Result review:
Bank Rakyat Indonesia (BBRI IJ, BUY, TP: IDR14,500)
The Biggest Micro Lender Story Continues
Bank Rakyat Indonesia (BBRI IJ, BUY, TP: IDR14,500)
The Biggest Micro Lender Story Continues
We expect modest earnings growth for
BRI on the back of supportive loans growth coming from micro lending, both for
the KUR programme and commercial micro lending. Aside from that, fee-income
would also bring additional income to BRI going forward coming from the BRILink
agent as well as electronic-banking features (ATMs, mobile and internet
banking). Maintain BUY with an unchanged GGM-derived TP of IDR14,500 (24%
upside). A short term risk is the slow progress in non-SOE corporate borrowers’
NPL status.
¨ Sustainable earnings
growth. Post
its inline FY16 results, we maintain our earnings growth projection of 7.8% in
2017 for Bank Rakyat Indonesia (BRI) with a slight fall in its net interest
margin (NIM) to 8.0% (FY16: 8.1%) as we expect a lower asset yield of 11.1%.
Moreover, we also assume stable credit cost of 228bps to maintain its loan loss
coverage (LLC) ratio at the minimum level of 150%.
¨ Biggest micro lender as this is BRI’s
bread and butter activity since many decades ago. The Government’s Kredit Usaha
Rakyat (KUR) micro lending program would still continue to be one of BRI’s main
growth engines with an IDR71.2trn target while maintaining the same interest
rate subsidy scheme. All in, micro lending contribution could reach
approximately 33.1% of loans booked by year-end (end FY16: 31.9%).
¨ Manageable asset quality due to its
significant exposure on micro lending. We expect NPLs from non-SOE corporate
borrowers to be lower given that some SOEs are already in the process of
liquidation, with several potential buyers lined up. Therefore, we expect a
2.2% NPLs ratio by year-end.
¨ Maintain BUY. We maintain our BUY
call on BRI, supported by its strong loans growth from micro lending, superior
NIMs and potentially higher fee-income from c.50m customer accounts. Our
GGM-derived TP of IDR14,500implies FY17F P/BV of 2.15x (-0.75SD of its
historical mean) and a P/E of 13x.
Kindly click the following link for the full report: Bank Rakyat Indonesia : The Biggest Micro Lender Story Continues
Eka Savitri
Vice President
Research Analyst - Banking
PT. RHB Securities
Indonesia
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