Ready to Leapfrog with Ultra Micro Ecosystem
FY 21 Result: Well Above Guidance
• BBRI’s consolidated net profit jumped +64.8% YoY to IDR30.76tn in FY21. This achieved 110% from our estimate.
• BBRI’s bank only bottom line recorded earnings of IDR32.2tn. The group consolidated attributable net profit was dragged down by loss booking entity of Bank Raya (AGRO IJ) on the back of loan clean up during hybrid bank transformation agenda.
• Strong top line has boosted earnings with NII grew by +21.9% YoY driven by rising loan yield (+50bps YoY) amid significant drop in CoF (-110bps YoY).
• CASA composition strengthened to 63.1% in FY21 (vs 60.8% in FY20) on the back of growth in CA (+15.4% YoY) and SA (+5.9% YoY) while TD declined by -1.4% YoY.
• Rising loan yield was supported by higher micro-loan segment both individually and on a group basis.
• BBRI’s bank only micro loan segment accounted for 42.1% from outstanding loan in FY21 (vs 39.9% in FY20). Meanwhile micro loan composition in consolidated basis was recorded at 46.4% from outstanding loan in FY21 (vs 42.4% in FY20).
• BBRI’s bank only NIM rose +90bps YoY to 6.9% in FY21 (vs 6% in FY20) and slightly above management guidance of 6.7%.
• The jump in NII also offset OPEX growth (+18.1%) as a result of one off employee benefits including pension fund and severance payment.
• BBRI loan grew +2.2% YoY (consolidated) and +7.2% YoY (bank only). BBRI’s bank only loan expanded above management guidance 6-7% for FY21 and higher than its industry growth of 5.2% YoY on the back of strong growth in micro business segment (+13.0% YoY).
• BBRI’s group NPL stood at 3% (+12bps YoY) in FY21. Credit cost grew +40bps YoY to 3.8% with coverage ratio of 278.1%.
ESG Focus : The Highest SFP among Peers
• In FY21, BBRI’s sustainable business activities loan portfolio has grown +12.2% YoY to IDR617.8tn or equivalent to 65.5% total loan. It was also the highest among peers.
• BBRI’s sustainable financing and ESG initiative hit some milestone in FY21 including : 1) establishment of ESG desk and Committee.
• Going forward BBRI will focus to strengthen its commitment in ESG by designing ESG roadmap, ESG integrated KPI as well as sectoral loan policies based on ESG risk mitigation.
Outlook & Recommendation : Maintain BUY Rating with Upgraded TP : IDR5,500
We see BBRI’s positive outlook on the back of several key catalysts. The establishment of UMi holding will help BBRI to focus on high yielding micro-business which management aspire micro loan composition to reach 55% total loan. We projected BBRI’s loan can reach 11% (management upper target) in FY22F with strong disbursement to micro loan segment due to higher KUR quota (>30% YoY). We believe with BBRI’s NIM could reach 8% should it focus on low cost funding and seeking higher yielding asset amid rising interest rate probability. In addition, positive earning outlook was also driven by potential improving asset quality and AGRO loan clean up has been accomplished in FY21 and will not continue in FY22. We maintain BUY rating with higher upgraded TP : IDR5,500 translating to 2.1x PBV FY22F. Risk to our call include : 1) slower loan growth; 2) deteriorating asset quality due to prolonging Covid-19 and 3) slower execution of Hybrid bank business model for its subsidiary.
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