Bank Rakyat Indonesia

Equity Research

Bank Rakyat Indonesia

BUY

BBRI IJ / BBRI.JK

(Unchanged)

Result Update | BCAS Vignette | Banking Sector 4 May 2018

Strong loan growth to start off the year Facts: 3M18 NP of IDR7.4tn with solid loan growth of 11.2%  Net profits: IDR7.4tn (+6.4% YoY, +2.5% QoQ) in 1Q18, in-line with 22.5% of our and street’s full-year estimates, driven by solid PPOP growth to IDR14.5tn (+10.0% YoY). Provisioning expenses increased slightly, to 2.8% YoY in 3M18. NIM was recorded at 7.5% in 1Q18 vs. 8.1% in 1Q17, due to adjustment in interest expense dating from the end of last year.  Above-industry loan growth (+11.2% YoY, +2.5% QoQ) end Mar-18, supported by consumer (+16.5% YoY), micro (+16.2% YoY) and small commercial (+14.3% YoY). On the deposit side, growth reached +12.7% YoY, -1.7% QoQ end Mar-18, resulting in slightly improved LDR to 91.2% end Mar-18 vs. 92.5% end Mar-17. CASA climbed to 55.9% end Mar-18 vs. 55.2% end Mar-17.  NPL darkened to 2.39% end Mar-18, vs. 2.16% end Mar-17 and 2.10% end Dec-17, a victim of seasonality. A new NPL of 0.51% popped up in SOE loans from a state plantation firm subsidiary. SML stood at 4.96%, down from 5.41% end Mar-17, but higher than the 4.09% booked end Dec-17. Outlook: Expect higher contribution from micro business Based on recent 1Q18 results, we believe BBRI performance is still on track with our forecast and expect the Company to keep maximizing its net profit by accelerating loan growth in 2018 (our assumption: 12.0% YoY in 2018F). However, this will come at the expense of sharper NPL pressure in 1Q18, but with healthy coverage level of 176.7% in Mar-18, currently the highest among SOE banks. This could provide ample room for BBRI to reduce its CoC throughout the end of this year (similar seasonality in 2017) which adds support to our net profit forecast of 13% YoY in 2018F. Additionally, it is worth noting that BBRI plans to continue aggressively adding BRILink agents, climbing to ~500k from current level of 281k in 1Q18; this could lead to higher fee-based income in the future.

Willy Suwanto w illy.suw [email protected] +6221 23587222 ext 178 Gilang Purnama [email protected] +6221 23587222 ext 178

Current Price: IDR3,150 Target Price: IDR4,300 (Unchanged) Upside potential: 36.5%

12M PRICE PERFORMANCE (IDR)

(%)

4,000

40.0

30.0

3,500

20.0 3,000

10.0

2,500

Rel. to JCI performance (RHS)

BBRI IJ (LHS) 300 200

100 -

Recommendation: Maintain BUY rating, IDR4,300 TP We maintain BUY rating on BBRI, as its loan growth has already shown positive YTD growth end Mar-18, actually contrary to seasonality of negative growth in the first quarter. Solid micro loan business is likely to help BBRI bottom line to expand at a comfortable level this year, although this comes at the expense of lower fee-based income, as the micro business is frankly less profitable. Our TP is still IDR4,300, with implied 2018F PBV of 2.8x, as there is no change in fundamentals; however, we are likely to readjust our TP with current risk-free on higher USGG10YR. Risks: weaker-than-expected loan demand resulting from unfavorable economic conditions & weaker-thanexpected low-end purchasing power.

Source: Bloomberg

Exhibit 1. NIM vs. CoF

2016

20.2

3.1

14.8

2.7

2017

18.6

11.1

13.4

2.3

9.0

2018F

18.7

13.5

11.8

2.1

8.0

Source: BCA Sekuritas

(%)

7.0

8.2

7.9

7.9

8.1

8.0

7.9

6.0

7.8

7.5

5.0 4.0

3.0 2.0

4.4

4.2

3.8

3.7

1.0

3.4

3.5

3.3

3.3

STOCK PERFORMANCE Y TD Absolute

1M

3M

12M

-13.5% -12.5%

-15.8%

19.3%

JC I Return

-7.8%

-5.9%

-11.6%

3.7%

Relative

-5.6%

-6.6%

-4.2%

15.6%

EPSG (%)

P/E (x)

P/B (x)

Source: Bloomberg

FINANCIAL HIGHLIGHT ROE (%)

MARKET DATA 12M price range (IDR)

:

2,640 - 3,920

12M PE range (x)

:

11.2 - 15.4

Outstanding shares (mn)

:

123,346

Market cap (IDRbn)/(USDmn)

: 388,539 / 27,874

Avg daily turn. (IDRbn/USDmn) :

381.3 / 27.4

Source: Bloomberg

0.0 2014

2015

2016

1Q17

2Q17

Blended Cost of Fund

Sources: Company, BCA Sekuritas

3Q17 NIM

4Q17

1Q18

SHAREHOLDERS Government of Indonesia

:

56.8%

Public (each below 5%)

:

43.3%

Source: Bloomberg

Exhibit 2. Results: Summary 1Q17

4Q17

1Q18

QoQ (%)

YoY (%)

24,655 6,746

25,598 7,723

26,232 7,609

2.5 (1.5)

6.4 12.8

17,909

17,876

18,622

4.2

4.0

4,090

5,714

5,220

(8.7)

27.6

21,999

23,591

23,842

1.1

8.4

Operating expense

8,787

9,507

9,304

(2.1)

5.9

Impairment of fin. assets

5,243

1,707

5,388

215.7

2.8

Operating profit

7,970

12,377

9,150

(26.1)

14.8

Pretax profit

8,114

12,442

9,158

(26.4)

12.9

Net profit

6,646

8,552

7,401

(13.5)

11.4

BS & ratio analysis

1Q17

4Q17

1Q18

QoQ

YoY

Gross loans (IDRbn)

678,614

736,280

754,460

2.5

11.2

Third party funding (IDRbn)

733,955

841,656

827,050

(1.7)

12.7

(IDRbn) Interest Income Interest expense Net interest income Non-interest income Total operating income

1Q18/ 2018F

1Q18/ cons

22.8

23.9

21.8

21.9

22.5

22.5

Key ratios Net interest margin (%)

8.1

7.8

7.5

Cost efficiency (%)

39.9

40.3

39.0

Cost to income (%)

72.3

60.5

70.9

Loan/deposit (%)

92.5

87.5

91.2

Loan/funding (%)

83.6

79.3

82.9

Capital adequacy (%)

20.9

22.8

20.7

2.2

2.2

2.4

176.2

191.9

176.7

20.7

18.5

19.4

Gross NPL (%) LLP/NPL (%) ROAE (%) Source: Company, BCA Sekuritas estimate

Exhibit 3. NPL vs. CoC (%)

Slight increase in NPL due to seasonality.

3.5

3.0 2.5

2.0

2.0

2.3

2.2

2.3

2.2

2.4

2.0

1.0

3.3

3.1

1.5

3.1 2.5

2.2

2.9

1.6

0.5 0.0

2015

2016

1Q17

2Q17 CoC

3Q17

4Q17

1Q18

NPL

Sources: Company, Financial Services Authority, BCA Sekuritas

Bank Rakyat Indonesia, 4 May 2018

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Exhibit 4. BRILink agents and transaction value (IDRtn) 350.0

('000 agents) 400

298.0

350

300.0 280.8

279.8

250.0

203.5

100.0

139.1

200

123.4

84.6

138.3

150

104.0

97.6

300 250

200.0 150.0

BBRI aims to double its BRILink headcount to 500k agents by end18.

97.6

106.0 50.0 56.3

100 50

56.3

0.0

0 2016

1Q17

2Q17

3Q17

2017

Agents

1Q17

1Q18

Transaction value


Exhibit 5. Loan breakdown (IDRtn)

558

500

16%

400

12% 4%

300 200

100

31%

13%

14%

653

659

665

15%

15%

15%

13%

12% 4%

12% 3%

12% 3%

13% 3%

21%

21%

21%

20%

16%

16%

16%

16%

16%

16%

32%

33%

33%

34%

35%

34%

1Q17

2Q17

3Q17

4Q17

1Q18

20% 16%

725

635

700 600

708

12% 3% 20%

BBRI reclassifies its corporate loan bracket from >IDR50bn to >IDR200bn.

12% 3% 21%

0 2015 Micro

2016 Consumer

Small Commercial

Medium

Corporate Non-SoE

SoE


Exhibit 6. Micro loan breakdown (IDRtn) 250 216.1

211.5

200

178.9

150

0% 0% 16%

225.9

229.3

24%

25%

239.4

26%

251.2 25%

7%

24%

3% 8%

0% 2%

0% 2%

0% 1%

81%

74%

74%

74%

73%

74%

84%

2015

2016

1Q17

2Q17

3Q17

4Q17

1Q18

100

0% 1%

0% 1%

For every customer shifting to micro KUR, there are 3 customers moving to Kupedes. BBRI currently serves a total of 10mn micro loan borrowers.

50 0 Kupedes

Kupedes Rakyat

Micro KUR

New Micro KUR



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Teguh Hartanto Director of Equity, ext: 129 [email protected] RESEARCH DIVISION [email protected] Pandu Anugrah Head Of Research, ext: 168 Strategy, Consumer Staples [email protected]

Aditya Eka Prakasa Equity Analyst, ext: 182 Automotive, Telco, Media, Metal Mining [email protected]

Arga Samudro FI Analyst, ext: 181 FI Strategies & Macroeconomist [email protected]

Johanes Prasetia Equity Analyst, ext: 185 Retail, Poultry, Hospital [email protected]

Michael Ramba Equity Analyst, ext: 184 Construction, Property Residential, Infra [email protected]

Nyoman Widita Prabawa Equity Analyst, ext: 180 Cement, Plantation, Oil & Gas [email protected]

Gilang Purnama Equity Analyst, ext: 178 Banking, Industrial Estate [email protected]

Willy Suwanto Equity Analyst, ext: 178 Banking, Consumer, Petrochemical [email protected]

Prasetya Gunadi Equity Analyst, ext: 183 Banking, Coal, Heavy Equipment [email protected]

Achmad Yaki Yamani Technical Analyst, ext: 186 Technical Analyst [email protected]

Indra Taurean Research Associate, ext 186

Rachel Christabelle Sual Research Associate, ext 179

[email protected]

[email protected]

Ermawati Agustina Erman Head of Institutional Sales, ext: 159 [email protected]

Haslienda Rifman Institutional Sales, ext: 137 [email protected]

Jennifer Frederika Yapply Institutional Sales, ext: 187 [email protected]

Wilson Budiarto Sutarko Institutional Sales, ext: 195 [email protected]

[email protected]

Jodi Pujiyono Sales Trader / Dealer, ext: 196

Santoso Jodikin Sales Trader / Dealer, ext: 164 [email protected]

Yuni Pratiwi Research Associate, ext: 183 [email protected] EQUITY CAPITAL MARKET DIVISION [email protected]

Arief Iskandar Institutional Dealer, ext: 136 [email protected]

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