BJBR
Contact our analyst Lingga
14% upside, Hold
8th December 2021
Price Rp1,415
Target price Rp1,600
Higher e-Channel income
BJBR recorded a net profit of IDR 1.4 trillion, up 17.5% YoY, supported by PPOP which increased by 37% YoY from Fee Based Income from their e-channel which had growth of 43.6% YoY, as well as gains from financial instruments. Provisions were increased significantly by 196.3% YoY in order to strengthen the balance sheet through a higher coverage ratio (from 138% in 3Q2020 to 161% in 3Q2021). NPLs improved from last year's 1.5% to 1.3%.
Significant increase in commercial loans
Loans grew 7% YoY driven by commercial loans which grew 23.5% YoY originating from APBN / APBD, BUMN, selective distribution to corporations and syndication. Consumer loans rose by a slower 2.7% YoY due to the slowdown in consumer credit demand during this pandemic. But BJBR expects consumer growth will recover in 2022 in line with a recovery of economic activity and purchasing power. Micro loans declined -2.5%, as the distribution scheme through financial institutions was affected by higher risk due to the pandemic, so distribution through these financial institutions was postponed. Meanwhile, direct distribution to MSME still grew 18.7% YoY. We estimate loan growth will be 7.13% in 2021F.
Funding dominated by Time Deposit
Total Deposits grew 7.6% YoY dominated by Time deposits, up 12.9% YoY. The increase in Time Deposits came from the placement of corporate funds, in line with banking liquidity which was still quite strong while demand for credit was limited. The liquidity meant cost of funds was lower at 3.8% from last year's 4.9%. The ongoing digitization of products and services is aimed at increasing CASA funding. In 2021, BJBR projects that CASA will reach 40-45%. However, it should be noted that even though CASA is currently at 41.8%, BJBR has still been able to manage their cost of funds well, as can be seen from the 110 bps decrease in cost of funds in the past year.
Asset Quality Improvement and Credit Restructuring
In terms of Gross and Net Non Performing loans, they remained stable at 1.3% and 0.4% in 3Q21, followed by improvements in Special Mention Loans, which fell by IDR 61 billion YoY, or down 2.8% thanks to improvements in mortgages. As of Sept 2021, loan restructuring reached IDR 3.8 trillion or 4% of total loans. Commercial and corporate loans account for the largest portion of restructuring, at 44 percent.
Focus on increasing credit growth and digital products
BJBR's focus is to maintain credit growth with NPLs at the same level. In 2022, BJBR will continue to increase loans in line with the recovery of economic activity and demand. BJBR is committed to continuously improving digital services and products to encourage fee-based income growth from e-channel transactions
Valuation: 14% Upside potential, Hold.
Based on our DDM Valuation, we have a target price within one year of IDR 1,600, which would mean the shares trading at 1.1x PBV and gives 14% upside potential. Hold.
BJBR recorded a net profit of IDR 1.4 trillion, up 17.5% YoY, supported by PPOP which increased by 37% YoY from Fee Based Income from their e-channel which had growth of 43.6% YoY, as well as gains from financial instruments. Provisions were increased significantly by 196.3% YoY in order to strengthen the balance sheet through a higher coverage ratio (from 138% in 3Q2020 to 161% in 3Q2021). NPLs improved from last year's 1.5% to 1.3%.
Significant increase in commercial loans
Loans grew 7% YoY driven by commercial loans which grew 23.5% YoY originating from APBN / APBD, BUMN, selective distribution to corporations and syndication. Consumer loans rose by a slower 2.7% YoY due to the slowdown in consumer credit demand during this pandemic. But BJBR expects consumer growth will recover in 2022 in line with a recovery of economic activity and purchasing power. Micro loans declined -2.5%, as the distribution scheme through financial institutions was affected by higher risk due to the pandemic, so distribution through these financial institutions was postponed. Meanwhile, direct distribution to MSME still grew 18.7% YoY. We estimate loan growth will be 7.13% in 2021F.
Funding dominated by Time Deposit
Total Deposits grew 7.6% YoY dominated by Time deposits, up 12.9% YoY. The increase in Time Deposits came from the placement of corporate funds, in line with banking liquidity which was still quite strong while demand for credit was limited. The liquidity meant cost of funds was lower at 3.8% from last year's 4.9%. The ongoing digitization of products and services is aimed at increasing CASA funding. In 2021, BJBR projects that CASA will reach 40-45%. However, it should be noted that even though CASA is currently at 41.8%, BJBR has still been able to manage their cost of funds well, as can be seen from the 110 bps decrease in cost of funds in the past year.
Asset Quality Improvement and Credit Restructuring
In terms of Gross and Net Non Performing loans, they remained stable at 1.3% and 0.4% in 3Q21, followed by improvements in Special Mention Loans, which fell by IDR 61 billion YoY, or down 2.8% thanks to improvements in mortgages. As of Sept 2021, loan restructuring reached IDR 3.8 trillion or 4% of total loans. Commercial and corporate loans account for the largest portion of restructuring, at 44 percent.
Focus on increasing credit growth and digital products
BJBR's focus is to maintain credit growth with NPLs at the same level. In 2022, BJBR will continue to increase loans in line with the recovery of economic activity and demand. BJBR is committed to continuously improving digital services and products to encourage fee-based income growth from e-channel transactions
Valuation: 14% Upside potential, Hold.
Based on our DDM Valuation, we have a target price within one year of IDR 1,600, which would mean the shares trading at 1.1x PBV and gives 14% upside potential. Hold.
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