BMRI
Contact our analyst Lingga
13% upside. Hold
4th November, 2021
Price Rp7125
Target price Rp8050
Increase in PPOP with Lower Provisions
In 3Q21, BMRI recorded a net profit of IDR 6.7 trillion, up 80.1% supported by an increase in net interest income of IDR 18.1 trillion, up 37.3% YoY. Interest income increased by 14.1% YoY and combined with a decrease in interest expense by 24.5% YoY, meant PPOP was up 41.6% YoY, although it was flat QoQ. This was accompanied by a 2.7% QoQ decrease in provision in 3Q21, so that provisioning only rose 0.6% YoY. The percentage increase in provision being lower than the increase in PPOP resulted in a significant increase in operating profit.
Loan growth led by Commercial and Micro
Loan growth was 17% YoY after the consolidation of BSI which grew 20% YoY in 3Q21. Bank only credit growth was 8% YoY. The main drivers of loan growth were commercial, up 13.9% YoY and micro, up 9.8% YoY. On the financial side, deposit growth fully balanced credit growth at 18.53% YoY. CASA remains the main pillar with a consolidated ratio of 69.7% consisting of 28.8% Current accounts and 24.5% Saving accounts. The strong CASA ratio was also due to the decrease in time deposits by 3.63% as banks have been able to reduce time deposits rates.
Asset Quality and Restructuring
NPLs and SMLs were at 3% and 4.5% in 3Q21. LAR increased to 19.6% from 20.5% in 2Q21 following the improving trend of restructurings. The Bank has started to reduce some NPLs from restructured loans, by IDR 2.4 trillion in 3Q21 from IDR 1.7 trillion in 2Q21). We see encouraging trends in both asset quality and Cost of Credit. Management maintains its Cost of Credit guidance at 1.9-2.4% in 2021F
Digital developments; Livin (retail) and Kopra (business)
The New Livin app launched on October 21st with many features that are new in the market, such as pre-login, smart top-up, and online onboarding among others. The goal is to optimize the current strong customer base (>30 million subscribers) together with the comprehensive ecosystem of banks within the group. This is the reason behind digital transformation via a super-app instead of going through a separate digital bank. New Life has had 1.5 million downloads since its launch on October 2nd 2021. Kopra, launched as BMRI's effort to maintain their edge in the wholesale business, through providing clients with a holistic digital banking ecosystem, for example, E-Fx, trading & underwriting, and cash management. Currently, 65% of BMRI's total loans come from the wholesale segment.
Valuation: 13% Upside, Hold.
Based on our DDM Valuation, we have a target price within one year of IDR 8,050,or trading at 1,8x PBV which gives 13% potential upside, Hold.
In 3Q21, BMRI recorded a net profit of IDR 6.7 trillion, up 80.1% supported by an increase in net interest income of IDR 18.1 trillion, up 37.3% YoY. Interest income increased by 14.1% YoY and combined with a decrease in interest expense by 24.5% YoY, meant PPOP was up 41.6% YoY, although it was flat QoQ. This was accompanied by a 2.7% QoQ decrease in provision in 3Q21, so that provisioning only rose 0.6% YoY. The percentage increase in provision being lower than the increase in PPOP resulted in a significant increase in operating profit.
Loan growth led by Commercial and Micro
Loan growth was 17% YoY after the consolidation of BSI which grew 20% YoY in 3Q21. Bank only credit growth was 8% YoY. The main drivers of loan growth were commercial, up 13.9% YoY and micro, up 9.8% YoY. On the financial side, deposit growth fully balanced credit growth at 18.53% YoY. CASA remains the main pillar with a consolidated ratio of 69.7% consisting of 28.8% Current accounts and 24.5% Saving accounts. The strong CASA ratio was also due to the decrease in time deposits by 3.63% as banks have been able to reduce time deposits rates.
Asset Quality and Restructuring
NPLs and SMLs were at 3% and 4.5% in 3Q21. LAR increased to 19.6% from 20.5% in 2Q21 following the improving trend of restructurings. The Bank has started to reduce some NPLs from restructured loans, by IDR 2.4 trillion in 3Q21 from IDR 1.7 trillion in 2Q21). We see encouraging trends in both asset quality and Cost of Credit. Management maintains its Cost of Credit guidance at 1.9-2.4% in 2021F
Digital developments; Livin (retail) and Kopra (business)
The New Livin app launched on October 21st with many features that are new in the market, such as pre-login, smart top-up, and online onboarding among others. The goal is to optimize the current strong customer base (>30 million subscribers) together with the comprehensive ecosystem of banks within the group. This is the reason behind digital transformation via a super-app instead of going through a separate digital bank. New Life has had 1.5 million downloads since its launch on October 2nd 2021. Kopra, launched as BMRI's effort to maintain their edge in the wholesale business, through providing clients with a holistic digital banking ecosystem, for example, E-Fx, trading & underwriting, and cash management. Currently, 65% of BMRI's total loans come from the wholesale segment.
Valuation: 13% Upside, Hold.
Based on our DDM Valuation, we have a target price within one year of IDR 8,050,or trading at 1,8x PBV which gives 13% potential upside, Hold.
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