Research & Stock Picks

Emiten Report

19 February 2024

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BBRI: BUY (Maintain), TP at 6,800 – Higher earning-assets portfolio to support NIM

Higher earning-assets portfolio to support NIM

Double-digit loan growth in FY24 on micro and medium segments. BBRI booked solid loan growth in FY23 (+11.2% YoY), driven mainly by micro and medium segments. For FY24, BBRI has set a loan growth target range of +11-12% YoY (SSI:11.5%), supported by micro-segment (led by Kupedes, which grew +64% YoY in FY23). We also forecast that the growth in ultra-micro segment loans (PNM & Pegadaian) will continue to outgrow bank-only loans, and will account for more than 12% of BBRI’s total loans in 2024F (9% in 2023).

Stable NIM despite tight liquidity on higher lending yield. BBRI’s NIM came in at 7.95% in 4Q23, down from 8.05% in previous quarter, mainly due to higher CoF. BBRI expects its FY24 CoF to remain elevated, mainly due to the need for cash for Ramadan and dividend repatriation. However, BBRI expects FY24 NIM to remain flattish at 7.9%-8.0% (SSI: 7.9%), as the increase in CoF will be offset by the increase in lending yield, supported by portfolio rebalancing (shift from KUR to Kupedes), as well as minimal modification losses in 2023.

 

Continuous LAR improvement to below 10% in FY24. On the asset quality side, LAR came in at 12.5% in Dec-23 vs. 13.9% in 3Q23 and 17.1% in Dec-22, and the bank expects its LAR to improve further and fall below 10% (SSI: 10%) with NPL ratio going down below 2.9% (SSI: 2.9%) in FY24. In line with the improvement in LAR ratio, BBRI managed to lower its cost of credit (CoC) to 2.38% in FY23 vs. 2.55% in FY23, and it projects CoC to fall below 2.3% in FY24 (SSI: 2.3%). The bank’s LAR coverage came in at 54.14% in 4Q23 vs. 49.4% in 4Q22.

Maintain BUY rating and TP of IDR 6,800 (3.1x PBV). At this juncture, we maintain our BUY rating for BBRI and our TP at IDR 6,800/share, based on a 2024F PBV of 3.1x (sector: 2.9x), on the back of its solid capital structure. We continue to favor BBRI because we believe it will continue to book double-digit loan growth next year, aided by ultra micro-segment and Kupedes loan, which will help stabilize NIM despite some pressure in the CoF. Also, BBRI’s strong CAR (27.3% in FY23) convinced us that the bank could maintain its dividend payout ratio above 85% for the next few years. Downside risks: slower-than-expected economic recovery, lower-than-expected NIM and loan growth, higher cost of credit, and higher opex.

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