Indonesia’s Big 4 banks — BBCA, BBRI, BMRI, BBNI — dominate the country’s financial system. Three of them report ~19-20% ROE. But that headline number hides enormous differences in how they make money, how protected they are from rate cycles, and what they’re actually worth. Decomposing the ROE reveals that these are fundamentally different businesses wearing similar return profiles.
Figures are from published annual reports and yfinance data through early 2025. This is analysis, not investment advice.
The Scorecard
| Metric | BBCA | BBRI | BMRI | BBNI | Best |
|---|---|---|---|---|---|
| ROE | 20.4% | 19.0% | 19.2% | 11.7% | BBCA |
| ROA | 3.6% | 3.0% | 2.0% | 1.5% | BBCA |
| Leverage | 5.6x | 6.3x | 9.6x | 7.9x | BBCA (lowest) |
| NIM (approx) | ~5.5% | ~6.5% | ~3.2% | ~3.0% | BBRI |
| Cost-to-Income | 34.2% | 47.6% | 45.4% | 53.4% | BBCA |
| P/BV | 3.1x | 1.7x | 1.6x | 0.97x | BBNI (cheapest) |
| P/E | 15.4x | 9.5x | 8.4x | 8.3x | BBNI (cheapest) |
BBCA wins on almost every quality metric but is the most expensive stock. BBNI is cheapest but weakest. The interesting question is what’s happening in between.
DuPont Decomposition: Where the ROE Actually Comes From
The key equation: ROE = ROA x Leverage.
BBCA: 3.6% ROA × 5.6x leverage = ~20% ROE
BBRI: 3.0% ROA × 6.3x leverage = ~19% ROE
BMRI: 2.0% ROA × 9.6x leverage = ~19% ROE
BBNI: 1.5% ROA × 7.9x leverage = ~12% ROE
BBCA and BMRI report nearly identical ROEs. But BBCA earns 3.6% on its assets with modest leverage, while BMRI needs 9.6x leverage to compensate for 2.0% ROA. Leverage amplifies both gains and losses — BMRI’s ROE is more fragile, more exposed to credit deterioration or margin compression.
BBCA’s profitability advantage comes from two sources: a 34% cost-to-income ratio (world-class efficiency) and an 82% CASA ratio that keeps its cost of funds at just 0.66% of assets. BBRI compensates with the highest NIM (~6.5%) from micro lending, where it charges 12-20%+ interest — but that business requires 120,000+ employees and a 47.6% cost-to-income ratio.
The Rate Cycle Test
Bank Indonesia raised rates from 3.5% (2022) to 6.0%+ (2024). This was a natural experiment that exposed which banks have structural moats and which were riding favorable conditions.
| Bank | Interest Expense Growth | Cost of Funds (% of assets) |
|---|---|---|
| BBCA | +75% | 0.66% |
| BBRI | +114% | 2.82% |
| BBNI | +119% | 2.14% |
| BMRI | +140% | 1.74% |
BBCA’s interest expense rose 75%. Everyone else more than doubled. The reason is simple: BBCA’s 82% CASA ratio means most depositors accept near-zero interest. When the central bank raises rates, BBCA barely has to pass it through. BBRI, with ~65% CASA, has to compete harder for deposits.
The profit impact was dramatic:
- BBRI went from +65% profit growth (2022) to flat (2024). Interest expense doubled from 26.3T to 56.2T while micro borrowers couldn’t absorb full rate pass-through.
- BMRI grew assets 30% in two years (2,174T to 2,829T) but profit barely moved. Asset growth outpacing earnings means ROA is declining.
- BBNI’s net interest income declined for three straight years (41.3T to 40.3T). Revenue stagnated while costs kept rising.
- BBCA kept compounding, though growth decelerated from 19% to 5%.
The inverse trade is worth watching: when BI eventually cuts, the banks with the most rate-sensitive deposit bases (BBRI, BMRI) should see the sharpest NIM recovery.
Four Banks, Four Theses
BBCA — The Expensive Compounder. Highest quality bank in Indonesia. 20% ROE sustained for 20+ years, lowest leverage, cheapest deposits, best efficiency. The price reflects it: 3.1x P/BV and 15x P/E. A Gordon Growth Model suggests ~1.7x fair value, but the gap is explained by quality premium, scarcity (only privately-controlled mega-bank), and arguably a lower real cost of equity (beta of just 0.04). Not a bargain, but the kind of stock that makes expensive look cheap in retrospect. Breaks if ROE falls below 18% sustained.
BBRI — The Rate Cut Play. The franchise isn’t broken — the rate cycle squeezed it. 600,000+ BRILink agents and dominance in micro lending create a moat no one can replicate quickly. At 1.7x P/BV with 19% ROE, you’re paying a fair price for a rate-sensitive business at the wrong point in the cycle. When rates normalize, NIM expands and earnings re-accelerate. Risk: micro NPLs spiking in a downturn, or digital disruption eroding the village network. Breaks if NPL gross exceeds 4% or NIM stays below 6% even after cuts.
BMRI — Turnaround at a Crossroads. The 2020-2023 turnaround was real (ROE: 8.7% to 22.7%). But profit has plateaued while the balance sheet keeps inflating. With 9.6x leverage — highest among the Big 4 — there’s less margin for error. At 1.6x P/BV, the market is pricing for continued improvement, but ROA is trending the wrong way. The retail push (Livin’ app, mortgages, Islamic banking via BSI) needs to generate earnings, not just asset growth. Breaks if ROA falls below 1.5%.
BBNI — Cheap for a Reason. Below book value at 0.97x P/BV. 11.7% ROE barely covers the ~12-14% cost of equity for Indonesian banks. No structural moat — no CASA dominance, no micro niche, no turnaround momentum. NII declining, costs rising, efficiency worst in class. The bull case is mean reversion: any improvement in efficiency plus rate relief could push ROE to 15% and justify 1.5x P/BV, with 5-7% dividend yield while you wait. But sub-1x P/BV can go lower (0.7x during COVID). Being cheap isn’t the same as being undervalued. Breaks if ROE drops below 10%.
Who Should Own What
| Investor Profile | Best Fit | Why |
|---|---|---|
| Safety-first, long-term | BBCA | Most predictable, lowest risk, compound and forget |
| Value, medium-term | BBRI or BMRI | Quality at reasonable prices, rate cycle catalysts |
| Income / dividends | BBNI or BBRI | Highest yields (5-7% and 3-4% respectively) |
| Contrarian / turnaround | BBNI | Cheapest, highest risk, highest re-rating potential |
What This Analysis Doesn’t Cover
Five gaps worth flagging: detailed NPL trends by segment, CASA ratio trajectory over time, management quality and governance (particularly SOE risks at BBRI/BMRI/BBNI), macro modeling of BI rate paths, and technical/momentum analysis. Each is a rabbit hole that would deepen the picture.
The core takeaway stands: when three banks show ~19% ROE, the right question isn’t “which is cheapest?” but “which ROE do you trust?” DuPont decomposition and the rate cycle test point to the same answer — but the market already knows, and it’s priced in at 3.1x book.