Bank Syariah Indonesia (BRIS.IJ Rp 2,950; HOLD TP Rp 3,000) Robust 3Q24 performance (in line); Potential growth outlook in Sharia market remained intact

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Bank Syariah Indonesia (BRIS IJ)

Robust 3Q24 performance (in line); Potential growth outlook in Sharia market remained intact

BRIS posted 3Q24 net profit of Rp1.7tr (+2% qoq, +24% yoy, in line), supported by strong loan growth, improving NIM, and stable CoC.
To further accelerate growth, BRIS aims to leverage its Hajj SA (deposit), gold business (loan), and bancassurance (fee-based income).
We raised our FY24-25F net profit est. by 4-5%, resulting in higher ROE, increased FV PBV of 2.8x (from 2.6x) and a TP of Rp3,000; maintain Hold.

Robust 9M24 net profit growth driven by solid loan expansion

In 9M24, BRIS reported a robust net profit of Rp5.1tr (+22% yoy), achieving 78%/75% of our/cons. estimates (i.e., in line). This growth was driven by an 8% yoy increase in PPOP, supported by solid loan expansion (+15% yoy), which mitigated the impact of a 59bps lower NIM at 5.2%, resulting from a 43bps rise in CoF. Furthermore, a substantial 25% yoy reduction in provision expenses lowered CoC to 0.9% in 9M24 from 1.4% in 9M23, enhancing profitability.

3Q24: Steady growth with improved margin

In 3Q24, BRIS recorded a net profit of Rp1.71tr (+2% qoq, +24% yoy), aligned with our 3Q24E of Rp1.69tr. NIM improved by 29bps qoq in 3Q24, reaching 5.3%, driven by an 8bps increase in loan yields, while CoF remained steady at 2.6%. A 15bps qoq rise in opex led to a higher CIR of 50.6%, though still an improvement over 52.9% in 3Q23, reflecting continued cost efficiency. Asset quality remained solid, with CoC stable at 0.9% and NPL stable at 2.0%.

Three avenues to drive future growth

Aside from its core business in payroll, BRIS aims to drive future growth by expanding its: 1) Haj SA to improve its low-cost funding, 2) gold business to achieve higher yields and lower CoC, and 3) partnership with Prudential Syariah to improve its fee-based income. After a more aggressive approach, the monthly new Haj SA openings rose to 62k in Sep24 from 29k in FY23. Although still forming 4% of total loans, the gold business has shown good traction with 61% yoy growth as of Sep24. The partnership with Pru Syariah has provided the bank Rp86bn fee income as access fee to its 1mn customers, with potential future income from access fee and commission.

Maintain Hold rating on premium valuation, with a higher TP of Rp3,000

Despite the robust performance and growth potential in its niche market segment, we believe the upsides have been priced in its premium valuation. We raised our FY24-25F EPS est. by 4-5% to account for better-than-expected CoC. We maintain a CoE of 7.9% (inverse CoE since merger) and an LTG of 3%, but raise our FY25F ROE to 16.9%, resulting in a higher FV PBV of 2.8x (2.6x prev.) and a TP of Rp3,000. Risks to our view are higher NIM and lower CoC.

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