Bank Mandiri (BMRI IJ) (Buy) - Solid 1H26 results

Solid 1H26 results

BMRI reported solid 1H26 results, with headline profit of IDR30.4tn [+24% y-y; 2Q26 net profit of IDR15.0tn, -2% q-q; +34% y-y on a proforma basis, post-BSI (BRIS IJ, Buy)-deconsolidation basis], tracking above our forecast at ~53% of FY26F. We attribute the beat mainly to internal factors: robust PPOP growth (+20% y-y in 1H26, or a more normalized +13% y-y stripping out a favorable opex base from one-off accounting changes in 2Q25), resilient non-interest income, and benign cost of credit.

Externally, results were shaped by tighter system liquidity — elevated SRBI issuance and a higher BI-rate pushed up funding costs and intensified deposit competition (albeit easing somewhat late in 2Q26) — which kept NIM under pressure (4.56% in 1H26 vs. 4.81% in 1H25) even as proforma consolidated loan growth held up at a strong +18.8% y-y, led by the wholesale (Corporate/Commercial) book, while retail loan growth stayed subdued (+1.3% YTD) as management prioritized asset quality over volume. Stripping out the opex one-off, underlying NII growth was a more modest +9% y-y, underscoring that margin, not cost control, remains the key swing factor for FY26F earnings.

Notably, management flagged that the q-q dip in interest income/loan yield was not purely a system-liquidity story: a batch of new related-party (SOE/government) loans booked in 2Q26 came on at rates of 100-200bp below the normal book yield, so lending rates actually softened even as SRBI-driven funding costs rose - a mix effect layered on top of the broader margin squeeze. Management revised its FY26E guidance to reflect the BRIS deconsolidation and funding-cost pressure: NIM guidance was cut to 4.3-4.5% (from 4.5-4.7% previously) and loan growth guidance was set at 7-9%, while CoC (0.6-0.8%) and CIR (39-41%) expectations were maintained — with 1H26 CIR of 37.9% already tracking better than the low end of the range.

Management also guided for full-year PPOP and net profit growth to taper below the 1H26 pace, with NIM pressure expected to persist through 3Q26E (as large low-yield SOE/government loan bookings continue to offset ongoing repricing efforts) before stabilizing in 4Q26E. By contrast, cost of credit looks to be near a trough — 1H26 CoC of 0.61% is tracking toward the low end of the 60-80bp FY26E guidance band with limited further room to fall.

2Q26 results summary

Net interest income declined to IDR22.8tn (-9% q-q; +5% y-y proforma), bringing 1H26 NII to IDR47.8tn (+8% y-y), below our estimates (accounting for ~42% of our FY26F estimates, below the ~50% pro-rata pace). The q-q softness reflects rising funding costs (bank-only CoF deposit rose to 2.04% from 1.97% in 1Q26) amid tight liquidity, alongside continued loan-yield repricing pressure in the Corporate and Micro & Payroll portfolios and a batch of new related-party (SOE/government) loans booked in the quarter at rates 100-200bp below the normal book yield, which management cited as the main driver of the ~IDR2tn q-q drop in interest income.
PPOP slightly decreased to IDR21.6tn (-5% q-q; +32% y-y proforma), taking 1H26 PPOP to IDR44.2tn (+20% y-y), broadly in-line with our estimates (accounting for ~48% of our FY26F estimates). Growth was underpinned by strong non-interest income (+25% y-y in 2Q26, led by Livin' fee income growth of +46% y-y in 1H26) and lower opex (-9% y-y in 2Q26; -1% y-y in 1H26) following the normalization of elevated 2Q25 promotion/G&A spend.
Provision expense declined to IDR2.4tn (-10% q-q; -2% y-y proforma), with 1H26 provisions of IDR5.1tn (-12% y-y) accounting for only ~33% of our FY26F, well below our full-year run-rate — reflecting resilient asset quality, with consolidated LAR improving to 5.83% (from 6.02% in 1Q26) and NPL steady at ~1.0%, alongside an ample ~235% NPL coverage.
Net profit increased to IDR15.0tn (-2% q-q; +34% y-y), taking 1H26 PATMI to IDR30.4tn (+24% y-y), above our estimates (accounting for ~53% of our FY26 estimate) — ahead of the pro-rata pace as strong middle-line growth and low provisioning more than offset NIM compression.
Loan (proforma, excl. BRIS) increased 18.8% y-y to IDR1,677tn as of Jun-26 (+3.9% q-q; +6.4% YTD, on track for the 7-9% FY26E guidance), driven by wholesale (Corporate + Commercial), while retail loan growth remained slow at +1.3% YTD - a broadly industry-wide, not bank-specific, softness that management expects to only gradually recover as private-sector demand returns (early signs of a +3% q-q pickup in 2Q26). Asset quality remained healthy: the consolidated NPL ratio at 1.01% (vs. 1.10% in 1H25), LAR at 5.83% (vs. 6.92%), though NPL coverage moderated to 235% (from 265%) - still comfortably at management's ~230% comfort level. Performing restructured loans improved to 1.88% of the book (-61bp y-y), though the Stage 2/Special Mention ratio ticked up to 2.93% (+26bp y-y), with construction and logistics borrowers flagged by management for closer monitoring.
Deposit (proforma) increased 17.1% y-y to IDR1,763tn, mainly on time deposits (+54.4% y-y) and savings accounts (+8.0% y-y), as funding shifted toward higher-yielding tenors amid tight system liquidity. This brought the CASA ratio to 69.2% (-1.0pp q-q; -7.4pp y-y) and bank-entity LDR to ~92.3% in 1H26 (+2.1pp y-y), consistent with industry-wide funding-cost pressure from elevated BI-rate/SRBI issuance.

Valuation and risks

We derive our TP of IDR6,000 (unchanged) using DuPont analysis with the following key parameters: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 11.0%, beta 1.09x and a CAR-adjusted ROAE of 18.0% (all unchanged). Our TP implies 1.7x FY26F P/B (vs 1.5x currently) and 9.7x FY26F P/E (vs 8.2x currently). Risks are worsening macroeconomic trends, tighter liquidity competition, and/or higher credit costs and opex growth.

Fig. 2: BMRI – quarterly results

BMRI IDRbn	1Q25	2Q25	1Q26	2Q26	Q-Q %	Y-Y %	YTD-26	YTD-25	Y-Y %	FY26F	vs FY26F%
Interest income	35,092	41,951	37,375	35,520	(5.0)	(15.3)	72,895	77,043	(5.4)	174,659	41.7
Interest expense	12,582	15,072	12,325	12,731	3.3	(15.5)	25,056	27,654	(9.4)	60,567	41.4
NII	22,510	26,879	25,050	22,789	(9.0)	(15.2)	47,839	49,389	(3.1)	114,092	41.9
Net premium income	428	(367)	287	204	(28.9)	(155.6)	491	61	704.9
Total NII + Net Premium inc	22,938	26,512	25,337	22,993	(9.3)	(13.3)	48,330	49,450	(2.3)	114,092	42.4
Other income	10,624	9,687	11,268	11,512	2.2	18.8	22,780	20,311	12.2	49,453	46.1
Operating income	33,562	36,199	36,605	34,505	(5.7)	(4.7)	71,110	69,761	1.9	163,545	43.5
Total opex	13,079	17,486	13,992	12,934	(7.6)	(26.0)	26,926	30,565	(11.9)	70,506	38.2
PPOP	20,483	18,713	22,613	21,571	(4.6)	15.3	44,184	39,196	12.7	93,039	47.5
Provisions	3,368	3,384	2,691	2,430	(9.7)	(28.2)	5,121	6,752	(24.2)	15,355	33.4
NP	13,197	11,258	15,384	15,028	(2.3)	33.5	30,412	24,455	24.4	57,431	53.0

Source: Company data, Verdhana estimates

Fig. 3: BMRI – quarterly ratios

BMRI Ratios	1Q25	2Q25	1Q26	2Q26	Q-Q %	Y-Y %
NPLs (IDRbn)	14,165	21,095	16,464	16,942	2.9	(19.7)
Provisions (IDRbn)	40,976	51,296	38,799	39,733	2.4	(22.5)
NPL %	1.0	1.2	1.0	1.0
LLR %	3.0	3.0	2.4	2.4
NPL cov %	289.3	243.2	235.7	234.5
LARs %	7.4	7.1	6.1	5.8
LAR Coverage %	53.5	54.7	41.4	40.6
Margin analysis (%) Bank only	1Q25	2Q25	1Q26	2Q26	Q-Q %
Gross Loan Yield	7.6	7.8	7.1	6.9
Cost of funds	2.7	2.8	2.3	2.4
Spread	4.9	5.0	4.8	4.5
NIM	4.6	4.6	4.5	4.4
Growth and ratios (%)	1Q25	2Q25	1Q26	2Q26	Q-Q %
Asset growth y-o-y	(3.5)	11.4	16.5	0.5
Loan y-o-y	(3.3)	11.0	16.2	(1.4)
Loan q-o-q	(16.9)	22.5	(14.8)	3.9
Deposit y-o-y	(9.0)	10.7	21.0	(3.6)
Deposit q-o-q	(15.8)	27.9	(17.8)	1.9
LDR	97.1	93.0	93.3	95.1
CASA	75.2	74.0	70.2	69.2
Efficiency ratio	39.0	44.5	38.2	38.2
CAR	18.5	19.5	19.7	19.7
B/S ROAE	18.3	16.0	19.2	19.8
Cost of credit %	0.88	0.88	0.61	0.59

Source: Company data, Verdhana research

Fig. 4: BMRI – balance sheet

BMRI - B/S structure IDRbn	1Q25	2Q25	1Q26	2Q26	Q-Q %	Y-Y %	YTD-26	YTD-25
Equity (incl minority)	263,275	297,917	313,952	293,023	(6.7)	(1.6)	(10.5)	(5.0)
Assets	2,088,725	2,514,684	2,432,621	2,527,568	3.9	0.5	(10.7)	3.6
Loans	1,388,753	1,701,214	1,614,150	1,677,449	3.9	(1.4)	(11.5)	1.8
Deposits	1,429,911	1,828,481	1,730,303	1,763,167	1.9	(3.6)	(16.3)	7.6
CASA	1,075,191	1,353,650	1,214,972	1,219,907	0.4	(9.9)	(14.8)	6.5
TD	354,720	474,831	515,330	543,261	5.4	14.4	(19.4)	11.0
CASA %	75.2	74.0	70.2	69.2

Source: Company data, Verdhana research

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general.

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Rating Table

Rating Remains	Buy
Target price Remains	IDR 6,000
Closing price 23 July 2026	IDR 4,380

Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

Tags: BANKS, Bank Mandiri, BMRI, BMRI JK, BMRI IJ, Erwin Wijaya

Bank Mandiri (BMRI IJ) (Buy) - Solid 1H26 results

Solid 1H26 results

Fig. 1: BMRI – 1H26 y-y summary

Fig. 2: BMRI – quarterly results

Fig. 3: BMRI – quarterly ratios

Fig. 4: BMRI – balance sheet

Rating Table

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Bank Mandiri (BMRI IJ) (Buy) - Solid 1H26 results

Fig. 1: BMRI – 1H26 y-y summary

Fig. 2: BMRI – quarterly results

Fig. 3: BMRI – quarterly ratios

Fig. 4: BMRI – balance sheet

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