Indonesia Digital Trends And Green Bonds Will Reshape Future Lending

Key Takeaways

• Digital adoption and expanded SME focus are boosting deposit growth, loan expansion, and supporting higher earnings through cost efficiencies and improved digital engagement.
  
• Improved risk management, sustainability initiatives, and strong capital position are enhancing earnings stability and enabling growth in ESG-focused and corporate lending.
  
• Intensifying competition, weak non-interest income, rising operating costs, and asset quality concerns threaten profitability, while digital disruption and regulatory dependence add further pressure to growth prospects.

Catalysts

Provides various banking products and services in Indonesia, rest of Asia, New York, and Europe.

• Accelerating digital adoption in Indonesia is enabling BNI to grow low-cost CASA deposits and transactional banking via digital platforms (e.g., wondr app and BNI Direct), which is expected to structurally lower funding costs and support margins over time, directly benefiting net interest margin and earnings.
  
• BNI's strategic expansion into SME and microfinance, supported by data-driven credit scoring and dedicated risk teams, is set to capitalize on Indonesia's growing middle class and financial inclusion trends, driving higher loan growth and potentially boosting interest income and revenues.
  
• Enhanced risk management and improvements in asset quality-evidenced by declining NPL formation and robust loan loss coverage-are likely to provide greater earnings stability and reduce the drag from provisions, supporting net margins.
  
• The sustained issuance of sustainability bonds and improved MSCI ESG ratings position BNI to finance large green and social projects, aligning with increasing demand for sustainable development and ESG-friendly investments, and unlocking new long-term lending revenue streams.
  
• Prudent liquidity management, a strong capital base, and front-loaded deposit gathering give BNI the flexibility to support an anticipated back-end loaded corporate loan pipeline, positioning the bank for an acceleration in loan growth and revenue generation, especially as macro conditions and system liquidity improve.

Bank Negara Indonesia (Persero) Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bank Negara Indonesia (Persero)'s revenue will grow by 18.9% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 41.5% today to 32.3% in 3 years time.
• Analysts expect earnings to reach IDR 27269.0 billion (and earnings per share of IDR 693.73) by about September 2028, up from IDR 20866.0 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as IDR22824.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.5x on those 2028 earnings, up from 7.9x today. This future PE is lower than the current PE for the ID Banks industry at 17.3x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.43%, as per the Simply Wall St company report.

Bank Negara Indonesia (Persero) Future Earnings Per Share Growth

Risks

• Persistent margin pressure due to intense deposit competition and a structurally higher cost of funds, as indicated by a declining NIM (revised downward to 3.8% for 2025), could constrain BNI's ability to grow profitability and adversely affect net margins and earnings over the long term if the funding environment does not improve.
  
• Sluggish non-interest income growth and OpEx rising faster than total revenues (non-interest income down 3% YoY, OpEx up 3% YoY, PPOP down 1.7% YoY) reveal a risk that BNI's efficiency and fee revenue initiatives may not be sufficient to offset top-line pressures, negatively impacting return on equity (ROE) and bottom-line growth.
  
• Emerging asset quality concerns in the consumer portfolio-specifically, rising NPLs in mortgages (3%), auto loans (2.7%), and credit cards (2.5%) with continued pressure in the medium business segment-could lead to higher provisions and weakened earnings stability if economic headwinds persist or if vintage credit risks remain underestimated.
  
• Reliance on regulatory and fiscal tailwinds for liquidity and lending growth, such as ongoing BI policy easing and government spending, creates vulnerability; slow fiscal disbursement or a shift in monetary policy stance amid external shocks could limit deposit and loan growth prospects, impacting BNI's revenue trajectory.
  
• The digitalization push (e.g., digital app growth, SME lending, transactional CASA expansion) faces medium
• to long-term risks from potential disruption by fintechs and digital banks, which could erode BNI's market share and fee income streams if BNI's platforms fail to keep pace with evolving customer preferences and industry innovation.

Valuation

• The analysts have a consensus price target of IDR5118.857 for Bank Negara Indonesia (Persero) based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of IDR6100.0, and the most bearish reporting a price target of just IDR3500.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be IDR84520.3 billion, earnings will come to IDR27269.0 billion, and it would be trading on a PE ratio of 10.5x, assuming you use a discount rate of 14.4%.
  
• Given the current share price of IDR4410.0, the analyst price target of IDR5118.86 is 13.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.