Bank Rakyat Indonesia (BBRI IJ)
FY26 Outlook: Continuing to Focus on Asset Quality While Expanding Non-Core Businesses
- We believe the potential removal of KUR graduation scheme should have a limited impact if the quota and rate subsidy remain steady.
- With mgmt. expectation of higher loan growth, better CoC, and cautious NIM outlook, consensus is expecting double digit FY26 earnings growth.
- BBRI currently trades at 1.7x FY25C PBV, at -1.4SD of its 5-year mean, reflecting the challenging micro business conditions.
Strengthening its core business while expanding its non-core
While waiting for the micro segment to recover, BBRI is aiming to expand its corporate and consumer loans. As of 9M25, micro loans only grew 1% yoy due to the 10% decrease in Kupedes loan and flat KUR, offset by the 29% increase in Pegadaian. In the micro business, especially in Kupedes, BBRI continues to focus on asset quality with a stricter underwriting process. To grow its consumer business, the bank aims to strengthen dominance in the payroll business, accelerate growth in auto loans and mortgages, and expand gold services.
Limited impact from potential change in KUR scheme
The government plans to remove KUR graduation scheme, hence allowing borrowers to access unlimited KUR (from 2 or 4 currently) with a flat interest of 6% (from 6-9% currently), while maintaining the micro plafond at Rp100mn (unchanged). While investors might be skeptical given the bleak outlook of the bank’s higher yielding loan Kupedes (Risk-adjusted NIM of 9.2% vs KUR’s 7.8%), it is worth noting that the KUR’s quota remained relatively steady at Rp320tr in FY26F, vs. initial FY25F of Rp300tr. Unless there is a significant increase in quota or changes in interest rate subsidy, we see KUR and Kupedes remaining co-existent as independent MSME loans.
Double-digit FY26 earnings growth expectation
Management indicated a better CoC at 2.9-3.2% for FY26F, driven by lower exposure from the FY23 Kupedes vintage. Management also anticipated overall loan growth to recover to 9-10% in FY26F if micro conditions improve. However, amid the potential lower CoF, NIM might still be under pressure given the potential decline in loan yield amid the lower benchmark rate. Consensus is expecting FY26F earnings of Rp62.3tr, implying 10% yoy growth from FY25F.
Below-mean valuation amid challenging micro condition
BBRI’s current PBV valuation stands at 1.7x, which is at -1.4SD below its 5-year avg, driven by the challenging business conditions and uncertainties in government’s program. Management remains optimistic in resolving the vintage loan but is cautious on the micro conditions and asset yield outlook.
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