BMRI
Contact our analyst achmadi
20% UPSIDE, Buy
14th March 2024
Price Rp 7,400
Target price Rp 8,850
Continued Double-Digit Profit Growth
In 2023, BMRI reported a robust growth in consolidated net income of 33.74% year-over-year (YoY), increasing from IDR 41.17 trillion to IDR 55.06 trillion. This achievement positioned BMRI as the second-best performer among the big-four banks in terms of profit growth. The growth was primarily fuelled by a significant increase in interest income, which rose by 17.94%. Another contributing factor was the 37.06% YoY reduction in provision expenses. We predict that BMRI will continue to enhance its profitability in 2024, with an expected increase of 25.62% YoY to reach IDR 69.17 trillion.
Leading in Loan Growth
As of December 2023, BMRI's consolidated loan portfolio reached IDR 1,398 trillion, marking a substantial 16.29% YoY growth and positioning it as the leader among the big-four banks. The Commercial segment led with a 21.24% YoY growth. The Social Service and Business Service sectors were the top growth sectors, expanding by 55.02% and 32.93% annually, respectively. We anticipate that BMRI will further expand its consolidated loan portfolio by 14.31% YoY.
Robust ESG Commitment with Sustainable Financing
BMRI has demonstrated a serious commitment to implement ESG practices in its business. It is evident that BMRI’s loan portfolio includes sustainable financing, accounting for 23.98%, which is 454-bps higher than in 2022. As of December 2023, BMRI’s total sustainable financing amounted to IDR 264 trillion, representing a significant increase of 15.79% YoY. Of this amount, IDR 129 trillion was allocated for Green Loans, while IDR 135 trillion was earmarked for social loans. Additionally, 81% of CPO debtors were already certified CPO Plantation and Refinery (included in the process debtors).
Stable Liquidity in the Fourth Quarter of 2023
BMRI maintained stable liquidity throughout 2023, evidenced by a 5.78% YoY growth in third-party deposits, which boosted the Current and Savings Account (CASA) ratio by 88 basis points to 74.30%. The increase in deposits and the CASA ratio was primarily driven by a 7.92% YoY growth in Current Accounts. We forecast an 8.50% growth in total deposits for 2024, and a 26-basis point increase in the CASA ratio to 74.56%.
Significant Asset Quality Improvement
BMRI’s asset quality experienced a significant improvement, with a decrease in its consolidated NPL ratio by 73 basis points YoY to a level of 1.19% as of December 2023. The Corporate segment emerged as the healthiest segment with an NPL ratio of 0.31%, while the Commercial segment experienced the most significant improvement, decreasing by 3.19% to 1.73%. We forecast that BMRI’s consolidated NPL ratio will further improve in 2024 to a level of 1.14%.
Valuation: 20% Upside, Buy
Our Multi-Stage Dividend Discount Model (DDM) Valuation indicates a target price of IDR 8,850 within a year, corresponding to a price-to-book value (PBV) ratio of 2.47x and offering a potential 20% upside. Therefore, we recommend to Buy.
In 2023, BMRI reported a robust growth in consolidated net income of 33.74% year-over-year (YoY), increasing from IDR 41.17 trillion to IDR 55.06 trillion. This achievement positioned BMRI as the second-best performer among the big-four banks in terms of profit growth. The growth was primarily fuelled by a significant increase in interest income, which rose by 17.94%. Another contributing factor was the 37.06% YoY reduction in provision expenses. We predict that BMRI will continue to enhance its profitability in 2024, with an expected increase of 25.62% YoY to reach IDR 69.17 trillion.
Leading in Loan Growth
As of December 2023, BMRI's consolidated loan portfolio reached IDR 1,398 trillion, marking a substantial 16.29% YoY growth and positioning it as the leader among the big-four banks. The Commercial segment led with a 21.24% YoY growth. The Social Service and Business Service sectors were the top growth sectors, expanding by 55.02% and 32.93% annually, respectively. We anticipate that BMRI will further expand its consolidated loan portfolio by 14.31% YoY.
Robust ESG Commitment with Sustainable Financing
BMRI has demonstrated a serious commitment to implement ESG practices in its business. It is evident that BMRI’s loan portfolio includes sustainable financing, accounting for 23.98%, which is 454-bps higher than in 2022. As of December 2023, BMRI’s total sustainable financing amounted to IDR 264 trillion, representing a significant increase of 15.79% YoY. Of this amount, IDR 129 trillion was allocated for Green Loans, while IDR 135 trillion was earmarked for social loans. Additionally, 81% of CPO debtors were already certified CPO Plantation and Refinery (included in the process debtors).
Stable Liquidity in the Fourth Quarter of 2023
BMRI maintained stable liquidity throughout 2023, evidenced by a 5.78% YoY growth in third-party deposits, which boosted the Current and Savings Account (CASA) ratio by 88 basis points to 74.30%. The increase in deposits and the CASA ratio was primarily driven by a 7.92% YoY growth in Current Accounts. We forecast an 8.50% growth in total deposits for 2024, and a 26-basis point increase in the CASA ratio to 74.56%.
Significant Asset Quality Improvement
BMRI’s asset quality experienced a significant improvement, with a decrease in its consolidated NPL ratio by 73 basis points YoY to a level of 1.19% as of December 2023. The Corporate segment emerged as the healthiest segment with an NPL ratio of 0.31%, while the Commercial segment experienced the most significant improvement, decreasing by 3.19% to 1.73%. We forecast that BMRI’s consolidated NPL ratio will further improve in 2024 to a level of 1.14%.
Valuation: 20% Upside, Buy
Our Multi-Stage Dividend Discount Model (DDM) Valuation indicates a target price of IDR 8,850 within a year, corresponding to a price-to-book value (PBV) ratio of 2.47x and offering a potential 20% upside. Therefore, we recommend to Buy.
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