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Security Bank
- Sector: Financial Services
- Sub Sector: Banks
- Country: Philippines
- Bond: SECBPM 5.5 29
- Indicative Yield-to-Maturity (YTM): 4.704%
- Credit Rating : BBB
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Fundamental View
AS OF 27 Feb 2025- Security Bank is the 7th largest bank in the Philippines by total assets and was established on June 18, 1951. Its dollar bonds provide better yield pickup compared to its nearest comparable. We remain comfortable with the bond given Security Bank’s total capital ratio of 14.20%, which is 400 basis points above the minimum regulatory hurdle, which can buffer modest credit losses in its loan portfolios should macroeconomic headwinds worsen.
Business Description
AS OF 27 Feb 2025- Security Bank is the 7th largest bank in the Philippines by total assets and was established on June 18, 1951. Security Bank’s businesses include wholesale banking, financial markets, and retail banking. The bank provides commercial banking services such as deposit products, loans and trade finance, domestic and foreign fund transfers, treasury, foreign exchange, and trust services.
- Security Bank's loan portfolio is 32% consumer & MSME, 28% middle market, and 40% corporate as of 3Q 2024.
Risk & Catalysts
AS OF 27 Feb 2025- Any rating downgrade of the Philippine sovereign would have a negative impact on Security Bank.
- Given the current rate cut environment that drives funding costs lower, Its strategy to aggressively capture market share in the retail and MSME segment might allow the bank to deliver faster growth and higher net interest income margin.
- Rapid expansion on higher yielding retail and MSME segments could worsen asset quality and increase credit costs.
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Search topics about wealth insights and investments.Kingdom of Saudi Arabia
- Bond: KSA 3.25 26
- Indicative Yield-to-Maturity (YTM): 4.321%
- Credit Rating : A
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Country Overview
AS OF 27 Feb 2025- The Kingdom of Saudi Arabia’s economy is heavily reliant on its petroleum sector. Oil accounts for almost 40% of Saudi’s GDP and 75% of its fiscal revenue.
- Saudi Arabia has the second largest proven petroleum reserves and fourth largest measured natural gas reserves. It is currently the largest exporter of petroleum in the world.
- As of 2023, Saudi Arabia’s main exports were China (12.0% of total exports), Japan (6.4%), India (6.3%), and South Korea (6.1%)
Macro Fundamentals
AS OF 27 Feb 2025- There is an expectation that deficits may remain within the 4% -7% assuming Brent averages at less than USD 75 per barrel in 2025. Despite this, we still expect its credit to remain stable given that its deficits are still in line with developed economies.
- The debt-to-GDP ratio of about 28.3% remains low compared to its developed economy peers. Combined with sizable reserve buffers, this mitigates any potential headwinds from the country’s oil sector.
- Saudi Arabia’s inflation is within modest levels given that the riyal is pegged at 3.75 riyals per US dollar since 1986. Its monetary authority also mirrors the US Fed’s decisions when it comes to local rates.
Risk & Catalysts
AS OF 27 Feb 2025- Saudi Arabia’s government revenues are closely linked to fluctuations in oil prices. Lower oil prices could result in slower economic growth and higher deficits.
- Saudi Arabia has huge forex reserves to maintain its peg to the US dollar in the event of external shocks.
- The government aims to diversify the economy with multibillion investments in the technology and tourism sectors. However, the high costs could pose a risk to the government budget balance.
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Search topics about wealth insights and investments.Meta Platforms
- Sector: TechnologyTechnology Media and Telecommunications
- Sub Sector: Technology
- Country: US
- Bond: META 4.95 33
- Indicative Yield-to-Maturity (YTM): 4.95%
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Fundamental View
AS OF 25 Feb 2025We are encouraged by Meta’s strong advertising growth relative to peers in 2023 and 2024. Meta has extremely strong credit metrics of 0.3x gross leverage and $49 bn net cash. We continue to expect Meta to be a regular/annual issuer to fund its shareholder returns and massive investments in AI and the metaverse.
Longer term, we expect Meta to adhere to its previously communicated financial policy of maintaining a positive or neutral cash balance. Meta does have legal and regulatory risks notably an FTC suit that seeks to unwind its prior acquisitions of Instagram and WhatsApp. However, not all event risk is negative as Meta would be the greatest beneficiary from a potential TikTok ban.
Business Description
AS OF 25 Feb 2025- Meta Platforms is the largest social networking company in the world. Meta generates substantially all of its revenue from advertising which includes Facebook, Instagram, Messenger, and third-party affiliated websites or mobile applications.
- In 4Q24, Family of Apps was 98% of revenue (96.7% from advertising and 1.1% from other) and Reality Labs was 2% of revenue. Reality Labs generated $17.7 bn in operating losses during LTM 4Q24 as the company is investing heavily in the metaverse.
- There are 3.35 bn Family Daily Active People (DAP) as of 4Q24, and the Family Average Revenue per Person (ARPP) was $14.25 quarterly in 4Q24.
- Meta is headquartered in Menlo Park, California. Employee headcount was >74k at 4Q24.
Risk & Catalysts
AS OF 25 Feb 2025In December 2020, the FTC filed a lawsuit against Meta targeting its acquisitions of Instagram and Whatsapp. If Meta is forced to unwind prior acquisitions, this would be a credit negative given reduced scale and diversification.
Meta’s business model relies almost entirely on user-generated content. As such, there are risks related to customer privacy (e.g., Cambridge Analytica data scandal in 2018) and regulatory changes (e.g., Section 230 protections).
In April 2024, the US signed into law a bill requiring a sale or ban of TikTok, although Trump signed an executive order instructing the Attorney General to not enforce the TikTok ban for 75 days (to 4/5/2025). If a ban is implemented, this would positively impact Meta and others with competing short-form video products.
In October 2022, activist Altimeter Capital wrote a letter to Zuck and Board although it was on the friendly-side of activism and some suggestions have already been implemented.
Key Metric
AS OF 25 Feb 2025| $ mn | 2020 | 2021 | 2022 | 2023 | LTM 4Q24 |
|---|---|---|---|---|---|
| Revenue YoY % | 21.6% | 37.2% | (1.1%) | 15.7% | 21.9% |
| EBITDA | 46,069 | 63,882 | 49,622 | 71,955 | 101,568 |
| EBITDA Margin | 53.6% | 54.2% | 42.6% | 53.3% | 61.7% |
| CapEx % of Sales | 18.3% | 16.3% | 27.5% | 20.8% | 23.8% |
| Sh. Ret. % of CFO-CapEx | 27% | 116% | 152% | 46% | 68% |
| Net Debt | (61,954) | (47,998) | (30,815) | (47,018) | (48,989) |
| Gross Leverage | 0.0x | 0.0x | 0.2x | 0.3x | 0.3x |
| EV / EBITDA | 15.8x | 14.0x | 5.8x | 12.3x | 14.5x |
CreditSight View Comment
AS OF 01 May 2025We are encouraged by Meta’s strong advertising growth relative to peers in 2023, 2024, and 1Q25. Meta has extremely strong credit metrics of 0.3x gross leverage and $41 bn net cash. We continue to expect Meta to be a regular/annual issuer to fund its shareholder returns and massive investments in AI and the metaverse. Longer term, we expect Meta to adhere to its previously communicated financial policy of maintaining a positive or neutral cash balance. Meta does have legal and regulatory risks notably an FTC suit that seeks to unwind its prior acquisitions of Instagram and WhatsApp. In addition, the recent EC decision could have an impact as early as 3Q25. However, not all event risk is negative as Meta would be the greatest beneficiary from a potential TikTok ban.
Recommendation Reviewed: May 01, 2025
Recommendation Changed: April 18, 2024
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Search topics about wealth insights and investments.Amazon.com
- Sector: ConsumerTechnology Media and Telecommunications
- Sub Sector: Retail/GrocersTechnology
- Region: US
- Bond: AMZN 4.65 29
- Indicative Yield-to-Maturity (YTM): 4.298%
- Credit Rating : A1/AA/AA-
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Fundamental View
AS OF 25 Feb 2025- We continue to have confidence in CEO Andy Jassy and the company’s long-term business for both AWS and Stores. The recent operating trends reinforce our views particularly the margin improvement. We continue to believe that Amazon is an underappreciated winner in Generative AI given the breadth of its cloud business and offerings including custom silicon and its platform Bedrock.
- Gross leverage declined to 0.4x and 0.9x on a lease-adjusted basis. While Amazon is increasing its capex spend (along with the other hyperscalers), we are encouraged by its debt reduction and zero shareholder returns. Also, Amazon’s equity cushion is ~$2.2 tn. There are risks related to the FTC suit although we expect those to be addressed by behavioral remedies, and we view a breakup as unlikely.
Business Description
AS OF 25 Feb 2025- Amazon is an e-commerce company which sells a wide range of its own products and those of 3rd party sellers. Amazon offers fulfillment services for 3rd party sellers (FBA) and sells cloud computing services (AWS). In 4Q24, 3rd party units were 62% of total paid units, and FBA units are a majority of 3rd party units.
- In LTM 4Q24, NA segment was 61% of sales, International was 22% of sales, and AWS was 17% of sales.
- Amazon disclosed it surpassed 200 mn Prime members in April 2021. The annual membership was increased in February 2022 from $119 to $139 in the US, although fees vary by country. In mid-2019, Amazon Prime began to transition from 2-day to 1-day shipping. Amazon Prime also offers Prime Video, streaming music, and other benefits.
- In 2006, Amazon launched AWS which remains the leader in cloud computing (IaaS/PaaS). Amazon sells its own devices (e-reader, smart speaker, streaming media player, etc.).
Risk & Catalysts
AS OF 25 Feb 2025- We think Amazon has moderate event risk given its large size (~$2.2 tn market cap).
- While Amazon is increasing its CapEx spend, we are encouraged by the $14 bn reduction in lease-adjusted debt from year-end 2022 through year-end 2024.
- Amazon continues to face regulatory scrutiny. In September 2023, the FTC and 17 states filed a lawsuit against Amazon and accused the company of (1) punishing sellers for offering lower prices elsewhere and (2) making Prime eligibility conditional on usage of fulfillment services. The biggest risk would be a breakup, although we view that as unlikely.
- Amazon’s $14 bn acquisition of Whole Foods has shown its proclivity for large M&A, although the regulatory environment could make large deals challenging.
Key Metric
AS OF 25 Feb 2025| $ mn | 2020 | 2021 | 2022 | 2023 | LTM 4Q24 |
|---|---|---|---|---|---|
| Revenue YoY % | 37.6% | 21.7% | 9.4% | 11.8% | 11.0% |
| EBITDA | 57,284 | 71,994 | 74,593 | 110,305 | 144,162 |
| EBITDA Margin | 14.8% | 15.3% | 14.5% | 19.2% | 22.6% |
| CapEx % of Sales | 12.1% | 13.3% | 11.5% | 8.5% | 12.3% |
| Sh. Ret. % of CFO-CapEx | 0% | 0% | (49%) | 0% | 0% |
| Net Debt | (50,497) | (44,771) | 7,316 | (19,598) | (43,202) |
| Gross Leverage | 0.6x | 0.7x | 1.0x | 0.6x | 0.4x |
| EV / EBITDA | 28.3x | 23.3x | 11.7x | 14.4x | 16.1x |
CreditSight View Comment
AS OF 02 May 2025We continue to have confidence in CEO Andy Jassy and the company’s long-term business for both AWS and Stores. AWS is now a $117 bn run-rate business and delivered record operating margin of 39.5% in 1Q25. We continue to believe that Amazon will be a winner in Generative AI given the breadth of its cloud business and offerings including custom silicon (Trainium, Inferentia) and its platform Amazon Bedrock. We estimate leverage was roughly flat at 0.4x gross and 0.9x lease-adjusted gross. While Amazon’s capex has been ramping, along with other hyperscalers, we are encouraged by its debt reduction over the past few years and zero shareholder returns. Also, Amazon’s market cap is $2.1 tn. There are risks related to the FTC suit although we view a breakup as unlikely.
Recommendation Reviewed: May 02, 2025
Recommendation Changed: May 01, 2024
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Search topics about wealth insights and investments.Pertamina
- Sector: Energy
- Sub Sector: Oil and Gas
- Region: Indonesia
- Bond: PERTIJ 3.1 30
- Indicative Yield-to-Maturity (YTM): 5.339%
- Credit Rating : -/BBB/-
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Fundamental View
AS OF 30 Dec 2024Pertamina enjoys very strong linkages with the Government of Indonesia (GoI) and is assured of extraordinary support in times of distress.
Slightly higher YoY FY24E Brent crude prices could lift upstream margins and overall EBITDA (given the upstream business accounts for >65% of consolidated EBITDA).
Although leverage typically remains low, Pertamina incurs large capex spending that could pressure its free cash flow generation.
High persisting dividend outflows could restrain free cash flow improvements.
Business Description
AS OF 30 Dec 2024- Pertamina is involved in a broad range of upstream and downstream oil, gas, geothermal and petrochemical operations.
- In the upstream sector, it engages in the exploration, development and production and supply of crude oil, natural gas and geothermal energy.
- As for the downstream sector, the company carries out refining, marketing and distribution of oil, gas, fuel products and petrochemical and other non-fuel products.
- As of 31 December 2022, its total proved oil reserves stood at ~1,289 mmbbl (mn barrels of oil) and gas reserves stood at ~817 mmboe (mn barrels of oil equivalent). Its average daily oil and gas production was ~1,044,000 boe per day in FY23. The company owns and operates 6 refineries in Indonesia.
- Under the Public Service Obligation (PSO) mandate, Pertamina is responsible for providing certain grades of motor gasoline, automotive diesel oil, kerosene and LPG at subsidized prices. The subsidized retail price is often times lower than the cost of production, creating a shortfall, for which it receives reimbursements from the GoI.
Risk & Catalysts
AS OF 30 Dec 2024Pertamina’s profitability is materially affected by volatility in oil & gas prices. Prolonged periods of low oil prices could hurt upstream earnings that form the bulk of overall EBITDA (>65%).
As retail prices of certain fuel products are regulated, realized prices may be below its cost of sales.
Pertamina has to initially absorb the shortfall between the regulated retail price and the cost of producing and distributing certain fuel products. If the price of crude oil exceeds the price ceiling set by the GoI, the company may receive insufficient subsidy reimbursements.
Capex typically remains elevated and which pressurizes its free cash flow generation.
Key Metric
AS OF 30 Dec 2024| $ mn | FY19 | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|---|
| Debt to Book Cap | 36.2% | 38.5% | 41.2% | 42.1% | 37.6% |
| Net Debt to Book Cap | 22.4% | 18.9% | 21.9% | 12.5% | 8.5% |
| Debt/Total Equity | 56.8% | 62.5% | 70.0% | 72.7% | 60.4% |
| Debt/Total Assets | 26.4% | 28.3% | 29.9% | 30.8% | 27.4% |
| Gross Leverage | 2.2x | 2.4x | 2.5x | 1.9x | 1.9x |
| Net Leverage | 1.3x | 1.2x | 1.3x | 0.6x | 0.4x |
| Interest Coverage | 8.1x | 7.8x | 8.7x | 11.2x | 8.9x |
| EBITDA Margin | 14.9% | 19.9% | 16.0% | 16.7% | 17.7% |
CreditSight View Comment
AS OF 19 Mar 2025We have a Market perform recommendation on Pertamina. Pertamina’s Jan-30/31 bonds trade 22 bp/24 bp wider than Petronas’ 30/32 bonds, while its longer-dated bonds trade an average of 42 bp wider. We see this differential as fair given Petronas’ solid net cash position, larger EBITDA, and stronger financial reporting quality; we believe the wider differential for the longer-dated bonds is attributable to Petronas’ notes trading tight. We remain comfortable with Pertamina’s full state-ownership, timely fuel subsidy and compensation from the Indonesian government, our expectation for Pertamina’s strategic policy role to sustain, positive free cash flow generation, robust credit metrics and adequate liquidity. That said, its capex remains elevated amid a ramp up in energy transition goals.
Recommendation Reviewed: March 19, 2025
Recommendation Changed: May 16, 2023
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Search topics about wealth insights and investments.Export-Import Bank of India
- Sector: Financial Services
- Sub Sector: Financial Services
- Region: India
- Indicative Yield-to-Maturity (YTM): 4.92%
- Credit Rating : ( Baa3 / BBB- / BBB- )
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Fundamental View
AS OF 27 Dec 2024The Export-Import Bank of India (EXIMBK) was founded in 1982. Its credit standing is built upon the key role it plays in the promotion of India’s cross border trade and investment development, as India’s official export credit agency.
EXIMBK is 100% owned by the Government of India. Given its crucial policy role, close governmental links and quasi-sovereign status, we view it as inconceivable that the Indian government would fail to provide EXIMBK with support in a timely manner, if needed.
Business Description
AS OF 27 Dec 2024- EXIMBK presently serves as a growth engine for the internationalization efforts of Indian businesses, facilitating the import of technology and export product development, export production, export marketing, pre- and post-shipment, as well as overseas investment.
- As at F1H25, EXIMBK's loan portfolio was principally made up of export finance (68%) and term loans to exporters (18%), with the remaining 14% split among the financing of overseas investment, import finance, and export facilitation. 44% come under the policy business/face GOI risk while the remaining 56% are to the commercial business.
- By geography, the bank has a primary exposure of 33% to Africa, 56% to Asia (mainly South Asia), 7% to Europe and the Americas, and the remaining to the rest of the world.
Risk & Catalysts
AS OF 27 Dec 2024As a quasi-sovereign issuer with backstops from the Government of India and the Reserve Bank of India (RBI), it is viewed as a proxy to the sovereign. Any downgrade to India’s sovereign rating will flow through to EXIMBK as well.
EXIMBK’s policy role may require it to, at times, take on exposures that could lead to financial losses. This has led to poor asset quality and high impairment charges similar to the public sector commercial banks during the years leading up to the pandemic.
Capital standing, however, is robust thanks to capital infusions from the Government of India which have been stepped up in recent years – INR 50 bn was injected in FY19, followed by infusions of INR 15 bn and INR 13 bn in FY20 and FY21 respectively. The bank received INR 7.5 bn in FY22 despite capital levels remaining strong during the year. No infusions have been made since FY23 due to the comfortable capital position.
Key Metric
AS OF 27 Dec 2024| INR mn | FY21 | FY22 | FY23 | FY24 | 1H25 |
|---|---|---|---|---|---|
| Net Interest Margin (Annual) | 1.84% | 2.19% | 2.29% | 2.06% | 1.70% |
| ROAA | 0.19% | 0.54% | 1.04% | 1.43% | 1.16% |
| ROAE | 1.49% | 3.97% | 7.76% | 11.47% | 9.54% |
| Equity/Assets | 13.23% | 14.12% | 12.87% | 12.06% | 12.31% |
| Tier 1 Capital Ratio | 24.0% | 28.6% | 23.7% | 19.6% | 27.4% |
| Gross NPA Ratio | 6.69% | 3.56% | 4.09% | 1.94% | 2.02% |
| Provisions/Loans | 2.46% | 0.90% | 1.24% | 0.29% | 0.16% |
| Pre-Impairment Operating Profit / Average Assets | 2.13% | 2.31% | 2.41% | 2.12% | 1.68% |
CreditSight View Comment
AS OF 06 Jan 2025Exim Bank of India is the country’s key policy bank with full government support. It provides financial assistance to exporters and importers with a view to promote trade in India. It is 100% owned by the Government of India (GoI) and is a proxy to the India sovereign in international debt markets (quasi-sovereign status). The bank cannot be liquidated without the government’s approval and has a track record of government capital infusions. The bank’s asset quality is back on track after some wobbles in previous years. Capital levels are strong. We maintain a Market perform recommendation on the bank.
Recommendation Reviewed: January 06, 2025
Recommendation Changed: January 04, 2021
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Search topics about wealth insights and investments.BMO Financial
- Sector: Financial Services
- Sub Sector: Consumer Finance and Banking
- Region: Canada
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Fundamental View
AS OF 30 Dec 2024BMO is geographically diversified within Canada & via its commercial banking business in the U.S. and is also well-diversified by revenue with contribution from fee income businesses.
Credit has performed worse than peers in 2024, but losses are likely to stabilize and gradually improve in 2025, based on underwriting and risk management changes in recent years as well as seasoning effects.
Business Description
AS OF 20 Dec 2024- BMO Financial Group is the fourth largest depository institution in Canada with C$1.41 tn in assets as of F4Q24 and a market capitalization of US$70 bn. Total deposits were C$982 bn at F4Q24.
- BMO operates 1,890 branches in Canada and the United States in 2024.
- As of YE23, BMO had 1,013 branches within the United States, mostly in the Midwest. BMO ranked 11th in deposit market share in the U.S. (SNL), with a top-2 share in Illinois.
Risk & Catalysts
AS OF 20 Dec 2024BMO has a strong core deposit base in Canada and in the U.S., which mitigates the potential for a liquidity event. BMO remains well-capitalized relative to requirements with a target CET1 ratio of 12.5% (13.6% at F4Q24).
BMO closed the acquisition of Bank of the West from BNP Paribas in February 2023, significantly expanding its footprint in the U.S. We don’t expect deal integration to have much impact on the credit profile.
We view real estate-related risk in Canada as manageable for BMO given low LTV of exposures in vulnerable markets and conservative underwriting. Commercial real estate accounts for ~10% of total loans, and office is quite manageable at ~1% of total.
Credit deterioration was worse than peers in 2024, leading to elevated provisions in 2H24; BMO has indicated the problem loans were mostly originated in 2021, and provisions should start to improve in 2025.
Key Metric
AS OF 20 Dec 2024| $ mn | FY20 | FY21 | FY22 | FY23 | LTM 4Q24 |
|---|---|---|---|---|---|
| Revenue | 17,461 | 20,509 | 26,727 | 21,694 | 24,095 |
| Net Income | 3,790 | 6,167 | 10,519 | 3,291 | 5,380 |
| ROAE | 0.94% | 0.92% | 0.92% | 0.92% | 0.92% |
| NIM | 1.58% | 1.53% | 1.53% | 1.53% | 1.53% |
| Net Charge-offs / Loans | 0.25% | 0.14% | 0.08% | 0.14% | 0.39% |
| Total Assets | 713,376 | 797,018 | 860,451 | 969,851 | 1,011,587 |
| Unsecured LT Funding | 51,916 | 51,915 | 64,886 | 63,418 | 66,700 |
| CET1 Ratio (Fully-Phased-In) | 11.9% | 13.7% | 16.7% | 12.5% | 13.6% |
CreditSight View Comment
AS OF 29 May 2025We maintain our Market perform for BMO, with our preference within the group remaining to trade up in quality to RBC and TD. Surprising deterioration in asset quality metrics was the story throughout the latter part of F2024, with provisions well above historical average levels. Management has attributed the weakness largely to large wholesale loans to new borrowers originated in 2021, but given the steady climb in reserve coverage as well as changes to risk management and underwriting in recent years, BMO is confident quarterly provision ratios should moderate across F2025 alongside further potential benefits from efficiency initatives. This appeared to be the case thus far in F1H25.
Recommendation Reviewed: May 29, 2025
Recommendation Changed: August 26, 2020
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Fundamental View
AS OF 02 Dec 2024We expect PT Mineral Industri Indonesia’s (MIND ID) strategic importance and policy role to the Government of Indonesia (GoI) to strengthen in line with the GoI’s downstream push and green energy transition efforts.
We expect MIND ID’s credit metrics to improve meaningfully from FY25 onwards as strong commodity prices (barring coal and nickel), capacity additions, and healthy dividend income from key joint venture PT Freeport Indonesia (PTFI) could offset high capex.
Mining regulatory risk remains a concern, though MIND ID’s large diversified scale of operations could partly limit such risks.
A potential IPO of its aluminium business within the next 3-5 years could boost financial flexibility.
Business Description
AS OF 02 Dec 2024- MIND ID is an unlisted Indonesian state-owned holding company of various Indonesian mining operators.
- Key subsidiaries include: 1) Bukit Asam: Coal mining, processing, and sale of coal; 2) Timah: Tin mining, processing, and sale of downstream products; 3) Aneka Tambang (Antam): Mining, processing, and sale of gold products, nickel, ferronickel, bauxite and chemical grade alumina; 4) Inalum: Production of aluminium.
- Key unconsolidated joint ventures and associates include: 1) PT Freeport Indonesia (PTFI): Mining, processing and sale of copper, gold and silver. MIND ID aims to raise its stake in PTFI to 71% from a current 51% in the medium-to-long term; 2) PT Vale Indonesia (PTVI): Mining and processing of nickel. MIND ID has a current 34% stake in PTVI.
Risk & Catalysts
AS OF 02 Dec 2024MIND ID is subjected to unanticipated changes in mining policies that raise operational and regulatory uncertainties.
MIND ID is exposed to commodity price fluctuations that could hurt sales price realizations and profitability.
Capex typically remains elevated, pressurizing its free cash flow generation and leverage.
MIND ID faces material asset concentration risk for its coal, gold and tin segments.
Key Metric
AS OF 02 Dec 2024| IDR bn | FY21 | FY22 | FY23 | LTM 9M23 | LTM 9M24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 52.0% | 44.6% | 41.6% | 41.5% | 38.0% |
| Net Debt to Book Cap | 29.6% | 27.1% | 24.5% | 25.3% | 23.7% |
| Debt/Total Equity | 108.3% | 80.5% | 71.2% | 70.9% | 61.4% |
| Debt/Total Assets | 46.1% | 38.7% | 35.6% | 35.4% | 31.6% |
| Gross Leverage | 4.7x | 3.5x | 7.0x | 6.2x | 6.0x |
| Net Leverage | 2.7x | 2.1x | 4.1x | 3.8x | 3.7x |
| Interest Coverage | 3.2x | 3.9x | 2.2x | 2.3x | 2.2x |
| EBITDA Margin | 21.5% | 19.9% | 12.3% | 12.3% | 11.8% |
CreditSight View Comment
AS OF 30 May 2025We have an Underperform recommendation on MIND ID. We think valuations are uncompelling versus its SOE peers, at ~15 bp wider than Pertamina and slightly wider to PLN. We think the differentials should be wider and see room for MIND ID to widen ~5-10 bp ahead, considering MIND ID’s materially weaker credit profile, less crucial policy role, and greater exposure to Indonesia’s mining policy changes. We also expect free cash flows to remain negative over the next 2 years from heavy downstream capex. That said, key mitigants include MIND ID’s gradually strengthening strategic importance, resilient commodity prices (especially gold), persisting large dividend income from Freeport Indonesia (PTFI), and our expectation for a modestly improving FY25 credit outlook.
Recommendation Reviewed: May 30, 2025
Recommendation Changed: March 19, 2025
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Fundamental View
AS OF 01 Nov 2024ING displays robust and consistent asset quality, good earnings, solid capital ratios and a well-balanced funding profile.
These attributes are supported by its strong franchise in retail and wholesale banking in the Benelux region, its good geographic diversification, and its focus on low risk residential mortgage lending.
At the same time, it has sizeable exposures to cyclical industry sectors in its Wholesale Banking division, although these have been reduced in recent years.
Business Description
AS OF 01 Nov 2024- ING was founded in 1991 by a merger between Nationale-Nederlanden and NMB Postbank Group. It is now the largest Dutch financial institution by total assets.
- ING Bank is focused on retail and commercial banking in the Benelux countries, with direct banking franchises in Germany, Spain, Italy, Australia, as well as Poland, Romania, Turkey and the Philippines.
- In April 2016, it completed the process of divesting all of its insurance business (in Europe, the US and Asia), under the Restructuring Plan conditions imposed by the European Commission after it received state aid in 2008-2009.
- In November 2016, ING announced that its resolution entity would be its holding company, ING Groep NV. ING Groep is now the issuing entity for all TLAC/MREL-eligible debt (AT1, Tier 2 and senior unsecured), and its sole operating entity is ING Bank N.V.
Risk & Catalysts
AS OF 01 Nov 2024Exposure to Russia has been coming down meaningfully, and the book is well covered (€1.0 bn offshore exposure with >€0.5 bn cover from guarantees). It also has €400 mn of equity in its Russian subsidiary. We highlight this as Russian exposure is continuing to attract interest and led to some additions to Stage 3 exposures year to date. To put these figures in context, the figures for Russian offshore exposure and equity in Russia at the beginning of the war in February 2022 were €5.3 bn (€2.2 bn covered by risk transfers to third parties) and €0.2 bn.
ING’s CET1 ratio will trend down towards its 12.5% target in the coming years, bringing it more in line with other major peers.
Customer deposits fund over 60% of ING’s balance sheet. 85% of deposits are insured.
Key Metric
AS OF 01 Nov 2024| € mn | Y20 | Y21 | Y22 | Y23 | 3Q24 |
|---|---|---|---|---|---|
| Return On Equity | 4.6% | 8.8% | 7.1% | 14.4% | 14.8% |
| Total Revenues Margin | 1.9% | 2.0% | 1.9% | 2.3% | 2.3% |
| Cost/Income | 63.2% | 60.5% | 60.3% | 51.2% | 49.1% |
| CET1 Ratio (Transitional) | 15.5% | 15.9% | 14.5% | 14.7% | 14.3% |
| CET1 Ratio (Fully-Loaded) | 15.5% | 15.9% | 14.5% | 14.7% | 14.3% |
| Leverage Ratio (Fully-Loaded) | 4.8% | 5.9% | 5.1% | 5.0% | 4.7% |
| Liquidity Coverage Ratio | 137.0% | 139.0% | 134.0% | 143.0% | 146.0% |
| Impaired Loans (Gross)/Total Loans | 2.1% | 1.8% | 1.7% | 1.8% | 1.9% |
CreditSight View Comment
AS OF 02 May 2025After divesting its insurance operations, the remaining business, ING Bank, has stayed a solid Benelux-based bank with a strong direct banking arm in several countries. Profitability growth has been supported by a gradual recovery in the Dutch economy, but since 2018 heavily affected by higher compliance costs after ING was hit by a money-laundering charge. Net interest revenues are declining but fundamentally, the bank looks in good shape versus several other core European banks and fee income is increasing. Capital ratios are trending downwards given distributions on offer to shareholders. In January 2025, it announced its intention to exit Russia, which would appear credit positive. We moved from Outperform to Market perform on 6 February 2025.
Recommendation Reviewed: May 02, 2025
Recommendation Changed: February 07, 2025
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Fundamental View
AS OF 06 Sep 2024IBK benefits from a legally binding solvency guarantee from the Korean government and is viewed as a Korean quasi-sovereign issuer. The bank is listed, but remains majority state-owned. Previous governments had proposed privatizing it, but subsequent governments scrapped these plans. The government intends to keep its stake above 50%, and wants IBK to focus on lending to SMEs and provide earlier stage investment capital.
IBK manages the difficult feat of combining its policy role to support Korean SMEs with performance that compares creditably with Korean commercial banks.
Business Description
AS OF 04 Sep 2024- IBK was established under its own Act in 1961 to assist the development of Korea's small business sector. It claims a 23% market share in SME lending.
- It was listed in the early 1990s, but was re-nationalised following heavy losses in the Asian economic crisis of the late 1990s. It was re-listed in 2003, and is majority owned by the government which holds 59.5%; the National Pension Scheme holds 5.6%, and other policy banks have small stakes (7.2% by Korea Development Bank and 1.8% by the Export-Import Bank of Korea).
- Under Article 43 of the IBK Act, if the bank incurs losses they should be set against its reserves and "if the reserves are not sufficient the Government shall assume the remaining loss". Although this is a solvency guarantee and not an explicit guarantee for the timely payment of debts, we believe the Korean government will ensure IBK is in a position to make such timely payments.
Risk & Catalysts
AS OF 07 Jan 2025The bank’s ratings are closely tied to the Korean sovereign’s ratings due to its quasi-sovereign status.
Its ratings and its default risk should therefore not be impacted by any deterioration in its financials, provided the government continues to inject new capital when needed, which it is expected to.
Its policy mandate requires it to use at least 70% of its funding for SMEs. Risks are mitigated by its granular SME exposures which are more than 80% secured, including guarantee from state-owned credit guarantee agencies. Korean governments have also always been quick to provide support including capital injections to IBK when needed, with the most recent injection of KRW 1.3 tn during the COVID.
Key Metric
AS OF 04 Sep 2024| KRW bn | FY20 | FY21 | FY22 | FY23 | 1H24 |
|---|---|---|---|---|---|
| Pre-Provision Operating Profit / Average Assets | 1.33% | 1.30% | 1.49% | 1.59% | 2.78% |
| ROAA | 0.5% | 0.6% | 0.6% | 0.6% | 0.6% |
| ROAE | 6.4% | 9.2% | 9.5% | 8.8% | 8.7% |
| Provisions/Average Loans | 0.60% | 0.34% | 0.50% | 0.67% | 1.03% |
| Nonperforming Loans/Total Loans | 1.08% | 0.85% | 0.85% | 1.05% | 1.30% |
| CET1 Ratio | 11.1% | 11.3% | 11.1% | 11.3% | 11.6% |
| Total Equity/Total Assets | 6.95% | 6.92% | 6.79% | 7.10% | 7.06% |
| NIM | 1.55% | 1.51% | 1.78% | 1.79% | 1.73% |
CreditSight View Comment
AS OF 23 Sep 2024IBK is not wholly government owned – 59.5% direct government ownership, 7.2% KDB and 1.8% KEXIM – but is a policy bank benefiting from a Korean government solvency guarantee. For a policy bank it also has a fairly good track record and manages the difficult feat of combining its policy role to support Korean SMEs with performance that compares creditably with Korean commercial banks. As the leading lender to Korea’s medium and small businesses, IBK plays a key role in the country’s economy, enhanced by the longstanding objective of numerous administrations to achieve a more diversified economy less reliant on the “chaebol”. Successive Korean governments have always been quick to provide support including capital injections to the policy banks when needed.
Recommendation Reviewed: September 23, 2024
Recommendation Changed: March 17, 2017