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Fueled by a fifth market speculation of ANZ’s potential divestment plan, we initiate coverage on Bank Pan Indonesia (PNBN), Indonesia’s 3rd largest private bank by market cap, with BUY rating and TP of IDR 2,200, implying 2025 PBV of 1.0x and 15.5% potential upside. Our BUY rating is premised on 1) ANZ’s 38.8% planned stake sale, 2) Corporate segment assets quality improvement and 3) improved NIM on higher yielding assets disbursement. PNBN’s strategy to shift toward the commercial sector and lower CoC should help support growth, allowing for earnings CAGR of 11.3% in 2024F-26F. Risks: unconcluded divestment plan, residual NPLs from commercial segment and higher-than-expected CoF.
ANZ’s fifth divestment talk to potentially result in dividends and higher ROEs. Realization on the Australia New Zealand Banking Group’s (ANZ) plan to divest its 38.8% stake in PNBN should serve as positive catalyst. Earlier this year, ANZ Chief Executive Officer Shayne Elliott stated that he aimed to grow his firm’s presence in India, China, and Vietnam, while at the same time seeking to leave PNBN and Bank of Tianjin Co. While ANZ has not set out any specific timeline, we believe materialization of this divestment, a fifth time since 2015, could positively impact PNBN’s financial performance, given future potential dividend disbursement, which could raise ROE from 5.3% in 2024F to 8.2% in 2025F, assuming payout ratio of 50%.
Higher yielding loans disbursement with improved assets quality. PNBN will continue to maintain its strategy of switching from corporate to commercial sector, targeting enterprises with ticket sizes between IDR 5bn-IDR 7bn, primarily due to the sector’s higher loan yields compared to corporate segment. In addition, the bank will concentrate on improving assets quality in the corporate segment and increasing its mortgage loan disbursements in the consumer segment. However, our projection for PNBN’s future loan growth is quite modest, at 7.7% p.a. in 2024F-2026F (peers avg: 11.2% p.a.), as the increased exposure to commercial (35.5% in 2026F, from 32.4% in 2023) and consumer segments (18.7% in 2026F, from 17.4% in 2023) will not be sufficient in offsetting the corporate segment’s softer growth. Additionally, NPL ratio declined from 2.97% in FY23 to 2.79% in 1H24, thanks to improved assets quality in the commercial segment. Consequently, we project PNBN’s cost of credit to decrease from 2.1% in FY23 to 1.7% in FY24.
Initiate with BUY based on 1.0x 2025F PBV with 15.5% potential upside. Our positive view on PNBN is based on normalized ROE. We incorporated 8.8% COE with risk-free rate of 6.5%, ROE of 8.5% in 2025F, before gradually improving to 8.9% in 2026F, and 5% long-term growth. Our TP of IDR 2,200 implies PBV of 1.0x, reflecting 15.5% potential upside despite 45.3% YTD outperformance of the JCI. Risks to our call include unconcluded divestment plan, residual NPLs from commercial segment and higher-than-expected CoF. BUY.
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