BJBR
Contact our analyst achmadi
6.97% upside, Hold
27th August 2024
Price Rp1005
Target price Rp1075
Big Decrease in Net Income
In the first half of 2024, BJBR’s Net Income Attributable to the Parent Entity saw a significant decline of -21.11% YoY, reaching IDR 0.726 trillion. This decrease was primarily driven by a substantial 29.17% YoY increase in Interest Expenses, which led to a 93-bps drop in the NIM ratio, bringing it down to 3.90%. Additionally, provision expenses increased considerably by 62.89% YoY as part of the company's strategy to mitigate macroeconomic uncertainty through a more conservative approach. We project that in 2024, BJBR's Net Income Attributable to the Parent Entity will experience a further decline, albeit slightly less severe than in 2023, with a projected YoY decrease of -21.36%. The NIM ratio is expected to stabilize at 3.91%.
Loan Surge Fueled by KUB and Sustainable Financing
As of June 2024, BJBR’s consolidated loans experienced strong growth of 12.19% YoY. The most significant driver was the Non-Bank Loan segment, which saw a tremendous increase of 91.73% YoY, largely due to the impact of KUB Formation in Q1 2024, offsetting a -3.29% decrease in corporate loans. Additionally, the sustainable portfolio showed solid growth, increasing by 19.21% YoY, reaching IDR 18 trillion. We forecast that by December 2024, BJBR’s loan portfolio will continue to expand by 15.73%, supported by growth in the Commercial and Corporate segments, which are expected to increase by 9.97% YoY, and the Non-Bank portfolio, which is anticipated to rise by 121.02% YoY due to the KUB Formation.
Robust Deposit Growth Aligned with Loan Expansion
In June 2024, BJBR’s consolidated customer deposits grew by 16.36% YoY, driven by a significant increase in savings accounts, which rose by 33.28% YoY. This growth led to a 70-bps increase in the CASA ratio, reaching 43.90%. In response to the "High for Longer" interest rate environment, BJBR expects deposit growth to align with loan growth to manage interest expenses and maintain an adequate liquidity ratio. This alignment will reduce the need for non-CASA funding sources. We forecast that by December 2024, BJBR will expand its deposits by an additional 17.23% YoY, supported by CASA, with the CASA ratio expected to increase by 256 bps YoY, reaching 43.96%.
Ongoing KUB Formation: Bank Jambi and Others Set to Join
Following the successful formation of KUB through the acquisition of a 15.57% ownership stake in Bank Bengkulu, Bank Jambi has officially decided to join the group. The process is ongoing and is currently in the Fit and Proper Test phase, awaiting the completion of the transaction. The capital already injected amounts to IDR 221.4 billion. Additionally, Bank Maluku Malut is expected to join in the near future, as it is currently undergoing the Due Diligence process. Meanwhile, Bank Sultra is still in the feasibility study phase, indicating potential future integration into the KUB group. These developments are part of BJBR’s strategic expansion efforts, aiming to strengthen its regional banking network and enhance overall financial performance.
Valuation: 6.97%, Upside, HOLD
Based on our DDM valuation, we have revised our target price to IDR 1,075 within a year, representing a valuation of 0.70x PBV and a potential upside of 6.97%. Given this modest upside potential, we recommend a “Hold” rating for this stock.
In the first half of 2024, BJBR’s Net Income Attributable to the Parent Entity saw a significant decline of -21.11% YoY, reaching IDR 0.726 trillion. This decrease was primarily driven by a substantial 29.17% YoY increase in Interest Expenses, which led to a 93-bps drop in the NIM ratio, bringing it down to 3.90%. Additionally, provision expenses increased considerably by 62.89% YoY as part of the company's strategy to mitigate macroeconomic uncertainty through a more conservative approach. We project that in 2024, BJBR's Net Income Attributable to the Parent Entity will experience a further decline, albeit slightly less severe than in 2023, with a projected YoY decrease of -21.36%. The NIM ratio is expected to stabilize at 3.91%.
Loan Surge Fueled by KUB and Sustainable Financing
As of June 2024, BJBR’s consolidated loans experienced strong growth of 12.19% YoY. The most significant driver was the Non-Bank Loan segment, which saw a tremendous increase of 91.73% YoY, largely due to the impact of KUB Formation in Q1 2024, offsetting a -3.29% decrease in corporate loans. Additionally, the sustainable portfolio showed solid growth, increasing by 19.21% YoY, reaching IDR 18 trillion. We forecast that by December 2024, BJBR’s loan portfolio will continue to expand by 15.73%, supported by growth in the Commercial and Corporate segments, which are expected to increase by 9.97% YoY, and the Non-Bank portfolio, which is anticipated to rise by 121.02% YoY due to the KUB Formation.
Robust Deposit Growth Aligned with Loan Expansion
In June 2024, BJBR’s consolidated customer deposits grew by 16.36% YoY, driven by a significant increase in savings accounts, which rose by 33.28% YoY. This growth led to a 70-bps increase in the CASA ratio, reaching 43.90%. In response to the "High for Longer" interest rate environment, BJBR expects deposit growth to align with loan growth to manage interest expenses and maintain an adequate liquidity ratio. This alignment will reduce the need for non-CASA funding sources. We forecast that by December 2024, BJBR will expand its deposits by an additional 17.23% YoY, supported by CASA, with the CASA ratio expected to increase by 256 bps YoY, reaching 43.96%.
Ongoing KUB Formation: Bank Jambi and Others Set to Join
Following the successful formation of KUB through the acquisition of a 15.57% ownership stake in Bank Bengkulu, Bank Jambi has officially decided to join the group. The process is ongoing and is currently in the Fit and Proper Test phase, awaiting the completion of the transaction. The capital already injected amounts to IDR 221.4 billion. Additionally, Bank Maluku Malut is expected to join in the near future, as it is currently undergoing the Due Diligence process. Meanwhile, Bank Sultra is still in the feasibility study phase, indicating potential future integration into the KUB group. These developments are part of BJBR’s strategic expansion efforts, aiming to strengthen its regional banking network and enhance overall financial performance.
Valuation: 6.97%, Upside, HOLD
Based on our DDM valuation, we have revised our target price to IDR 1,075 within a year, representing a valuation of 0.70x PBV and a potential upside of 6.97%. Given this modest upside potential, we recommend a “Hold” rating for this stock.
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