JPMorgan cuts Bank Mandiri stock rating to underweight

On Monday, JPMorgan downgraded shares of Bank Mandiri (BMRI:IJ) (OTC: PPERF), lowering its stock rating from Neutral to Underweight and adjusting the price target to IDR5,500.00 from the previous IDR6,050.00. The stock, currently trading at $0.35 and near its 52-week low, maintains a P/E ratio of 9.21. According to InvestingPro analysis, the bank, with its $32.5B market cap, is trading close to its Fair Value. This change reflects concerns over the bank’s growth and earnings potential in the coming years.

JPMorgan analysts project a 9-10% negative revision in Bank Mandiri’s earnings for 2025 and 2026, suggesting that current consensus estimates may be overly optimistic. While the bank has demonstrated solid revenue growth of 9.87% over the last twelve months, the forecast remains cautious. The forecast is based on several factors, including expected loan growth, net interest margin (NIM), and provisions. InvestingPro subscribers have access to over 10 additional key insights about Bank Mandiri’s financial health and growth prospects. The industry’s liquidity situation, combined with the bank’s guidance for double-digit loan growth, indicates potential deposit pricing pressure.

Despite Bank Mandiri’s success in creating a robust payment platform for a wide range of clients, the banking system’s liquidity is under strain. A notable achievement highlighted by InvestingPro is the bank’s 22-year track record of maintaining dividend payments, demonstrating long-term stability. While Bank Mandiri is likely to increase its deposit base faster than the industry average, the growth differential may not suffice to balance the cost of funds while maintaining a growth rate around 10%. Consequently, net interest income (NII) is anticipated to be the primary driver of the downward earnings revisions.

The bank’s asset quality has remained relatively stable. However, a slowdown in credit growth within the industry could result in increased cash-flow pressures by mid-year, particularly in the Micro segment, with the potential to extend to other areas. As a result, JPMorgan forecasts a slight rise in gross credit costs to 113 basis points this year, an increase of 16 basis points year-over-year, rather than a decrease. This uptick is expected to affect both earnings per share (EPS) and valuation multiples for Bank Mandiri, though the bank maintains a relatively low P/E ratio relative to its near-term earnings growth potential.

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