BBRI
Contact our analyst Lingga
27% UPSIDE, Buy
9th August, 2021
Price Rp3850
Target price Rp4900
Focus in the Micro Segment
BBRI which has consistently been focused on growth in the micro-segment, recorded net profit growth of 22% YoY. Growth was driven by an increase in net interest income of 34.2% YoY in addition to a decrease in cost of funds to 2.18% in 2Q21 from 3.54% in 2Q20. We still see limited room for Cost of Funds to decline further this year. Fee and other income growth of +18.9%, came from fees and commissions up 9.9%YoY, plus treasury transaction income, and fee recovery income. Operating expenses increased by 5.3%YoY due to the adjustment of the micro segment's performance appraisal incentives and costs related to insurance. Provision fees increased by 134% YoY helping to achieve NPL coverage of 258% and LAR coverage of 31%. BBRI targets 30% LAR Coverage in 2021F.
Good Credit Growth from Micro KUR
Credit growth rose 5%YoY. This growth was driven by 17% YoY growth in the micro segment, from distribution of Micro KUR of IDR 87 trillion in 2021. Micro increased to 40.2% of total loans in 2Q21 from 36.1% in 2Q20. Consumer loans growth of 3.5% YoY came from KPR subsidized mortgages, and faster growth in digital lending through channels such as Ceria and Traveloka pay later. This year, BBRI has transferred the management of the auto loan/KKP portfolio to BRI Finance. If you don't take into account the transfer, consumer credit is 5.5% yoy higher. Small loans grew 0.9% YoY contributed by retail. Medium loans grew 4.9% YoY especially for household needs. Credit growth is still forecast in the 7-8% range from potential growth in the MSME segment such as agriculture, trade, medical equipment, and an additional IDR 21 trillion micro KUR
CASA Increased Significantly
Third Party Funds grew 6.5%YoY, driven by CASA which rose significantly by 13% YoY especially savings accounts with growth of 14.5% YoY. The composition of low-cost funds reached 60.1% in 2Q21 from 56% in 2Q20. With the growth of Third Party funds, LDR reached 84.52%.
Restructuring Decrease
NPL was 3.27% from 3.12% in 1Q21 this decline in quality was driven by the micro segment originating from the Covid NPL restructuring of 4.4% from 2.5%. A textile debtor was also downgraded to NPL. Special Mention Loans increased to 5.22% from 4.52% in 1Q21 due to debtors in the BUMN segment in transportation, agribusiness and construction. In June 2021, credit restructuring continued to decline to IDR 175.2 trillion from IDR 180.5 trillion in May 2021. This decline was caused by the micro and small business segments through principal payments of IDR 44.3 trillion .
Valuation: 27%, Upside, Buy
Based on our DDM Valuation, we have a target price within one year of IDR. 4,900 or trading at 2,8x PBV which gives 27% potential upside, Buy.
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