Indonesia: Bank BJB, Bank Central Asia, Bank Danamon Indonesia, Bank Mandiri Persero, Bank Negara Indonesia Persero, Bank Rakyat Indonesia Persero, Bank Tabungan Negara Persero and more

• Confidence matters
• Ahead of the industry
• Superior quality
• Generous upside potential

Reiterate BUY on BJBR with TP of IDR2,100 based on 16.6% FY22-24E average ROE, implying 1.4x FY22E P/BV. We see two key reasons to be more optimistic this year than the solid 2021 numbers suggest. First, asset mix and loan pricing power hold the potential for yield enhancement. Second, outstanding loan quality is likely to persist as economic recovery should spur healthy demand. We expect these factors to boost investors’ confidence, thus translating to stronger share price performance.

• Unwarranted premium
• Underutilized deposit franchise
• Fading superiority in quality
• Narrowing ROE gap with peers

Reiterate SELL on BBCA with TP of IDR6,400 based on 17.8% FY22-24E average ROE, implying 3.6x FY22E P/BV. Current premium valuation of 4.5x for the stock over peers’ 1.7x average reflects high expectations. However, we see a disconnect between BBCA’s fundamentals and premium valuation given its fading superiority in ROE, NPL and LLC, all of which are unlikely to show swift recovery.

• Testing business model
• Tough competition
• Margin expansion likely to stall
• Still benefitting from cleaner balance sheet

Reiterate BUY on BDMN with TP of IDR2,700 based on 6.0% FY22-24E average ROE, implying 0.6x FY22E P/BV. The collaboration with MUFG will continue to act as a growth driver for BDMN. While the new wholesale-funded lower-yield business model of the bank will still be tested over the medium term as competition in the sector is likely to intensify, we see upside to profitability from lower credit cost outlook.

• Equipped to seize future growth
• Flushed with liquidity
• Benefiting from improving quality
• More upside

Reiterate BUY on BMRI with TP of IDR9,500, based on 17.1% FY22-24E average ROE, implying 2.0x FY22E P/BV. We remain favourably biased towards playing recovery beneficiaries like BMRI. The bank has the expertise to balance expansion with strong risk control. Its capital base is robust, being cleanly structured and core equity-based, therefore being supportive of growth and with strong capacity to absorb credit risk.

• Time to start collecting
• Gaining market share
• Well-guarded quality
• ROE uptrend here to stay

Reiterate BUY on BBNI with TP of IDR9,600 based on 13.5% FY22-24E average ROE, implying 1.3x FY22E P/BV. Low funding cost and ample liquidity has enabled the bank to compete with bigger peers and gain 200bps loan market share since 2015. At the same time, BBNI is moving to mitigate risk and refocusing expansion into higher-quality sectors. Yet it is trading at only 1.1x FY22E P/BV, making BBNI one of the best value-growth combinations within our coverage.

• Advantages priced in
• Supported by micro lending
• Largest scope to absorb risk
• Higher liquidity needed

We upgrade BBRI to HOLD with TP at IDR4,600 based on 15.6% FY22-24E average ROE, implying 2.3x FY22E P/BV. The stickiness of its micro franchise and the steps taken to mitigate risk should limit the downside for earnings. Valuation is fair even after factoring in challenging near-term funding growth, margin, and asset-quality dynamics. This, in our opinion, leads to a balanced risk-return trade-off for the stock.

• Muted ROE expansion
• Sensitive to funding cost
• Credit cost to remain elevated
• In need of capital raising

We downgrade BBTN to HOLD with TP at IDR1,800 based on 11.8% FY22-24E average ROE, implying 0.8x FY22E P/BV. We think expansion in mortgages will remain limited by funding and capital constraints despite the resilient source of demand in the mid-low end housing segment. This results in a relatively flat medium-term ROE outlook. Hence, despite the discounted valuation, we see limited upside from current valuation.