Maintain Buy at an All Time High Level
1Q22 Performance was In Line with Our Expectation
• BBRI booked a net profit of IDR12.2tn in 1Q22 (+3.0% QoQ/+78.2% YoY), in line with our expectation implying 25.6% run rate to our FY22F projection.
• On an annual basis, rising bottom line was driven by : 1) increasing NII (+12.1% YoY) and Non-II (+12.1% YoY) as well as 2) lower provisioning expense (-26.6% YoY).
• NIM improved +39 bps YoY to 7.7% was driven by -43 bps YoY drop in CoF along with strengthening CASA structure (63.6% in 1Q22 vs 58.9% in 1Q21).
• BBRI’s bank only net profit of IDR10.9tn indicated that other subsidiaries also contribute to positive consolidated bottom line even including Bank Raya (AGRO IJ).
• Previously, AGRO IJ booked a net loss of IDR3tn and sapped out BBRI’s consolidated net profit in FY21 as the bank did portfolio clean up during bank’s transformation period to be hybrid bank.
Focusing Growth to Higher Yielding Asset
• BBRI’s consolidated loan and financing grew +7.4% YoY in 1Q22, primarily driven by micro (+13.6% YoY) and small segment (+8.0% YoY).
• Given BBRI’s LDR is still around 87%, we believe that bank still have room to expand its credit and booking 11% loan growth for FY22F.
• By focusing on MSME segment which offer higher yield and now accounted for ~84% loan portfolio, BBRI’s could increase its NIM to 7.8-8.1% for FY22F.
• We think higher NIM is likely given BBRI’s successful low cost funding. BBRI’s ability to maintain low CoF is one of key success factor to achieve higher profitability.
Strengthening Competitive Advantages through UMi
• We expect the integration of Pegadaian and PNM in Ultra Micro (UMi) holding to continue this year.
• With Pegadaian and PNM, BBRI could offer a wide range of product including savings and loan. Note that Pegadaian and PNM each possessed 15.8 mn and 11.7 mn borrowers.
• By offering what management called ‘comprehensive saving beyond banking product’ through : 1) micro saving, 2) micro insurance, 3) gold saving & investment as well as through 4) mobile banking BRIMo, BBRI could attract low cost funding and boost its fee based income.
Key Catalysts and Risks
• Potential +54.7% YoY EPS growth driven by : 1) higher earning assets & well maintained CoF; 2) higher loan disbursement (+11% YoY FY22F); 3) improving asset quality at 2.8% along with lower CoC at 2.8% for FY22F.
• BBRI’s stock price soared +20.2% year to date and just hitting an all time high level along with massive foreign flows amidst heightened geopolitical tension between Russia and Ukraine.
• We think that war between Russia-Ukraine would benefit India and SEA including Indonesia in term of asset allocation and geographical rebalancing.
• Rising geopolitical tension between Russia-Ukraine to have inflationary impact through commodity prices channel. However, BBRI has a proven track record in maintaining loan growth and quality during period of high inflation in Indonesia.
• We also noted that slower integration of each BBRI’s subsidiary including the hybrid bank (AGRO IJ) to the ecosystem would likely to bet the downside risk.
Maintain Buy Rating with TP at IDR 5,500/share
Currently BBRI share is traded at +0.5STD of its forward P/B. Albeit BBRI’s share price has already hit an all time high level at IDR4,940/share, we maintain our buy rating for BBRI with TP at IDR 5,500/share implying 2.6x and 2.3x FY22F and FY23F P/B respectively.
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