Report by Galliano's Financials Research
Victor Galliano upgrades Bank Mandiri and Bank Negara to Buy on better-than-expected credit quality, attractive valuations and signs the government is reining in market-unfriendly policies. Both banks screen well on fundamentals (fig 1) and in his proprietary scorecard (fig 2). Mandiri is his top pick, driven by strong credit quality and solid returns, supported by mid-ranking valuations. Low NPLs underpin a declining cost of risk and improving post-provision returns, while returns relative to valuation are very attractive. With PBV near a three-year low and bond yields elevated, he sees scope for a valuation uplift if yields ease. Negara’s valuations are close to deep value and, although return trends remain uninspiring, it has the lowest MSME exposure of the peer group and second best NPL coverage.
