/Bank Mandiri (BMRI) FY24 Stock Analysis: Profit Declining in the Final Quarter, What Is the Prospect?
Stock BMRIFebruary 5, 2025

Bank Mandiri (BMRI) FY24 Stock Analysis: Profit Declining in the Final Quarter, What Is the Prospect?

Bank Mandiri (BMRI) has just released its FY24 financial report with a slightly below market expectations. Although profit is still growing slightly on an annual basis, operating cost pressures in the last quarter have caused net profit (NPAT) to fall significantly. Then, what really happened? And what are the future prospects of BMRI?

BMRI FY24: Weak Last Quarter

In 4Q24, BMRI recorded a net profit of IDR 13.8 trillion, down 11.0% QoQ and 13.9% YoY. The main cause of this decline was the increase in operating expenses, especially general & administrative expenses (GA expenses) which jumped 62.7% QoQ and 40.7% YoY. In addition, the efficiency of subsidiaries (including BRIS) is still a challenge that needs to be improved.

Overall, BMRI’s net profit during FY24 reached IDR 55.8 trillion, growing 1.3% YoY, but slightly below the consensus expectation of IDR 56.2 trillion. Non-interest income (Non-II) also fell short of expectations due to low recovery income, while provision expenses increased by 17.5% YoY due to fewer provision reversals compared to the previous year.

Interest Income Still Growing Strongly

Despite the decline in quarterly profits, interest income still showed solid performance. BMRI recorded interest income growth of 14.1% YoY, driven by strong credit growth of 19.5% YoY. This credit growth mainly came from the corporate (+26.7% YoY) and commercial (+23.0% YoY) segments, with repricing of lending rates in the commercial, MSME, micro, and retail segments.

However, cost of fund (CoF) pressure remains a challenge. Interest expense increased by 35.0% YoY, which made Net Interest Income (NII) growth only reach 6.1% YoY. However, compared to other state-owned banks, BMRI shows better CoF management, thanks to digitalization through the Livin’ by Mandiri platform for retail, Livin’ Merchant for MSMEs, and Copra for corporate customers.

Performance of Third-Party Funds and LDRs

Bank Mandiri recorded growth in Third Party Funds (DPK) of 7.7% YoY, with CASA growth higher (+8.5% YoY) compared to time deposits (+5.5% YoY). However, banks also rationalized some expensive deposits and current accounts, so that deposit growth slowed down slightly.

Because credit growth is higher than deposit growth, the Loan to Deposit Ratio (LDR) ratio rose to 98.0% (bank-only). However, management mentions that by January 2025, LDR has fallen below 95%, signaling an improvement in liquidity.

Asset Quality Improves, Lowest NPLs Among Major Banks

One of the good news from BMRI’s financial statements is the improvement in asset quality. The ratio of non-performing loans (Gross NPL) decreased to 1.12% from 1.19% in FY23, while Loan at Risk (LAR) also improved to 6.76% (FY23: 8.62%). This is the lowest NPL ratio among major banks in Indonesia.

Although the recovery is not as strong as expected due to challenging macro conditions, management is optimistic that by 2025 the recovery will increase.

2025 Outlook and Guide

Bank Mandiri’s management provides performance guidance for 2025 with several main targets:

  • Credit growth: 10-12% (FY24: +19.5%).
    • Our projection: Credit growth will be more in line with deposit growth. With digitalization continuing to drive CASA growth, while Bank Indonesia’s dovish stance can support banking liquidity.
  • Net Interest Margin (NIM): 5,0-5,2% (FY24: 5,15%).
    • Our projection: CoF pressures may still be there, but repricing credit rates could help maintain profit margins.
  • Cost of Credit (CoC): 1,0-1,2% (FY24: 0,79%).
    • Our projection: The increase in CoC does not indicate an increase in NPLs, but rather a normalization after a period of large provision reversals due to the COVID-19 pandemic.

Conclusion: BMRI Stock Still Worth Considering?

Overall, BMRI’s financial report for FY24 showed a combination of strong credit growth and improved asset quality, despite the pressure on profits in the last quarter due to rising operating costs.

Fourth-quarter results that are below expectations could cause short-term selling pressure on BMRI shares. However, fundamentally, BMRI still has attractive prospects, especially with its digitalization strategy and focus on operational efficiency.

We will continue to monitor BMRI’s performance developments in the January and February 2025 reports, especially related to liquidity and provisioning trends. If the economic recovery improves and management manages to maintain efficiency, BMRI shares remain an attractive option for long-term investors.

Is now the right time to buy BMRI shares? It depends on your risk profile and investment strategy. However, with solid fundamentals and positive growth projections, BMRI deserves to be on investors’ radar.

Reference ((Bank Mandiri))

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