Highlights

• Solid operating performance, but provisions capped earnings growth. PPOP increased 14.5% yoy, while net profit rose only 6.6% as provisions jumped 42.1%. Sequentially, 2Q26 PPOP declined 1.6% qoq and net profit fell 10.0% qoq.
   
• Front-loaded lending implies a significant 2H26 slowdown. Loans grew 24.4% yoy (+7.7% ytd), but management maintained its 8-10% full-year target and will align new lending with deposit growth while higher CoF prompted management to cut its NIM guidance to 3.3-3.5%.
   
• Maintain HOLD with an unchanged Rp4,150 target price, implying 0.9x 2026F P/B. Timely Kopdes repayment and lower programme exposure could provide upside, while a 10.6% dividend yield offers downside support.
   

Analysis

• Solid PPOP, higher provision overlay. Bank Negara Indonesia (BBNI) posted record-high pre-provision operating profit (PPOP) of Rp18.5t, growing 14.5% yoy in 1H26 (1H25: Rp16.2t, 1H24: Rp16.4t). The strong PPOP was supported by solid growth in both net interest income (NII) and fee income. However, provisions increased 42.1% yoy, limiting net profit growth to 6.6% yoy to Rp10.8t. Sequentially, 2Q26 PPOP declined 1.6% qoq and net profit fell 10.0% qoq as opex and provisioning rose 7.8% and 22.6% qoq respectively. 1H26 net profit was within our/market expectations, accounting for 49%/51% of our/market full-year estimates.
   

• Loans grew 24.4% yoy in 1H26; loan growth target maintained at 8-10%. Loans increased 24.4% yoy and 7.7% ytd, driven by wholesale lending. Excluding Agrinas (Rp55t), loans still rose 17% yoy, led by utilities, poultry, telecommunications and FMCG. Management maintained its 8-10% 2026 target, implying only limited net expansion in 2H26. Management said that its loan growth disbursement in 2H26 will follow deposit growth due to recent liquidity tightness. Loans to corporate SOE increased 63.2% yoy (6.7% qoq), accounting for 20.4% of total loans (1H25: 15.6%).
   
• Loan yield stabilised, but funding pressure will dominate, leading to lower NIM guidance. Blended loan yield held at 6.9% in 2Q26, but remained below 7.3% in 2Q25 as the mix shifted towards wholesale and SOE. Corporate yield improved slightly to 6.2% from 6.1% qoq, while management said corporate yield excluding Agrinas was stable. BBNI will set required yields on new loans around 100bp above the current portfolio yield. Nevertheless, cost of funds (CoF) rose to 2.63% in 2Q26 from 2.49% in 1Q26, and deposit costs will reprice faster than loans. Management consequently cut its 2026 NIM guidance to 3.3-3.5%. 
   
• Asset quality improved, but retail remained under pressure. Loan at risk (LAR) declined to 8.1% from 11.0%, while gross NPL remained at 1.9%. Write-offs fell 44% yoy as new NPL formation dropped. The higher credit cost of 1.1% reflected continued weakness across consumer and small-business loans, together with a precautionary overlay for rapid wholesale growth despite no visible wholesale stress. Consumer NPL rose to 3.0% in 1H26 from 2.1% in 1H25. Its NPL coverage normalised to 198% in 1H26 (1H25: 204.7%). 
   
• Agrinas and SAL create a prospective funding requirement. BBNI disbursed Rp55t to Agrinas at a 6% interest rate with a six-year tenor, with 0% expected credit loss (ECL), a government-backed repayment mechanism (according to the bank), and 50% RWA. Only Rp9t had been utilised, while Rp46t remained in Agrinas’ BBNI current account and will progressively leave as construction advances. Separately, around Rp76t of time-deposit growth came from the Ministry of Finance’s excess budget balance (SAL) placements. Their maturity, alongside Agrinas utilisation, will require BBNI to compete for replacement funding in 2H26. However, If the first scheduled Kopdes repayment is made on time in September and a programme scale-back reduces BBNI’s future loan exposure, these developments could provide upside catalysts.