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Bank Rakyat Indonesia (BBRI IJ)

Growth Opportunities Abound

The micro segment will remain as the growth engine for BBRI going forward supported by the bank’s participation in channelling the Government’s micro grant program and KUR super micro (max IDR10mn ticket size). We also believe that BBRI will continue its partnership with P2P lending to explore the digital ecosystem further. Furthermore, the extension of OJK’s policy on loans restructuring relaxation until March 2022 should also help BBRI to oversee its loans portfolio in a more manageable way.  

The micro segment remains its core. In Friday’s small group call, BBRI emphasised that the micro segment would remain its main growth engine given the potentially untapped segment of nearly 60mn borrowers. To penetrate this lucrative market, BBRI should benefit from its participation in the Government’s micro grant program with loans extended to 7.7mn business owners and the Government’s KUR Super Micro loans program (max ticket size of IDR10mn). The 8.7mn potential borrowers from both schemes should be the low hanging fruit for BBRI to grow its micro business. As such, BBRI targets double digits yoy growth for the micro segment in 2021, pushing its micro exposure above the management’s target of 40% to total loans by 2022.  

Expanding further into digital areas.Given its strong position in micro lending, BBRI will continue to improve its digital business processes, particularly in regard to the loan underwriting process through BRISPOT. BBRI plans to roll out more features in BRISPOT, such as a cash pick-up feature, KUR Super Micro, a micro customer profiling pipeline and cross-selling marketing and micro insurance. Aside from that, BBRI will also provide loans for P2P lending with short term loans (max 12 months), including names such as Investree, Amartha, Gojek, and Grab, whilst offering several digital loan products via e-commerce channels. Nonetheless, we believe that BBRI is still in the learning phase for these digital initiatives as it needs to familiarize itself with this business and be careful in assessing the risk profile in all aspects. 

Less pressure on the restructured loans bucket. With IDR200tn of total projected restructured loans as of December 2020 (bank only) and mainly dominated by the MSME segment, we believe the formation of new restructured loans in 2021 should be minimal. BBRI, however, emphasised that it conservatively assumes 15% of the restructured loans (~IDR30tn) would be downgraded to lower stages, i.e. stage 2 and 3. To ensure an ample buffer, BBRI has given guidance for credit costs of 2.5-3.0% for FY21F, still above its normal level yet lower than last year’s figure of 3.2%.

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