On Monday, JPMorgan (NYSE:JPM) issued a downgrade for Bank Mandiri (BMRI:IJ) (OTC: PPERF), changing its stock rating from Overweight to Neutral. The firm also adjusted the price target to IDR7,500.00, a decrease from the previous IDR8,000.00. The adjustment reflects concerns over the tightening liquidity conditions in Indonesia, which are anticipated to impact the bank's growth.
The analyst from JPMorgan highlighted several factors contributing to the tightening liquidity, including a rise in US/ID 10-year yields by 58/31 basis points since September lows, an increase in SRBI yields by 20 basis points, a 3.6% depreciation in the Indonesian Rupiah, and a slowdown in money supply growth to 7.3% in August 2024. These conditions are expected to lead to slower deposit and loan growth for Bank Mandiri.
Recent discussions and observations from a financials forum indicate that the growth in Current Account and Savings Account (CASA) at Bank Mandiri could decelerate. This is evidenced by the growth rate dropping to 13.8% in August compared to an average of 16.1% over May to July. Despite these short-term concerns, JPMorgan maintains a medium to long-term positive outlook on Bank Mandiri.
In response to the evolving financial landscape, JPMorgan has revised its growth forecasts for Bank Mandiri's loans and deposits for 2024, accounting for the increased liquidity tightness. However, the firm still expects approximately 15% loan growth over 2025 and 2026 estimates. JPMorgan's earnings per share (EPS) estimate for 2024 is 3% below consensus, while its EPS forecasts for 2025 and 2026 are 4% and 10% above the average street estimates, respectively.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Bank Mandiri's financial position and market performance. The bank currently boasts a market capitalization of $40.46 billion, reflecting its significant presence in the Indonesian banking sector. This aligns with the InvestingPro Tip identifying Bank Mandiri as a "prominent player in the Banks industry."
Despite the downgrade from JPMorgan, Bank Mandiri's financial metrics remain strong in several areas. The company's P/E ratio stands at 11.3, which is relatively low compared to its earnings growth potential. This is further supported by an InvestingPro Tip indicating that the bank is "trading at a low P/E ratio relative to near-term earnings growth."
Moreover, Bank Mandiri has demonstrated consistent profitability, with an InvestingPro Tip noting that the company has been "profitable over the last twelve months." This is reflected in the bank's impressive operating income margin of 58.42% for the last twelve months as of Q2 2024.
For investors seeking more comprehensive insights, InvestingPro offers 11 additional tips on Bank Mandiri, providing a deeper understanding of the company's financial health and market position.
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