BBRI
Contact our analyst Achmadi Hangradhika
18% UPSIDE, BUY
13th August 2024
Price Rp 4,720
Target price Rp 5,550
Almost Stagnant Profit Growth
In the first half of 2024, BBRI’s consolidated net income grew by a modest 0.95% year-over-year (YoY), reaching IDR 29.9 trillion. This limited growth was primarily due to a significant 43.23% YoY increase in Interest and Shariah Expenses, which contributed to a 28-basis point (bps) YoY decline in the Net Interest Margin (NIM) to 7.64%, despite a 15.25% YoY increase in Interest Income. Additionally, Provision Expenses rose by 33.83% YoY, further constraining profit growth, although the Gain on Forex-net nearly doubled, increasing by 92.46%. For the full year 2024, we forecast BBRI will generate IDR 62.94 trillion in consolidated net income, reflecting a 4.72% YoY growth.
Strong Loan Portfolio Growth
As of June 2024, BBRI’s consolidated loan portfolio showed robust growth, expanding by 11.20% YoY, consistent with the bank’s guidance. The most significant growth was in the Medium Segment, which grew by 29.75% YoY, followed by the Corporate Segment, with a notable 28.67% YoY increase. The Micro loans segment grew by 5.69% YoY; however, when including Ultra Micro (UMi) loans—incorporating figures from Pegadaian and PNM—the growth was 7.68% YoY. Pegadaian’s loans grew by 22.55% YoY, while PNM’s increased by 7.94% YoY. We forecast that by December 2024, BBRI’s consolidated loan portfolio will grow by 10.01% YoY.
Significant Growth in Customer Deposits
As of June 2024, BBRI’s consolidated customer deposits grew significantly by 11.61% YoY, driven by a 19.63% increase in Current Accounts and a 19.10% increase in Time Deposits. Savings Accounts also saw growth, albeit minimal at 0.76% YoY. Despite this, the strong performance in Current Accounts led to a 7.66% YoY increase in CASA, resulting in a CASA ratio of 63.17%, which is up 151 bps quarter-over-quarter (QoQ) but remains lower than last year. We forecast that by December 2024, customer deposits will grow by 3.82% YoY, with the CASA ratio expected to reach 63.25%.
Deterioration in Asset Quality
In the first half of 2024, BBRI’s gross Non-Performing Loan (NPL) ratio stood at 3.05%, up 10 bps YoY. The highest NPL was observed in the Small Segment, with a ratio of 5.05%, which saw the largest increase, rising by 76 bps. Although the Micro Segment also faced challenges, with an increase of 72 bps YoY, its NPL ratio remained relatively healthy at 2.95%. BBRI is actively implementing strategies to improve Ultra Micro asset quality, including tiered loan approvals and tighter loan top-up policies. We forecast that by December 2024, BBRI’s consolidated NPL ratio will improve to 2.53%.
Strong ESG Commitment
BBRI demonstrates a strong commitment to Environmental, Social, and Governance (ESG) principles, driving positive change through its operations. The bank has allocated 65.2% of its financing and corporate bond investments towards sustainable sectors, with the Sustainable Management of Living Natural Resources and Land Use sector being the largest contributor, accounting for IDR 60.83 trillion in green financing. Additionally, 52.3% of BBRI’s total wholesale funding is ESG-based.
Valuation: 18%, Upside, Buy
Based on our Dividend Discount Model (DDM) valuation, we have set a target price of IDR 5,550 within one year, implying a valuation of 2.20x Price-to-Book Value (PBV) and indicating a potential upside of 18%. Therefore, we recommend a Buy rating.
In the first half of 2024, BBRI’s consolidated net income grew by a modest 0.95% year-over-year (YoY), reaching IDR 29.9 trillion. This limited growth was primarily due to a significant 43.23% YoY increase in Interest and Shariah Expenses, which contributed to a 28-basis point (bps) YoY decline in the Net Interest Margin (NIM) to 7.64%, despite a 15.25% YoY increase in Interest Income. Additionally, Provision Expenses rose by 33.83% YoY, further constraining profit growth, although the Gain on Forex-net nearly doubled, increasing by 92.46%. For the full year 2024, we forecast BBRI will generate IDR 62.94 trillion in consolidated net income, reflecting a 4.72% YoY growth.
Strong Loan Portfolio Growth
As of June 2024, BBRI’s consolidated loan portfolio showed robust growth, expanding by 11.20% YoY, consistent with the bank’s guidance. The most significant growth was in the Medium Segment, which grew by 29.75% YoY, followed by the Corporate Segment, with a notable 28.67% YoY increase. The Micro loans segment grew by 5.69% YoY; however, when including Ultra Micro (UMi) loans—incorporating figures from Pegadaian and PNM—the growth was 7.68% YoY. Pegadaian’s loans grew by 22.55% YoY, while PNM’s increased by 7.94% YoY. We forecast that by December 2024, BBRI’s consolidated loan portfolio will grow by 10.01% YoY.
Significant Growth in Customer Deposits
As of June 2024, BBRI’s consolidated customer deposits grew significantly by 11.61% YoY, driven by a 19.63% increase in Current Accounts and a 19.10% increase in Time Deposits. Savings Accounts also saw growth, albeit minimal at 0.76% YoY. Despite this, the strong performance in Current Accounts led to a 7.66% YoY increase in CASA, resulting in a CASA ratio of 63.17%, which is up 151 bps quarter-over-quarter (QoQ) but remains lower than last year. We forecast that by December 2024, customer deposits will grow by 3.82% YoY, with the CASA ratio expected to reach 63.25%.
Deterioration in Asset Quality
In the first half of 2024, BBRI’s gross Non-Performing Loan (NPL) ratio stood at 3.05%, up 10 bps YoY. The highest NPL was observed in the Small Segment, with a ratio of 5.05%, which saw the largest increase, rising by 76 bps. Although the Micro Segment also faced challenges, with an increase of 72 bps YoY, its NPL ratio remained relatively healthy at 2.95%. BBRI is actively implementing strategies to improve Ultra Micro asset quality, including tiered loan approvals and tighter loan top-up policies. We forecast that by December 2024, BBRI’s consolidated NPL ratio will improve to 2.53%.
Strong ESG Commitment
BBRI demonstrates a strong commitment to Environmental, Social, and Governance (ESG) principles, driving positive change through its operations. The bank has allocated 65.2% of its financing and corporate bond investments towards sustainable sectors, with the Sustainable Management of Living Natural Resources and Land Use sector being the largest contributor, accounting for IDR 60.83 trillion in green financing. Additionally, 52.3% of BBRI’s total wholesale funding is ESG-based.
Valuation: 18%, Upside, Buy
Based on our Dividend Discount Model (DDM) valuation, we have set a target price of IDR 5,550 within one year, implying a valuation of 2.20x Price-to-Book Value (PBV) and indicating a potential upside of 18%. Therefore, we recommend a Buy rating.
Previously
