BBTN - Considers reducing KPR interest after BI rate drops

BBTN - Considers reducing KPR interest after BI rate drops Bank Tabungan Negara (BBTN) is considering lowering interest rates, including for home ownership loans (KPR), after Bank Indonesia (BI) officially lowered the benchmark interest rate, or BI-Rate, by 25 basis points (bps) to the level of 6%. Ramon Armando, Corporate Secretary of BTN, said that the easing of Bank Indonesia's monetary policy was a positive start to encourage the banking intermediation function, including BTN, whose credit is dominated by housing credit and financing. However, Ramon said that the impact of the reduction in the reference interest rate would take time to be transmitted to the market according to the liquidity conditions of each bank. Ramon further explained that banks generally only adjust credit interest rates when industry deposit interest rates show a decline. With the reduction in the benchmark interest rate by the central bank, it certainly gives banks a breather to be able to reduce their deposit interest rates. Comment : We believe the lower Fed and 7DRR rates will not have any significant impact on banking performance in 2H24 (see our previous report) and should start to take effect next year. BBTN will become the least beneficiary bank that gets the benefit, in our view. Yet, our expectation of better spending in the lower interest rate environment could somewhat potentially drive purchasing power from idle to low-class to become stronger. Despite making quite a small contribution, we also expect the lower yield on the non-subsidized and corporate loan segments could overall underpin 2025 earnings growth, ceteris paribus. Maintain BUY BBTN with GGM TP of IDR1,770 pegged at ‘24F P/B of 0.6x.