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Danareksa Equity Snapshot - BBRI, 24 Januari 2020
January 24, 2020 09:31

Bank Rakyat Indonesia(BBRI IJ)

Stay micro, stay profitable

BBRI’s FY19 net profits of IDR34.4tn are inline with the consensus (99.0% of FY19F). Loans growth was on the soft side at 8.4% yoy with higher micro lending exposure of 35.8% of the total loans portfolio as of December 2019. NIM, however, normalised to 6.7% due to an uptick in the blended CoF by c.30bps on a yoy basis. Meanwhile, the gross NPLs ratio could be maintained at 2.6% with 257bps credit costs. Going forward, BBRI’s management will continue to focus on its micro lending business with KUR and Kupedes as its core products. As such, BBRI’s management targets 40% micro lending exposure to the total loans book by the end of 2022.

FY19 highlights. The IDR34.4tn of FY19 net profits are inline with the consensus (99.0% of FY19F), supported by 8.4% yoy loans growth and 257bps credit costs. The NIM, meanwhile, slipped to 6.7% from 7.2% in FY18, owing to an uptick in the blended CoF by c.30bps to 3.6% in FY19. Nonetheless, 4Q19’s NIM expanded by c.10bps to 6.8% from 6.7% in 3Q19. This is encouraging and indicates that pressure on the blended CoF is already easing, although more gradually in our view.

Limited impact from PSAK 71 implementation. As of December 2019, the gross NPLs ratio dropped to 2.6% from September 2019’s figure of 3.1%, as BBRI’s management wrote off two non-SOE corporate borrowers in the transportation and energy sectors. For both names, BBRI already provides 100% coverage. Aside from that, the gross NPLs ratio for non-SOE corporates stood at 8.7% (Sep-19: 10.5%) coming from cement and textile borrowers. Additionally, the potential implementation of PSAK 71 of IDR13-15tn (IDR11tn in loans and the remaining in non-loans items) should be manageable with a limited impact on the bank’s CAR of 170bps from its current level of 22.8% as of December 2019. Such an adjustment should only bring down its shareholders’ equity by 7.5% from December 2019’s figure of IDR208.8tn.

Normalised margins. The bank’s significant exposure to micro lending at 35.8% of its total loans book as of December 2019 should provide an adequate buffer for its asset yields in our view. Going forward, BBRI targets 40% micro lending exposure and a maximum of 20% corporate lending exposure by 2022. BBRI’s management highlighted that it has already repriced the micro lending rate with tenors of more than two years and corporate segment loans as well. All in all, we see that a NIM of 6.8% this year should be achievable thanks to the 100bps cut in the KUR micro lending rate to 6% and last year’s policy rate cut. 

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