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Healthy growth from lower-risk segments. BBNI booked solid quarterly loan booking in 4Q23, driven by top-tier clients. This enabled the bank to post +7.6% YoY loan growth in FY23, with private corporate loan growth of +14.3% YoY. We expect the bank's loan growth to accelerate in FY24, given positive progress in the cleanup of SOE and commercial segments. BBNI projects to book FY24 loan growth of +9-10% YoY, supported by commercial and consumer segments.
Liquidity tightening hurt NIM in 4Q23. BBNI’s bank-only NIM came in at 4.4% in 4Q23 (-40bps QoQ), with an FY23 NIM of 4.6% (-20bps YoY). The drop in the bank’s loan portfolio risk and higher TD rates led to a decline in NIM as liquidity tightened in 4Q23. BBNI expects FY24 NIM to range between 4.5%-4.6% (SSI: 4.5%), even though its CoF might remain elevated in 1H24, as we believe that it will be partly offset by the increase in loan yield as the bank will start to disburse more loans to commercial debtors, albeit more cautiously as the risk management system improves. It is worth highlighting that the reformation of BBNI’s commercial segment has been going on for three years, and we expect to see noticeable improvements in loan disbursement in the segment in the next 2-3 years.
Continuous LAR improvement. On the asset quality side, LAR came in at 12.9% in Dec-23 vs. 14.4% in 3Q23 and 16.0% in Dec-22, and the bank expects its LAR to continue to improve to less than 10% (SSI: 9%) and NPL ratio to go down below 1.8% (SSI: 1.8%) in FY24. In line with the improvement in LAR ratio, BBNI managed to lower their cost of credit (CoC) to 1.4% in FY23 vs. 1.9% in FY22, and it projects CoC to fall below 1.4% in FY24 (SSI: 1.3%). The bank’s LAR coverage came in at 52.7% in 4Q23 vs. 48.8% in 4Q22, while its NPL coverage ratio went up to 319% in 4Q23 vs. 278% in 4Q22.
Maintain BUY rating and TP of IDR 6,600 (1.5x PBV). At this juncture, we continue to believe that the management will continue to strengthen BBNI’s risk management system, particularly for wholesale and SMEs; thus, the bank might see improvements in its NIM in the next 2-3 years as it will start to disburse more loans to SMEs. We maintain our BUY rating with a TP of IDR 6,600/share for BBNI, implying 2024F PBV of 1.5x (Sector: 2.9x). Key downside risks: higher-than-expected CoC, higher CoF (which might hurt the bank’s NIM even further).
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.
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