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28 Juli 2022

BBRI IJ - MNC Sekuritas Equity Report July 28, 2022

A Combination of Yield Improvement & Low Cost Funding Strategy
 
2Q22 performance was in-line with our expectation
BBRI managed to post a net profit of IDR12.66tn in 2Q22. The bottom line grew +3.6% QoQ and was largely driven by net interest income which increased +12.5% QoQ thanks to improving loan yield & lowering CoF. However, the double digit growth of net interest income was offset by increasing provisioning expense by +26.5% QoQ along with weakening asset quality as company reported an increase of +20 bps in NPL to 3.3% as at the end of Jun-22. Throughout 1H22, BBRI reported an impressive performance with net profit growth of +98.4%, yet still in line with our estimate (52.3% run rate of MNCS FY22E).
 
Sustaining growth momentum
BBRI’s success to record such impressive bottom line performance in 1H22 was also supported by company’s strategy to accelerate loan disbursement, while at the same time seeking a low cost funding.
 
BBRI’s loan grew +8.7% YoY and largely driven by its micro-loan business booking a growth of +15.1% YoY. Kupedes and KUR remain the growth driver for micro-loan. Note that, Kupedes and KUR each grew by +25.2% YoY & 41.8% YoY. BBRI micro KUR segment reached 48% from the quota of IDR260tn and management is optimistic in achieving the target. We maintain our loan growth projection for BBRI at 11% YoY FY22E on the back of “just right liquidity” strategy implemented by company. BBRI’s adequate liquidity was driven by TPF as the main source of funding constituting 73.1% from total funding sources in 1H22 and grew +3.7% YoY. Under the condition where loan demand is higher, BBRI could still utilize its treasury asset as an alternative source of fund.
 
With CASA growth of +13.4% YoY (65.1% TPF in 1H22 vs 59.6% TPF in 1H21) and company focus on higher yield assets (micro-loan), we expect the scenario for upside NIM is likely. In our earning calls recently, management has adjusted NIM guidance at 7.7-7.9% (vs 7.6-7.8% previously). This is still considered a more conservative view than our NIM estimate at 8.0-8.2% FY22E. All in all, with such improvement in asset allocation and funding strategy as well as post merger integration, we maintain our FY22E net profit of IDR47.57tn implying +54.7% YoY EPS growth.
 
Eyes on asset quality
We prefer to closely monitor LaR trend, rather than NPL to reflect asset quality as it also taking into account restructured loan with collectability 1. Indeed, BBRI loan quality continues to show an improvement indicated by declining LaR driven by consistently decreasing Covid restructured loans both by outstanding & debtors (LaR at 20.8% in 1H22 vs peak at 28.3% in FY20 or during the first year of pandemic). However, such figure was still above a normal level of <10%. Furthermore, we think we need to be more cautious on the likelihood of still higher LaR than pre-pandemic level, particularly when OJK end Restructured Loan Policy Relax by Mar-23. As such we could clearly see the real asset quality of a bank. However, we appreciate management’s forward looking & conservative provisioning policy to mitigate loan deterioration risk.
 
Maintain BUY at TP at IDR5,500/share
We maintain our BUY call for BBRI with TP at IDR5,500/share using DDM valuation method implying 2.6/2.3x FY22E/FY23E P/B. Key upsides : 1) potentially higher NIM and 2) cost improvement in subsidiaries. Key downsides : 1) outflows from heavy weight stock on JCI during Fed’s tightening cycle; 2) deteriorating asset quality
 
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