We maintain our BUY call on BBRI with an unchanged Target Price of IDR13,150 implying PBV of 2.8-2.3x for 2015-16F, liking its well-managed deposits structure and resilient margins. Note that BBRI is still the market leader in deposits, taking a market share of 13.7% as of September 2014, supported by brisk 32.2% YoY growth in TD although deposits only grew by 19.9% YoY. This translated into a higher blended CoF of 3.9% in 9M14, yet still manageable, in our view, especially given its superior yield on earning assets at 12.6%. As such, the NIM could be maintained at an impressive 8.8% in 9M14 backed by the higher loans yield, particularly from the micro loans segment. In 3Q14 itself, according to our calculations, the micro loans provided a 24.1% yield. Going forward, we expect the NIM to be maintained at 8.6% in FY15-16F as micro loans will grow by 18.5% and 19.4% in 2015-16F. BUY maintained with this highly profitable bank remaining as our top pick in the sector.
Deposits structure still in good shape
Amidst challenging macroeconomic conditions, BBRI has been the market leader in deposits, taking a market share of 13.7%, followed in second place by BMRI with a 13.5% market share. BBRI’s impressive achievement owes to high TD growth of 32.2% YoY in September 2014 while deposits only grew 19.9% YoY. As a result, the proportion of TD to customer deposits climbed to 47.0% as of September 2014 from 42.6% as of September 2013. In turn, this translated into a higher blended CoF of 3.9% in 9M14 compared to 3.0% in 9M13, yet still manageable, in our view, given BBRI’s superlative margins thanks to a loans portfolio dominated by the micro segment.
As the deposits structure remains manageable despite a higher blended CoF of 3.9%, margins have held up pretty well. The Net Interest Margin (NIM) could be maintained at an impressive 8.8% in 9M14 supported by a higher loan yield (in 9M14, the loan yield expanded to 14.8% from 9M13’s 13.3%). Going forward, we expect the NIM to be maintained at 8.6% in FY15-16F as micro loans will grow by 18.5% and 19.4% in 2015-16F, underpinned by micro lending to traders in traditional wet markets, which is notable for its resiliency in a challenging environment.
Maintain BUY, TP of IDR13,150
Further encouraged by the in-line 9M14 results, we maintain our positive stance on BBRI, particularly liking its manageable deposits structure and resilient margins. Furthermore, BBRI also offers the highest RoAE within the industry at 24.9% for 2015F. Derived from the DBV model with a 16.3% cost of equity and 6.0% terminal growth rate, our Target Price is unchanged at IDR13,150, implying PBV 2015-16F of 2.8-2.3x. BUY maintained with this highly profitable bank remaining as our top pick in the sector.