Bank Rakyat Indonesia (BBRI IJ)

Better profitability on the horizon

BBRI’s 1H23 net profits of IDR29.4tn are inline with the consensus (50.1% of FY23F) backed by 8.8% yoy loans growth, 7.9% NIM and lower credit costs of 241bps. The prolonged overhang on the Government’s KUR interest rate subsidy should lead to a lower BBRI commitment (from a KUR disbursement of IDR270tn previously) thus providing more room for commercial micro products such as Kupedes to grow. As such, ROAE is expected to be above 20% next year assuming gradual normalization of the payout ratio beyond 2023F.

1H23/2Q23 highlights. BBRI booked decent 1H23 net profits of IDR29.4tn backed by: 1) 8.8% yoy loans growth driven by micro and consumer loans that grew by 11.4% and 12% yoy, respectively, 2) manageable opex growth of 5.6% leading to a slight improvement in the CIR to 41.8% (1H22: 41.9%), 3) 241bps credit costs (1H22: 321bps). While customer deposits growth was mainly driven by 24.3% yoy current accounts growth yet with soft yoy growth in savings accounts. On a qoq basis, 2Q23’s earnings declined by 10.2% qoq mostly due to a higher CoC of 276bps (1Q23: 240bps) as BBRI downgraded two corporate names to NPL with outstanding amount of IDR2tn. 

Aiming to build sticky CASA deposits. With a stable policy rate environment outlook, BBRI is looking to build more sticky CASA deposits. CASA deposits stood at 65.7% of total customer deposits as of June 2023. Aside from the conventional approach, BBRI also sought another growth engine from its 666k BRILink agents as BBRI’s extended marketing channel employs a sharing income scheme. Additionally, BBRI also aims to further grow the wholesale market, particularly current accounts by offering more transactional products and services to its customers. By doing so, BBRI targets higher CASA velocity and fee-income generation in the future.

Abundant capital. Post the rights issue in 2H21 and lower risk weight on credit and operational risk regulated by OJK, CAR reached 26.7% as of June 2023, far above the Basel 3 requirement of 17.5%. With a loans growth target of minimum 10% and 11% for 2023/24F, BBRI’s capital remains ample hence provide room for potential acquisition on either the small multi-finance or insurance businesses. Meanwhile, the NIM target of 7.9% also looks achievable given the bank’s ability to book the highest asset yield of 12.9% since 2017. Going forward, BBRI is confident of booking a higher NIM backed by higher exposure to the regular non-KUR micro and ultra-micro segment. While the long-awaited concern on this year’s KUR interest rate subsidy from the Government should means that BBRI can focus to grow the regular micro products, the segment with higher yields.