Sinarmas Sekuritas Predicts Amar Bank Lampaui Tiga Digit Net Profit In 2023
JAKARTA - According to a recent research report published by Sinarmas Sekuritas, PT Bank Amar Indonesia Tbk (AMAR), a digital bank that serves the retail and MSME segments, has experienced strong development with extraordinary growth in its savings account.
With an impressive combined annual growth rate (CAGR) of 73 percent, AMAR's savings account jumped to IDR 150 billion from 2019 to 2022.
Here are some important points from the research report showing Amar's extraordinary performance:
1. Encouraging future growth through Savings
According to Sinarmas Sekuritas, AMAR's savings are expected to reach an annual growth rate of more than 50 percent, contributing to a significant increase in CASA (current account saving account). The goal is to increase the proportion of CASA from total customer deposits from 18 percent in 2022 to more than 25 percent by 2025.
In the first quarter of 2023, third-party savings reached a total of Rp133 billion, with average savings per customer reaching Rp1.3 million among more than 100 thousand users on their digital banking application.
2. Futures Deposit Remains A Source Of Main Funding
Entering 2023, AMAR's time deposits have rebounded to more than IDR 1 trillion in the first quarter. Based on this development, a conservative growth target of 25 percent has been set for the next three years.
Sinarmas Sekuritas projects that the number of time deposits will exceed IDR 1.5 trillion by 2025, double the number in 2022. This strong figure provides a solid foundation for further lending through 'Tunaiku,' AMAR's leading digital loan application.
3. Revive Loan Growth
Sinarmas Sekuritas predicts that lending will be faster, supported by data in the first quarter of 2023 which shows growth of 8 percent year-on-year. The projected three-year Sinarmas Sekuritas for loan growth set an annual growth target of 12 percent, driven by 15 percent of CAGR in loans for MSMEs and corporations.
Consistent Loan Results Benefits: Since 2018, AMAR has maintained a loan repayment rate of around 30 percent, which Sinarmas Sekuritas considers a significant advantage for digital banks. In 2023, Sinarmas Sekuritas estimates Net Interest Margin (NIM) remains close to 15 percent.
In addition, Net Interest Revenue (NII) is projected to grow with 11 percent of CAGR from 2023 to 2025, mainly driven by 9 percent of CAGR in interest income during the same period.
4. Generates Strong Cost-Based Revenue
As a digital bank, AMAR has taken advantage of significant cost-based revenues, achieving impressive combined annual growth of 40 percent from 2019 to 2022. The bank estimates that double-digit growth will be sustainable over the next three years. According to the financial model of Sinarmas Sekuritas, revenue from other costs and income is projected to experience combined annual growth (CAGR) of 17.5 percent from 2023 to 2025.
5. AMAR's Profits Increase
In the first quarter of 2023, AMAR managed to record a net profit of IDR 34 billion. Based on previous assumptions from Sinarmas Sekuritas, the estimated net profit for the entire year 2023 is projected to reach IDR 111 billion.
In the future, net profit is expected to continue to increase to IDR 181 billion in 2024 and IDR 279 billion in 2025. These positive financial results will have an impact on the level of equity returns (ROE) of 5 percent in 2024 and 7 percent of ROE by 2025, making AMAR one of the digital banks that has succeeded in making profits.
6. Embeddd Banking and Financing Collaboration
AMAR is committed to building technology-based digital banks that serve its market targets through embedded banking and financing collaboration. This is achieved through collaboration with digital ecosystem platforms to provide a variety of accessible banking services.
AMAR offers plug-and-play embedded banking and financing solutions for non-bank players, so they can provide banking services in their own application without requiring banking licenses. Overall, AMAR adopts technology and collaboration to provide the latest financial solutions.
Vishal Tulsian, President Director of Amar Bank, added that AMAR has now strengthened Four Pillars of strategy, including: 1) Tunaiku: Digital loans for retail and micro-businesses, 2) Relationship banking for commercial and corporate, 3) MSMEs: Digital banking for small businesses, 4) Embedded Banking and Finance: plug and play banking for any application-based technology company.
As mentioned in the research report from Sinarmas Sekuritas, banking penetration in Indonesia is still low as well as limited financial literacy, creating a profitable environment and can provide opportunities for digital banks to develop. We remain optimistic that Amar Bank will continue to serve individuals and MSMEs who still have limited access to digital banking services," said Vishal.
According to a research report by Sinarmas Sekuritas, the profitable business outlook from Amar Bank could lead to an increase in share prices and the potential for changes to the P/B ratio (Price-to-Book) from 1x to 1.7x in an average of 3 years. With this change, the target price in 12 months is estimated to reach IDR 410 (meaning, there is a potential increase of 45 percent).