BBRI
Contact our analyst Lingga
20% UPSIDE, BUY
19th May 2020
Price Rp2170
Target price Rp2610
Loan Growth up in 1Q20
Loan Growth jumped 9.4% YoY and 3% QoQ to 884.2 Trillion, partly as a result of restructuring to extend payments. Loan Growth was still dominated by the micro-segment which rose 12.7% YoY. We are somewhat wary of BBRI participating in the government's economic support program, and we lower our 2020 Loan Growth estimate from 9% to 5%.
Decline in asset quality
In 1Q20, NPL edged up to 2.81%, while SML rose to 6.19%. The total restructured loans resulting from the Covid-19 pandemic is Rp101.2 Trillion. Most are from the Micro and small commercial segments. BBRI still has strong liquidity to help manage the delayed payments for 6-9 months and will have relief from macro policies and slower credit growth. the full impact on asset quality and credit costs is still to be seen in 2Q20.
Net Interest Margin still depressed
NIM decreased to 6.66% in 1Q20 compared to 6.98% in FY19, along with a decrease in the CASA Ratio to 56.86% due to lower interest rates. Greater additional restructuring will increase pressures on liquidity and NIM's. We estimate the Net Interest Margin to be 4 - 5% in 2020.
Valuation: 20%, Upside, Buy.
Based on our DDM Valuation, we have a target price within one year of IDR. 2610 or trading at 1.1x PBV which gives 20% potential upside, Buy.
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