ARTO The Profit Imbalance That Kept Getting Worse Just Didn't

The Gap That Kept Widening Just Stopped Widening

Nine months into 2022, Bank Jago's consolidated net income sits at Rp40.6 billion - a real number, but a small one next to the Rp219.1 billion the Sharia business unit alone reported over the same nine months (Note 40). Subtract one from the other and the conventional bank - the app, the ecosystem lending, the legacy Artos back book - lost roughly Rp178.5 billion through September. That's the same structural story the Q1 2022 and H1 2022 posts have now flagged three times running.

What's actually new this quarter is the direction of the trend. Running the same standalone-quarter math the last two posts used: Q1's ratio was roughly 5.7x, Q2's widened to roughly 7.1x, and Q3 alone - Rp41.25 billion of Sharia net income (Rp219.1 billion nine-month total less the H1 2022 post's own Rp177,861 million figure) against Rp11.7 billion of consolidated net income (Rp40.6 billion less H1's Rp28.9 billion) - works out to roughly 3.5x. After two straight quarters of the imbalance getting worse, it just got meaningfully better. One quarter isn't a trend reversal on its own, and 3.5x is still "a young unit earns several times the whole bank's profit," not "the core bank is thriving" - but it's the first quarter in this backfill where that particular number moved the right way.

Nothing else about the underlying picture looks as encouraging. The stock fell another 27.9% this quarter, to its lowest close anywhere in this backfill (see below), and a fresh read of the loan book's own quality note shows the Sharia unit's asset quality souring faster than the conventional book it's propping up (see Beyond the Usual) - so the narrowing profit gap isn't obviously the start of a clean turnaround so much as one favorable data point inside a still-messy quarter.

The Prescription

Bank Jago should keep leaning into whatever is producing the Sharia unit's outsized return, but it needs to start managing that unit's own credit risk with the same seriousness it's applying to headline growth - this quarter's note-level detail shows substandard Sharia financing jumping from next to nothing to a meaningful share of that book (see Beyond the Usual), which is exactly the kind of early crack that's easy to miss while a business line is still the company's best story.

What it should stop doing: continuing to publish a single blended NPL ratio (2.10% gross) without ever breaking out that the Sharia book's own NPL rate (4.21%) is more than three times the conventional book's (1.28%). The Q1 and H1 posts both made a version of this point about profit disclosure; the same logic now applies to credit-quality disclosure - a filed footnote makes the split calculable, but nothing in the investor presentation tells a reader the bank's most profitable business is also, on this measure, its riskiest.

Key Financial Metrics

9M 2022 vs. 9M 2021 - PT Bank Jago Tbk, consolidated

FX: IDR 15,175.2 = USD 1 (September 30, 2022 close); comparative-period figures are shown in Rupiah only, consistent with prior posts in this backfill.

Metric	9M 2022 (IDR)	9M 2022 (USD)	9M 2021 (IDR)	YoY
Net interest and Sharia income ("Net Revenue" equivalent)	Rp983,843M	~$64.83M	Rp317,546M	✅ +209.9%
Other operating income	Rp52,039M	~$3.43M	Rp27,809M	✅ +87.1%
Provision for impairment losses	-Rp265,662M	-~$17.51M	-Rp41,739M	⚠️ +536.5%, the loan book's growth plus rising NPL
Other operating expenses (G&A, personnel, other)	-Rp721,969M	-~$47.58M	-Rp334,547M	⚠️ +115.8%
Operating income/(loss)	Rp48,251M	~$3.18M	-Rp30,931M	✅ First-ever 9M operating profit
Income before income tax	Rp52,349M	~$3.45M	-Rp32,605M	✅ First-ever 9M pre-tax profit
Deferred tax expense	-Rp11,776M	-~$0.78M	Rp0M	⚠️ An expense again, not a benefit
Net income/(loss) for the period	Rp40,573M	~$2.67M	-Rp32,605M	✅ First-ever 9M net profit - but see above
Earnings/(loss) per share (full amount, basic)	Rp2.93	~$0.0002	-Rp2.49	✅ First-ever positive 9M EPS
Net cash provided by/(used in) operating activities	Rp1,288,284M	~$84.89M	-Rp3,158,528M	✅ Second straight period of a large positive swing
Total cash and cash equivalents (period-end)	Rp1,442,283M	~$95.04M	Rp2,478,563M	⚠️ Down YoY - September 2021's balance still carried unspent Rights Issue II proceeds

Operating income/loss (above) is the closest equivalent measure for a bank. The operating cash flow swing mostly reflects Rp2,382.1 billion of current-account growth and Rp1,082.0 billion of savings growth funding the period, alongside Rp521.3 billion of reverse-repo securities maturing back into cash - funding-mix and timing, not a change in the underlying income-statement economics above.

Balance sheet metric	Sep 2022 (IDR)	Sep 2022 (USD)	Dec 2021 (IDR)	Change since FY2021
Total Assets	Rp15,823,104M	~$1,042.69M	Rp12,312,422M	✅ +28.5%
Loans and Sharia financing (net)	Rp7,942,404M	~$523.38M	Rp5,241,783M	✅ +51.5%
Third-Party Funds (deposits, incl. Sharia mudharabah)	Rp7,284,977M	~$480.06M	Rp3,677,572M	✅ +98.1%
Total Liabilities	Rp7,185,005M	~$473.47M	Rp3,952,606M	⚠️ +81.8%
Temporary Sharia (Syirkah) Funds	Rp349,407M	~$23.02M	Rp110,361M	+216.6%
Total Equity	Rp8,288,692M	~$546.20M	Rp8,249,455M	Essentially flat, +0.5%

The number worth remembering isn't "first-ever 9M net profit" - it's that the Sharia-vs-consolidated imbalance narrowed for the first time in this backfill, even as deposits kept outrunning loans (+98.1% vs +51.5% since FY2021) and the loan book's own credit quality kept deteriorating in absolute terms.

Key Operational Metrics

• CASA ratio^»: 70.6% (Sep 2022, Rp5,141,247M of Rp7,284,977M total deposits incl. Sharia) vs. 63.5% (Jun 2022, per the H1 2022 post) vs. 45.6% (Dec 2021) - continuing to climb every quarter this backfill has tracked it.
• Loan-to-Deposit Ratio^»: 111.96% (Sep 2022, gross loans and Sharia financing of Rp8,156,070M over total deposits incl. Sharia of Rp7,284,977M) vs. 118.81% (Jun 2022, per the H1 2022 post) - still falling, as deposit growth continues to outpace loan growth.
• NIM^» (blended, per presentation): 10.5% (9M 2022) vs. 6.1% (9M 2021) vs. 10.83% (H1 2022, per the H1 2022 post) - essentially flat quarter over quarter (Q3 alone came in at 10.0%, per the company's own presentation).
• NIM (loans only): 16.0% (9M 2022) vs. 13.6% (9M 2021, per presentation) vs. 16.8% (H1 2022, per the H1 2022 post) - cooling slightly as the loan book's mix shifts.
• NIM (treasury assets): 3.8% (9M 2022) vs. 3.5% (9M 2021, per presentation) - essentially flat.
• NPL^»: 2.10% gross / 0.95% net (Sep 2022, per the bank's own filed ratios) vs. 2.70%/1.41% (Jun 2022, per the H1 2022 post) - the gross ratio actually fell this quarter, the first improvement in this backfill, though the loan book's dollar growth is doing more of that work than any actual credit-quality improvement (see Beyond the Usual for the split behind this number).
• CAR^»: 97.50% (Sep 2022, per the bank's own filed ratios) vs. 169.92% (Dec 2021) vs. 109.80% (Jun 2022, per the H1 2022 post) - continuing to fall every quarter as capital gets deployed into risk-weighted loans, though still nearly 10x OJK's 10% minimum.
• ROE^» / ROA^» (per presentation, 9M 2022): 0.7% / 0.5%, essentially unchanged from H1's 0.76%/0.57%.
• Cost-to-Income^» (per presentation): 70% (9M 2022) vs. 102% (9M 2021) vs. 69.19% (H1 2022, per the H1 2022 post) - holding at its improved level rather than continuing to improve.
• Cost of Funds (end of period, per presentation): 2.0% (Sep 2022) vs. 2.8% (H1 2022, per the H1 2022 post) vs. 3.3% (Sep 2021) - still falling.
• Cost of Credit / Average Loan (per presentation): 5.2% (9M 2022) vs. 3.0% (9M 2021) vs. 5.3% (H1 2022, per the H1 2022 post) - essentially flat, tracking the loan book's growth and NPL together.
• Related-party loan concentration: 3.39% of the conventional loan book (Sep 2022, Rp199,707M across two borrowers) vs. 3.02% (Jun 2022, per the H1 2022 post, one borrower) - see Beyond the Usual.
• PT GoTo Gojek Tokopedia's share of current-account deposits (per the filed related-party note): 91.47% (Rp2,504,765M, Sep 2022) vs. 87.77% (Jun 2022, per the H1 2022 post) vs. 85.24% (Dec 2021) - a new high for this entire backfill, surpassing even the 90.8% recorded in 1H2021 - see Beyond the Usual.
• Undrawn loan commitments: Rp1,099,880M (Sep 2022) vs. Rp333,000M (Jun 2022, per the H1 2022 post) vs. Rp446,623M (Dec 2021) - more than tripled quarter over quarter, reversing H1's decline - see Beyond the Usual.
• Headcount: 423 permanent employees at 30 September 2022, down slightly from 427 at 30 June 2022 - the first quarter in this backfill headcount has fallen rather than grown.
• Branch network: unchanged from June - one non-operational head office, three branches, two sub-branches, no cash office.
• Not available as a clean 30 September figure in the financial statements: the presentation's 4.2+ million KYC-verified customer count is "as of" the presentation date rather than the reporting date, consistent with every prior quarter in this backfill.

The Stock Keeps Falling, Even As the Headline Numbers Improve

Bank Jago's shares closed at approximately Rp6,600 on 30 September 2022, down 27.9% from Rp9,150 three months earlier - a smaller single-quarter decline than Q2 2022's 37.5%, but enough to make Rp6,600 the lowest close anywhere in this backfill. No stock split has occurred at any point since the company's IPO, so Rp6,600 is the actual nominal price quoted on the IDX at the time, not a split-adjusted figure. The stock is now down 63.2% from its highest close in this backfill, Rp17,950 in July 2021.

This quarter's own numbers were, if anything, incrementally better than Q2's - the first-ever 9M operating profit, a second straight positive operating-cash-flow swing, and (per above) a narrower Sharia-vs-consolidated profit gap. The stock falling further despite that makes the same point the Q2 2022 post made: 2022's global growth-stock de-rating, not this quarter's operating results, remains the more plausible explanation for the share-price move. Indonesia's own currency and rate environment tightened further through Q3 2022 as Bank Indonesia continued raising rates in response to the same global inflation pressure - a headwind for a bank still priced mostly on an ecosystem narrative rather than proven core-banking earnings.

Beyond the Usual

PT GoTo Gojek Tokopedia's current-account concentration hit a new high for this backfill

The H1 2022 post reported PT GoTo Gojek Tokopedia's current-account share reversing sharply upward to 87.77% at June 2022. This quarter it climbed further, to 91.47% (Rp2,504,765 million) - the highest level recorded anywhere in this backfill, surpassing even the 90.8% seen in 1H2021. GoTo also remains present in the two deposit products it first appeared in last quarter: a Rp110,000 million time deposit (now 6.13% of all time deposits, versus 5.59% in June) and a Rp211,446 million Sharia mudharabah deposit (60.52% of that entire product, down from 81.24% in June only because third-party mudharabah deposits grew faster than GoTo's own balance, which barely moved). A single related entity anchors nine out of every ten rupiah sitting in current accounts, alongside a meaningful share of two other deposit products - concentration risk that keeps setting new records in this backfill rather than settling into a stable range.

The Trimegah related-party loan is back on the books for a third disclosed cycle - the same Rp100,000 million balance repaid to zero at June 2022 has reappeared unchanged, with no new disclosed reason, while the separate GOFIN loan shrank from Rp149,700 million to Rp99,707 million, leaving combined related-party loan concentration at 3.39% of the conventional book; this number cycles for no disclosed reason.

The Sharia unit's own credit quality is deteriorating faster than the conventional book it's carrying

Note 10's collectibility breakdown shows the loan book's substandard-or-worse balances (the categories that make up gross NPL) at Rp75,171 million for the conventional book, against Rp95,407 million for Sharia financing - meaning Sharia, despite being under 30% of gross loans and financing outstanding, now carries more non-performing balance in rupiah terms than the much larger conventional book. As a ratio of its own book, Sharia financing's NPL rate is 4.21%, more than three times the conventional book's 1.28%, even though the blended 2.10% headline rate (see Key Operational Metrics) reads as an improvement on its own. Special-mention (pre-NPL) Sharia financing also jumped nearly tenfold, from Rp35,970 million at December 2021 to Rp351,137 million at September 2022. None of this shows up in the presentation's single blended NPL chart - the business line generating essentially all of the bank's profit is also, on this measure, the riskier half of the loan book, and a reader relying on the headline ratio alone would have no way to know it.

A geographic segment note shows the reported loss sitting entirely in Jakarta, not West Java

Note 37 splits the bank's segments by business area rather than by conventional-versus-Sharia (Note 40's cut, used throughout this post). On that geographic basis, the Bandung/West Java segment - home to the bank's original, pre-transformation Artos operations - reported a Rp226,878 million pre-tax profit for 9M 2022, while the DKI Jakarta segment, which houses both the digital consumer bank and the Sharia unit, posted a Rp174,529 million pre-tax loss overall. Since the Sharia unit itself (based in Jakarta) earned roughly Rp219 billion pre-tax the same nine months, the implication is that Jakarta's non-Sharia digital-banking operations lost close to Rp390-400 billion on their own - a materially larger standalone loss than the "conventional bank lost Rp178.5 billion" framing elsewhere in this post suggests, because that framing nets Sharia's gain against West Java's separate profit as well. Two different, equally legitimate segment cuts of the same nine months tell two different stories about where the losses actually concentrate.

Restructured loans grew more than fivefold as pandemic-era relief formally ended

Total loans restructured during the period rose to Rp187,472 million at 30 September 2022, from Rp34,910 million at year-end 2021 - a 5.4x increase. Notably, none of this quarter's restructured balance relates to COVID-19: the filing states loans restructured specifically under the pandemic relaxation program stand at nil, down from Rp17,964 million at year-end, meaning every rupiah of this quarter's much larger restructured balance reflects ordinary commercial renegotiation rather than a continuing pandemic accommodation. A restructured-loan book growing this quickly, on a young loan portfolio that's already showing the NPL and special-mention increases discussed above, is worth watching closely next quarter rather than reading as routine portfolio management.

Two smaller footnote items, neither changing this quarter's judgment

Undrawn loan commitments more than tripled to Rp1,099,880 million at September 2022, reversing H1's decline to Rp333,000 million - a genuinely volatile line item, but one tracking loan-book growth (loans and Sharia financing grew 51.5% since FY2021) rather than signaling anything new on its own. Separately, capitalized software (Rp702,276 million net) now exceeds the bank's physical fixed assets (Rp144,447 million net) - an unsurprising balance-sheet reflection of a mobile-first digital bank, not a new development worth its own heading.

Target Valuation Range

Market cap Rp91.45 trillion (~$6.03 billion), ~11.0x P/B, ~>1,600x P/E. Bottom line: still overvalued on a book-multiple basis, but the multiple keeps compressing toward something more defensible, and this quarter's profit-imbalance narrowing (see above) is the first operational data point that argues for the re-rating rather than just the macro backdrop.

Bank Jago's shares closed at approximately Rp6,600 on 30 September 2022, down 27.9% from Rp9,150 three months earlier (see above). At 13,856,250,000 shares outstanding (unchanged since the March 2021 rights issue), that implies a market capitalization of approximately Rp91.45 trillion (~$6.03 billion).

Market cap → book value	Q3 2022
Share price (period-end)	Rp6,600
Shares outstanding	13,856,250,000
Market capitalization	Rp91.45 trillion (~$6.03 billion)
Total equity (book value)	Rp8,288,692M
Book value per share	Rp598.19

Peer-multiple sanity check	Q2 2022	Q3 2022	Change
P/B	15.3x	11.0x	down
P/E	>2,100x	>1,600x	down

P/B^»: ~11.0x, using book value^» per share of Rp598.19 (Rp8,288,692M total equity ÷ 13,856,250,000 shares) - down from ~15.3x three months ago, the lowest book multiple anywhere in this backfill, and again driven almost entirely by the falling share price rather than any material change in book value, which grew only 0.5% since year-end. P/E^»: technically positive for a fifth straight period, still economically meaningless at the implied multiple - annualizing 9M EPS of Rp2.93 (×4/3) gives Rp3.91, for an implied P/E north of 1,600x. Even excluding the Sharia-versus-conventional split, the headline consolidated number itself is too thin to support a real earnings multiple yet. A full DCF still isn't appropriate, for the reason every prior post in this backfill has given: five profitable periods out of eleven since the "Becoming Jago" transformation began, with the most recent three concentrated overwhelmingly in a single business line only about a year old, doesn't establish the kind of multi-year earnings trajectory a DCF's terminal-value assumptions could responsibly absorb. The peer-multiple read stays the honest one, and it continues moving toward a more defensible level: ~11x book is still a real premium for a bank whose conventional lending business remains unprofitable on its own, but it's now less than half the multiple this backfill started tracking two years ago.

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