Results
Review:
Bank Rakyat Indonesia (BBRI IJ, BUY, TP: IDR16,500)
More Room For Improvement
Bank Rakyat Indonesia (BBRI IJ, BUY, TP: IDR16,500)
More Room For Improvement
We maintain our BUY call and GGM-derived
IDR16,500
TP (11% upside) on the back of BRI’s strategy to focus on micro lending. The
KUR programme would not cause an overhang, in our view, since BRI can still
disburse loans through its regular micro lending product KUPEDES. Additionally,
BRI Link, its branchless banking agent that also facilitates micro borrowers,
utilises BRI’s e-banking network through the fee sharing scheme. That said, we
expect its fee income to contribute a greater portion (12.9%) to operating
income in FY18 (1H17: 10.7%).
¨
Still
focused on micro lending. Despite increasing competition in this segment, we
believe Bank Rakyat Indonesia (BRI) is still in a leading position due to its
extensive know-how in this field, which cannot easily be duplicated by rivals.
Gross NPL ratio for this segment was at a manageable 1.5% as of June. As such,
we expect its exposure to micro lending to increase to 34.1% of its loan book
by end-2018.
¨
Funding
mixture has room to improve. Given the substantial portion of micro
lending in its loan book, it should be able to manage its NIMs, which are well
above the industry average. Yet, we believe that, going forward, BRI would need
to improve its funding structure in order to minimise further NIM compression.
With over 36m micro savings accounts, BRI has already a decent customer base of
CASA deposits. Meanwhile, for current accounts, BRI aims to grow its
institutional clients. All in, we expect CASA deposits to reach 61.2% of total
customer deposits by the end of 2018.
¨
Expect
higher contributions from fee income. With a strong retail-based business model,
we expect BRI to book higher fee income contributions to its numbers, moving
forward. Payment services and e-banking related fees would also be two key fee
income contributors, due to the utilisation of BRI Link Agent as part of its
branchless banking infrastucture. BRI applies equal fee sharing income with BRI
Link Agent when providing several banking services, ranging from money
transfers to utilities payments. As such, we expect its fee income to grow 20%
YoY next year, resulting in a 12.9% contribution to total operating income.
¨
BUY,
with a IDR16,500 TP.
We maintain our BUY recommendation and GGM-derived TP of IDR16,500, which also
implies 2.2x 2018F P/BV. Our TP also reflects the following assumptions: 9.9%
CoE, 18.1% sustainable ROAE and 3% long-term growth. BRI is our Top Pick for
Indonesia’s big-cap banking stocks.
¨ Risks. Downside risks to our call are are higher-than-expected exposure to the KUR programme and higher-than-expected credit costs in providing an ample LLC ratio.
Kindly click the following link for the full report: Bank Rakyat Indonesia : More Room For Improvement
Best regards,
¨ Risks. Downside risks to our call are are higher-than-expected exposure to the KUR programme and higher-than-expected credit costs in providing an ample LLC ratio.
Kindly click the following link for the full report: Bank Rakyat Indonesia : More Room For Improvement
Best regards,
Eka Savitri
Vice President
Research Analyst - Banking
PT RHB Sekuritas
Indonesia
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