Indonesia's Rising Middle Class And Digital Banking Will Drive Growth

Key Takeaways

• Faster-than-expected digital adoption and funding improvements may drive sharper margin recovery and outperformance versus consensus expectations.
  
• Digital, ESG, and fintech initiatives position BNI for superior revenue growth, diversified income, and lasting profitability gains over competitors.
  
• Weak digitalization, mounting fintech competition, and government mandates threaten Bank Negara Indonesia's growth, profitability, and long-term retention of tech-oriented customers.

Catalysts

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

• While analyst consensus expects margin pressures to ease gradually, this may be too conservative-CASA deposit growth at 19 percent is already outpacing loan growth and, with ongoing digital adoption through the wondr app and BNI Direct, the cost of funds could decline faster than peers foresee, driving a sharper NIM recovery and outperformance in net margins.
  
• Analyst consensus anticipates cautious loan growth in higher-yielding SME and middle segments, but BNI's accelerated investments in credit scoring, organizational overhaul, and a robust corporate pipeline suggest loan growth could exceed guidance, translating to superior top-line and bottom-line expansion, especially as consumer and commercial lending rebalance at higher yields.
  
• With Indonesia's rapidly growing middle class and rising incomes, BNI's digital and retail banking strategy positions it to capture an outsized share of new-to-bank customers, significantly accelerating fee and transactional income growth compared to the industry average, and supporting long-term revenue compounding.
  
• BNI's early and aggressive participation in sustainability-linked finance and ESG lending via its green bond issuances and upgraded MSCI ESG rating will attract global capital inflows and enable premium pricing on lending products, materially improving funding costs and long-term return on equity.
  
• The large untapped opportunity in embedded finance, fintech partnerships, and digital SME services in Indonesia-where BNI is now deploying specialized platforms and digital onboarding-will drive new recurring non-interest revenues, diversify the earnings mix, and sustainably boost overall profitability.

Bank Negara Indonesia (Persero) Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Bank Negara Indonesia (Persero) compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Bank Negara Indonesia (Persero)'s revenue will grow by 21.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 41.5% today to 33.7% in 3 years time.
• The bullish analysts expect earnings to reach IDR 30233.6 billion (and earnings per share of IDR 810.77) by about September 2028, up from IDR 20866.0 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 11.1x on those 2028 earnings, up from 7.3x today. This future PE is lower than the current PE for the ID Banks industry at 16.3x.
• 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 14.59%, as per the Simply Wall St company report.

Bank Negara Indonesia (Persero) Future Earnings Per Share Growth

Risks

• Accelerating competition from fintech platforms and digital payment providers threatens to erode Bank Negara Indonesia's traditional fee income streams and loan growth, as adoption of these technologies is outpacing the bank's own digitalization investments, potentially resulting in weaker long-term revenues and market share loss.
  
• The bank's net interest margin has already come under pressure, dropping to 3.8% in the first half of 2025 due to intense deposit competition and a weak macroeconomic environment, suggesting ongoing susceptibility to funding cost volatility and margin compression which could further weaken profitability.
  
• Persistent underinvestment in digital capabilities compared to peers, despite recent digital app launches, elevates the risk that younger, tech-oriented customers will migrate to nimbler digital banks or fintechs, inhibiting sustainable deposit growth and dampening net interest income over the medium to long term.
  
• Continuing high state ownership exposes Bank Negara Indonesia to government-directed lending mandates and requirements to support strategic sectors or SOEs, which may suppress profitability and elevate non-performing loan risk, thereby weighing on net margins and overall earnings quality.
  
• The shift towards ESG and sustainable finance regimes is likely to drive up compliance and operating expenses while placing pressure on legacy lending portfolios in environmentally sensitive sectors, increasing the risk of future write-downs and hindering long-term revenue growth.

Valuation

• The assumed bullish price target for Bank Negara Indonesia (Persero) is IDR6000.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Bank Negara Indonesia (Persero)'s future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of IDR6000.0, and the most bearish reporting a price target of just IDR3500.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be IDR89648.0 billion, earnings will come to IDR30233.6 billion, and it would be trading on a PE ratio of 11.1x, assuming you use a discount rate of 14.6%.
• Given the current share price of IDR4100.0, the bullish analyst price target of IDR6000.0 is 31.7% 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.