• Still OVERWEIGHT; pecking order: Bank Mandiri (BMRI)>Bank Rakyat Indonesia (BBRI)>Bank Central Asia (BBCA)>Bank Tabungan Negara (BBTN). 7M24 PPOP growth accelerated to 7.7% YoY, driven by strong performances by BBCA and BMRI. We believe NIM has hit its lowest point and expect improvements going forward. 7M24 earnings growth slowed to 5.7% YoY on high credit costs. Loan growth surpassed expectations and NIM showed signs of recovery, while third-party funds grew slower. BBCA and Bank CIMB Niaga (BNGA) maintained the strongest liquidity ratios.

• 7M24 PPOP growth accelerated; earnings growth slowed due to still-high credit costs. 7M24 PPOP growth accelerated compared to the previous month (7M24: 7.7% YoY; 6M24: 7.4% YoY), driven by strong performances by BBCA and BMRI. The growth was supported by robust loan expansion and higher NIM MoM, which boosted NII. Non-II also saw an increase. However, 7M24 earnings growth was slightly slower compared to the previous month (7M24: 5.7% YoY; 6M24: 6.9% YoY), due to persistently high credit costs. Only BBCA and BNGA reported faster earnings growth during the period, benefiting from improved asset quality and adequate loan loss coverage.

• Credit costs stable MoM, up YoY driven by BBRI; other banks saw declines. Credit costs were relatively stable MoM but rose YoY, primarily due to higher credit costs at BBRI. Most other banks, particularly BBNI, BNGA, and BBTN saw lower credit costs compared to last year’s corresponding period.

• 7M24 loan growth surpassed expectations, NIM showed signs of recovery amid anticipated rate cuts. 7M24 loan growth accelerated compared to the previous month (7M24: 13.8% YoY; 6M24: 13.5% YoY), surpassing the banks' full-year guidance. BMRI saw the highest loan growth at 23.4% YoY, followed by BBCA at 14.5% YoY, and BBTN at 14.4% YoY. In contrast, BBRI was the only bank to report a slower loan growth rate in 7M24, in line with its strategy of adopting a more cautious lending approach to enhance asset quality. On a MoM basis, NIM edged up slightly to 5.2% in 7M24, compared to 5.1% in 6M24. We believe NIM has hit its lowest point and expect improvements in the coming months, supported by an anticipated cut in benchmark rates.

• Third-party funds growth slowed relative to loans, raising LDR in 7M24. Growth in third-party funds accelerated from 6M24 but remained significantly slower than loan growth, contributing to ongoing liquidity constraints. BBTN, BMRI, and BBRI posted the highest growth rates in thirdparty funds, rising 17.5% YoY, 12.9% YoY, and 12.5% YoY respectively. The sector's CASA ratio remained relatively steady at 71.1% in July, slightly down from 71.2% in June, although the Big-4 banks experienced a modest MoM increase in their CASA ratios. The slower growth in third-party funds relative to loan growth led to higher LDR, which rose to 88.3% in 7M24, up from 86.4% in 6M24 and 84.5% in 7M23. BBCA and BNGA maintained the strongest liquidity ratios.

Source: RHB Securities Research - 10 Sept 2024