Maybank IB has given a buy call on Bank Mandiri based on its 1H23 earnings growth which beat expectations. BMRI’s ability to grow its loan book, while maintaining quality will improve its earnings outlook, the house revised its FY23/24E earnings by 8%/10% to IDR50.3t/57.2t to reflect higher net interest margin (NIM) estimates, lower-than-expected credit cost and improving operating efficiency. Moreover, Maybank IB said it rolls forward the valuation to next year, applying 2.1x FY24E P/BV and a higher ROE of 19.8% (from 18.8%).
1H23 earnings of IDR25.2t beat estimates, achieving 54%/54% of /BBG FY23E. Earnings were driven by higher net interest income as NIM grew slightly to 5.6%. Moreover, BMRI’s loan growth beat sector growth substantially, which will positively impact interest income. With the CASA ratio secured at 73%, the house expects cost of fund to stabilize at 2.2%. Consequently, Maybank revised its FY23E/24E NIM estimate to 5.5%/5.6%. 1H23 loan growth – firing on all cylinders 1H23 loan growth was broad-based: corporate loans, commercial, SME, micro and consumer. Additionally, its subsidiary grew even more by 16% YoY, mostly attributable to Bank Syariah Indonesia, Mandiri Tunas Finance, and Mandiri Taspen.
Loan quality improvement in 1H23 was faster than anticipated, as loans-at-risk (10.3%) and NPLs (1.64%) are already below FY23 estimates. Maybank IB said it expects loan quality to continue to recover and thus has cut the FY23/24 NPL estimate to 1.5%/1.5%. Furthermore, NPL coverage of 304% in 1H23 is more than sufficient and it should provide ample buffer for its loan book, and limit downside risk to credit cost.
