helped offset the increase in CoF (+9bps QoQ and +74bps YoY).
Remain positive for the rest of the year
Following the release of 3Q23 results, most banks are confident that they can meet their loan growth and NIM targets for this year, while BBCA already hinted that it might be focusing on loan growth next year, supported by the fact that the bank is able to lower its LAR and maintain its NIM. Regarding NIM, even though there is a risk that the Fed rate may have to remain higher for longer than market had initially expected, all the banks are confident that they could maintain NIM at the current level; BBCA still has the highest CASA ratio amongst the big-4 banks (79.9% in 9M23) and low LDR ratio (67.4% in 9M23), BBRI will keep pushing the growth of Kupedes and other high-yielding ultra-microloans (PNM and Pegadaian) to offset the increase in its CoF, while BMRI and BBNI still have room to reprice its corporate loan yield. Regarding asset quality, most banks are quite confident that their LARs could improve further going forward, and they are already comfortable with the current LAR and NPL coverage ratio, suggesting that CoC may still decline in the coming years.
OVERWEIGHT on the sector, with BMRI and BBNI as our top picks
We maintain our Overweight rating for the sector due to the robust 3Q23 performance, particularly in comparison to other sectors. Our pecking order is as follows: BMRI (IDR 7,200/share), BBNI (IDR 5,800/share), BBRI (IDR 6,100/share), and BBCA (IDR 10,500/share). We chose BMRI as our top pick, mainly due to 1) adequate coverage, 2) strong loan growth but with continuous improvement in asset quality, and 3) NIM expansion due to strong CASA. BBNI’s management will continue improving its risk management system, and we believe it will continue to increase market share amongst Indonesia’s top tier 1 corporates. Downside risks: slower economic growth than anticipated, weaker NIM and loan growth than expected, and higher cost of credit.
Samuel Sekuritas Indonesia is a leading Indonesian securities brokerage firm. Established in 1997, the firm has grown to become one of the most respected and trusted financial services companies in the country. With a wide range of services and products, Samuel Sekuritas Indonesia has become a trusted partner to many investors, both institutional and individual.
The company offers a variety of financial services, including equity, debt and derivative securities brokerage services, research and portfolio management, asset management and capital market services, as well as a range of other investment solutions. Samuel Sekuritas Indonesia is also a leader in providing financial education and training, and has established itself as a leading provider of investor relations services.
The company has a strong research capability and is committed to providing its clients with up-to-date and reliable market analysis and recommendations. It also has a team of experienced and knowledgeable professionals who are dedicated to providing quality service to its clients. As a result, Samuel Sekuritas Indonesia has become a preferred partner for many investors in Indonesia.
In addition to its financial services, Samuel Sekuritas Indonesia also offers a range of other services, such as corporate finance and advisory services, mergers and acquisitions, and venture capital.
