Results Review:
Bank Rakyat Indonesia (BBRI IJ, BUY, TP: IDR14,500),
Micro Lending To Support Further Growth Ahead
Bank Rakyat Indonesia (BBRI IJ, BUY, TP: IDR14,500),
Micro Lending To Support Further Growth Ahead
We
expect decent earnings growth for BBRI, supported by higher loans growth and
manageable credit costs. Loans growth should be underpinned by the Government’s
target on its KUR programme, which should boost BBRI’s commercial micro lending
going forward –where borrowers need to obtain loans of more than IDR25m. The
additional micro borrowers would also support BBRI’s fee-income base. We are
already projecting lower loan yields due to higher KUR portion in its micro
lending book. Maintain BUY with unchanged GGM-based TP of IDR14,500 (19%
upside).
¨
Earnings
growth outlook. We
are projecting earnings growth of 7.8% in 2017 for Bank Rakyat Indonesia
(BBRI),with relatively stable credit cost of 228bps, which would maintain its
loan loss coverage (LLC) ratio at the minimum level of 150%. Moreover, BBRI is
expected to continue optimising its loan-to-funding ratio (LFR) in order to
manage its superior net interest margin (NIM) at 8%.BBRI’s 9M16 results were
inline with our expectations.
¨
Maintain
focus on micro lending. BBRI’s loan book would still be dominated by micro
lending, particularly with the Government’s Kredit Usaha Rakyat (KUR)
micro lending program. Under KUR’s current scheme, the Government provides a
10% subsidy while borrowers incura lending rate of only 9%. For next year, the
Government has already proposed lower lending rates of 7% to be paid by KUR
borrowers, and are still in discussions with participating banks on the
subsidy. We have already assumed lower loan yields of 13.2% in FY17 due to the
expected higher portion of KUR (27%)in micro lending (Sep: 22.6%).
¨ 3Q16 earnings – inline
|
FYE Dec (IDR bn)
|
3Q16
|
2Q16
|
QoQ
(%)
|
3Q15
|
YoY
(%)
|
Comments
|
|
NII
|
17,073
|
17,141
|
(0.4)
|
15,124
|
12.9
|
|
|
Non-II
|
3,503
|
4,574
|
(23.4)
|
2,760
|
26.9
|
Higher YoY due to e-banking related fees
|
|
PPOP
|
11,337
|
11,533
|
(1.7)
|
10,317
|
9.9
|
|
|
Provisions allowance
|
(3,917)
|
(3,911)
|
0.2
|
(3,098)
|
26.4
|
Credit cost of
252bps vs 237bps in 3Q15
|
|
Net Profit
|
6,775
|
5,931
|
14.2
|
6,470
|
4.7
|
¨
Maintain
BUY. We
maintain our BUY call on BBRI, supported by its strong loans growth from micro
lending, superior NIMs, and potentially higher fee-income from c.50m customer
accounts. Our GGM-based TP of IDR14,500 implies FY17F P/BV of 2.15x (-0.75SD of
its historical mean), and P/E of 13x.
Kindly click the following link for the full report: Bank Rakyat Indonesia : Micro Lending To Support Further Growth Ahead
Best regards,
Eka Savitri
Vice President
Research Analyst - Banking
PT. RHB Securities
Indonesia
