10M22 Bank-Only Results
Bank-only net profit rose +49.5% YoY in 10M22
Banks under our coverage have posted their bank-only 10M22 results; the combined net profit reached IDR 121.6tn (+49.5 YoY, 9M22: +55.3% YoY), mainly thanks to the decline in provision expense to IDR45.1tn (-30.7% YoY). Net interest income (NII) booked positive growth of +11.7% YoY, as NIM improved to reach an average of 5.03% in 10M22 (+18bps YoY), and loan growth also improved to +10.8% YoY. Notably, BMRI and BBRI recorded the highest PPOP growth among the banks under our coverage (+24.0% YoY and +18.8% YoY, respectively). BBRI is concentrating on the micro-segment, which is expected to grow by +13-15% YoY in FY22, while BMRI is focusing on high-yielding segments, as the company sees an opportunity to disburse more loans in the commercial and small segments. Regarding earnings growth, BBNI booked the highest earnings growth among the banks under our coverage (+83.4% YoY), followed by BBRI (+65.6% YoY), BMRI (+59.1% YoY), BBTN (+44.4% YoY) and BBCA (+17.7% YoY).
Big banks remain the primary contributor to loan growth
Banks under our coverage recorded a combined loan figure of IDR 3.49tn (+1.0% MoM, +10.8% YoY) as of Oct-22. The situation hasn’t changed much since last month, with big banks remain the primary contributor to loan growth (+11.1% YoY), while smaller banks’ loan growth remain relatively unchanged (+7.6% YoY). On an annual basis, loan recovery was led by BBCA (+14.4% YoY), followed by BMRI (+12.1% YoY), BBNI (+10.2% YoY), BBRI (+8.6% YoY), and BBTN (+7.6% YoY).
Deposits growth accelerated in Oct-22
Deposits increased at a higher rate than in Oct-22, with combined deposits of banks under our coverage reaching IDR 4,423tn (+4.9% MoM, +6.4% YoY). The bank under our coverage with the largest deposit growth rate was BMRI (+17.5% YoY), followed by BBNI (+12.9% YoY), BBCA (+10.0% YoY), BBRI (+6.3% YoY), and BBTN (+1.9% YoY). On the monthly basis, we noted that the current accounts of all the major SOE banks grew by 20% MoM, mostly due to government subsidies and compensations received by Pertamina throughout the month. Following this development, liquidity on the banks under our coverage was left ample, where combined LDR stood at 78.9% in Oct-22 (Sep-22: 81.9%, Oct-21: 78.8%).
OVERWEIGHT for the sector, with BBRI and BMRI as our top picks
We remain at OVERWEIGHT on the sector, as we believe the banks under our coverage can absorb the potential risks of higher NPLs going forward, and the drop in NIM should be manageable, paving the way for earnings growth of 14.3% in 2023F. We still prefer big banks to smaller banks, as they will continue to lead the banking sector’s loan growth, and they will be able to enjoy a lower cost of funds amidst tightening liquidity conditions. BBRI (BUY, IDR 6,200) and BMRI (BUY, IDR 12,600) remain our top picks in the banking sector. We also have a BUY rating for BBNI (BUY, IDR 11,700), but it has a different strategy compared to BMRI, focusing more on asset quality improvement than loan growth. While BBCA (HOLD, IDR 9,700) has a solid outlook in 2023F, we see its valuation as full. Downside risks: slower economic growth than anticipated, weaker NIM and loan growth than expected, and higher cost of credit.