How to Value Banks With No Dividends: The PNLF.IDX Problem Explained

Question:
I noticed that when the dividend payout ratio is 0%, the formula breaks—what should I do? And could you also look at PNLF? The bank never pays dividends and just parks the capital, which keeps ROE around 5% and P/BV extremely low, yet many investors buy it simply because it screens cheap on P/BV

Answer:
Yeah, PNLF is a perfect example of why “cheap PBV” on its own can be a trap.

Let me walk through it using actual numbers and your framework.

1. What PNLF actually looks like

From the latest 2024 data:

Net profit 2024: ~Rp 1.66T
Equity: ~Rp 65.1T
ROE: ~2.6%
BVPS: ~Rp 2,034
Share price: ~Rp 312
PBV: ~0.15×

Historically, ROE was a bit higher but still low: around 5–7% in 2020–2022.

Dividends:

Long-term: basically no regular dividend, with only tiny / occasional payments.

So your description is spot on:

Huge equity base,
Low ROE,
Almost no cash returned to shareholders,
Very low PBV (~0.15x).

2. What your justified P/B model says

In your framework, the key is:

\text{Fair P/B} = \frac{\text{ROE} - g}{\text{CoE} - g}

For a company that never pays dividends and just piles up assets, there are two problems:

If payout ~ 0%, then g ≈ ROE (book keeps compounding at ROE).
ROE is way below any reasonable CoE in Indonesia (say 12–15%).

Take a conservative example:

ROE = 5%
CoE = 12%
Payout = 0 ⇒ g ≈ 5%

Then:

\text{Fair P/B} = \frac{5\% - 5\%}{12\% - 5\%} = 0

Mathematically: if a company keeps all the money and reinvests forever at a return below CoE, it destroys value every year. The Gordon formula says the equity is only worth liquidation value → P/B tends to zero, not to 1x.

That’s why your formula “blows up” when payout is low or zero: it’s telling you this is not a good business to compound inside.

So:

PNLF’s very low PBV is consistent with low ROE and no payout.
It might be “cheap”, but it is also quite possibly a value trap.

3. How to think about a stock like this

For something like PNLF, you really have two angles:

A. Ongoing-business view (your justified P/B)

ROE structurally low (2–7%)
CoE high-ish (Indonesia risk)
Payout ≈ 0

→ On a pure economic basis, justified P/B is far below 1x, maybe even close to 0 in the extreme case. A PBV of 0.15× can be fair if the market believes:

ROE will stay low,
Cash will never be paid out or used well,
And governance won’t change.

In that world, people buying just because “PBV 0.15x must be cheap!” are missing the point: book value is being badly used.

B. “Cash box / holding company” view (sum-of-the-parts)

PNLF is really a holding company: big stakes in Panin Bank and Panin Dai-ichi Life plus other investments.

An alternative way to value it:

Mark its assets to market:
- Market value of its listed stakes,
- Fair value of bonds / cash / other assets.
Subtract debt and other liabilities.
Divide by shares ⇒ look-through NAV per share.
Compare current price to NAV ⇒ that gives you a holding-company discount.

If NAV per share is, say, Rp 2,000 and the stock is 300, that’s an 85% discount… but if management never returns the value (no dividends, no buybacks, no spin-off), the discount can stay huge for years. That’s governance risk, not pure finance.

So the key question isn’t “Is PBV 0.15x cheap?”
It’s: “Is there any realistic catalyst that forces/encourages them to use the capital better or return it?”

4. How I’d treat PNLF in your model

Purely from a modelling perspective (not advice):

Don’t plug 0% payout into your terminal justified P/B formula.
That assumes a healthy, shareholder-friendly steady state which clearly doesn’t exist.
Either:
- Use your justified P/B with a low ROE and a positive long-term payout that you think might happen in some future scenario (e.g. 30–40%), then heavily probability-weight that scenario, or
- Treat PNLF more like a discount-to-NAV governance story and not a normal bank.
When you see:
- ROE < CoE,
- Payout ≈ 0,
- Controlling family with no history of sharing value…
then your model is basically saying: “This is cheap for a reason.”

5. Bottom line (in plain language)

Your PBV/ROE/CoE framework is exactly what exposes why PNLF is tricky.
Low PBV alone doesn’t make it attractive if:
- management hoards capital,
- returns are permanently low,
- and there’s no path to change.

Conceptually:

PNLF is the kind of stock where the business economics and governance can fully justify a deep discount to book, even if that looks “crazy cheap” on a screen.