Bank Mandiri ($BMRI) has just announced a share buyback plan with a fund allocation of ~1.2 trillion rupiah. This step follows in the footsteps of other big state-owned banks, such as Bank Rakyat Indonesia ($BBRI) and Bank Negara Indonesia ($BBNI), which have also moved to carry out buybacks with an allocation of funds of up to 3 trillion rupiah and 905 billion rupiah, respectively.

Why Share Buyback? Strategy and Objectives

The main purpose of this buyback plan is certainly none other than to increase the value of shares in the market. With the approval of this plan at the General Meeting of Shareholders (GMS) which will take place on March 25, 2025 for BMRI, while BBRI on March 24, 2025 and BBNI on March 26, 2025, the buyback period will each last up to 12 months after the GMS approves the plan.

Activities of the Board of Directors and Stock Trading

In separate activities, two directors of Bank Mandiri, namely Agus Dwi Handaya and Alexandra Askandar, have purchased 800,000 and 310,000 BMRI shares respectively on February 10 and 11, 2025, at an average price of 5,000 rupiah per share and 4,870 rupiah per share. The total transaction reached ~5.5 billion rupiah.

Market Turbulence and the Impact of Buybacks

In today’s trading, Monday (17/2), BMRI’s share price strengthened by 5.85%, while BBRI and BBNI rose 4.4% and 4.58%, respectively. Although the implementation of this buyback is still pending shareholder approval, many analysts argue that this plan could be a short-term positive sentiment for the movement of the shares of the three state-owned banks. Moreover, there has been net foreign outflow pressure that has occurred since the beginning of the year.

What Does It Mean for Investors?

On the other hand, based on our calculations, the allocation of funds for this buyback is relatively small compared to the free float market cap of the three banks. Therefore, we believe that the stock price movement of state-owned big banks in the long term will remain more influenced by the fundamental performance of each company.

Conclusion

The share buyback plan announced by Bank Mandiri and other state-owned banks shows the seriousness of maintaining the value of shares in the market. For investors, this could be the right moment to pay attention to price movements and the potential short-term profits that could result from this strategic move. However, always remember to consider the fundamental factors in your investment decision-making.