Cheapest in the Sector

Retain BUY with TP of IDR 1,600 (0.43x 2026F PBV) on undemanding valuation. BBTN, helped by recently released solid 1Q26 net profit of IDR 1.1tn (+22.6% YoY, -7.6% QoQ), is on target to meet our full-year 2026F estimate, as we expect higher provisions in the subsequent quarters. BBTN’s 1Q26 earnings were driven by lower CoF and normalized credit cost, which lifted profitability despite margin pressure and in-line operating income. Supported by solid NII growth and lower provisioning, net profit was above expectations at 31.2% of our estimate and 29.6% of consensus. Looking ahead, management maintains guidance for 8–10% loan growth, 7–9% deposit growth, credit cost at 1.0–1.2%, and stable NIM albeit below previous peak levels. While NIM expansion remains constrained by falling assets yields, improving funding mix and improved assets quality provide support for earnings resilience. Thus, we retain BUY on BBTN with unchanged IDR 1,600 TP, supported by improving CoF trajectory, stronger assets quality, and undemanding valuation relative to peers (Figure 2). Biggest risk to our call: higher inflation to raise interest rates and NPLs.

 

2Q26F net profit -20.5% QoQ, -9.8% YoY on lower NIM and higher provisions. We estimate BBTN to book 2Q26F net profit of IDR881bn (-20.5% QoQ, +9.8% YoY), driven by normalized credit cost, while margin expansion remains limited amid ongoing pressure on assets yields. Following strong 1Q26 performance, earnings were supported by NII growth of +13% YoY, lower provisioning with CoC at 0.9%, and stable NIM at 3.6%, as lower CoF offset yield compression. Loan growth remained solid at ~10% YoY, driven by continued expansion in non-housing segments. For 2026F, we maintain our forecast for net profit at IDR3.5tn (+1.4% YoY), as we believe CoC will normalize in coming quarters while NIM is expected to decline due to ongoing pressure on asset yields.

 

Liquidity remains manageable, supported by improving funding mix. We expect 2Q26F liquidity to remain stable (LDR: ~94–95%), supported by steady deposit growth and ongoing optimization of funding mix. In 1Q26, deposits grew ~10% YoY, driven by time deposits (+12% YoY), while CASA grew +8% YoY, bringing CASA ratio to 50.2%. The improvement in funding mix was due to higher share of mid-institution deposits (~36% vs. 28% in 1Q25), carrying lower cost compared to large institutions. Loan growth remained solid at 10.3% YoY, mainly on non-housing loans, in line with BBTN’s strategy to increase non-housing mix toward ~30% over the medium term, which should support more balanced growth and margin stability despite near-term funding cost trade-offs.

 

Assets quality improving, with higher buffers and stronger capital position. With NPL at around ~3.0–3.2%, supported by better mortgage collection and tighter underwriting, 2Q26F assets quality should remain stable. In 1Q26, gross NPL improved to 3.1% (vs. 3.3% in 1Q25), while loan-at-risk declined to 19.6%, reflecting early success of the bank’s collection strategy. Provisioning declined significantly (-47% QoQ, -8% YoY), bringing credit cost to 0.9%, below guidance, while coverage ratio improved to ~124%, indicating stronger buffer positioning. Capital remains solid with CAR at ~20.6%, providing sufficient headroom for growth and supporting more sustainable earnings outlook into 2026.