Brokerage Maintains "Buy" Recommendation on Five Major Bank Stocks, Citing Improving Liquidity on IDX

JAKARTA, Indonesia - A leading Indonesian brokerage, Verdhana Sekuritas Indonesia, has reiterated its "buy" recommendation for five major bank stocks listed on the Indonesia Stock Exchange, citing expectations of improved liquidity within the national banking sector this year.

In a recent report, Verdhana Sekuritas pointed to the issuance of Bank Indonesia Certificates (SRBI) on Jan 31, 2025, as an indicator of easing liquidity conditions. The yield on these certificates decreased to 6.715% from 7.253% on Dec 27, with the spread between SRBI and Repo Rates narrowing by 20 basis points to around 6,500-6,715%.

"This liquidity improvement aligns with our previous thesis that overall bank profitability will be better in 2025," the report stated. "This suggests stable funding costs and room for Net Interest Margin (NIM) expansion."

The brokerage believes that the slight increase in credit interest rates observed so far will likely translate into higher profit margins for Indonesian banks in 2025. Based on this outlook, Verdhana Sekuritas maintains a bullish stance on the country's banking sector, particularly on the largest banks.

Verdhana Sekuritas has maintained its "buy" recommendation for PT Bank Central Asia Tbk shares with a target price of Rp 12,600 (about $0.79), based on DuPont analysis, implying a projected Price-to-Book (PB) ratio of around 5.4 times this year.

Similarly, PT Bank Mandiri Tbk shares are also given a "buy" recommendation with a target price of Rp 8,700 (about $0.55) using the DuPont methodology. This target implies a projected PB ratio of around 2.5 times and a Price-to-Earnings (PE) ratio of 12.6 times for this year.

PT Bank Rakyat Indonesia Tbk shares are also recommended for purchase with a target price of Rp 5,400 (about $0.34) based on DuPont analysis, considering a projected Return on Average Equity (ROAE) of around 18% this year.

Other "buy" recommendations include PT Bank Negara Indonesia Tbk with a target price of Rp 6,600 (about $0.41) and PT Bank Syariah Indonesia Tbk with a target price of Rp 3,800 (about $0.24).