Bank Rakyat Indonesia: Micro loan outlook continues to be under pressure
- Expect slower loan growth as micro loans remain muted
- Anticipated slower recovery income in 2025F
- Untapped potential as a dividend play for Indonesia’s banking sector
- TP lowered to IDR3,600
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- Bank Rakyat Indonesia: Bank Rakyat Indonesia (BBRI IJ): <Result analysis> 1Q25: Earnings in-line amid weak loan growth and NIM trend [HOLD, TP IDR3,600]02 May 2025
- Bank Rakyat Indonesia: <Results First Take> Bank Rakyat Indonesia (BBRI): 1Q25 Earnings in line but loan growth and NIM were weak30 Apr 2025
Consequentially, we expected loan growth to be muted in 2025F at only 6%. We also revised down our loan growth number in 2024F following weakening 11M24 number at a bank-only level to 8%, whereas we earlier forecasted around 10% loan growth in 2024F.
Weaker recovery income expected. We anticipate recovery income to normalise in 2025F as overall asset quality in the micro segment continues to deteriorate. Furthermore, the implementation of a 5% cap on NPL gross at each BBRI office has made it increasingly challenging for borrowers to refinance their loans. This, in turn, raises the probability of default among borrowers, ultimately exerting upward pressure on BBRI’s credit cost.
We also noted that more than 90% of Kupedes loans and 100% of KUR loans are insured by Jamkrindo and Askrindo. Based on what we know of Jamkrindo, we believe the insurance scheme is unsustainable for the both insurance and BBRI as the premium is too small, especially for the non-KUR segment. We believe that without additional capital injection for those insurance, there is significant risk toward BBRI, especially toward its recovery income.
We also saw some increase in the overall claim paid by the loan guarantor , of which the largest constituent is Jamkrindo with 69% of total guarantee assets and 89% guaranteed loans across the industry as of 2023.
11M24 result. BBRI reported their 11M24 earnings (bank-only) at IDR50tn (+4% y/y, DBS24F: 83.3%), relatively in line to our forecast, but sightly behind consensus. The bank-only number is primarily driven by a higher recovery income in 2024 and subsidiary dividend of IDR2.6tn. Since the dividend will be excluded from consolidated earnings, earnings should drop by 0.1%. The loan growth in y/y basis is merely 5.0% y/y on a m/m basis, shrunk by 0.6%. The YTD loan growth only grew by 6.4% in 11M24. We believe BBRI will miss its loan growth guidance of 10-12% this year, prompting a lower guidance next year, particularly as we expect a moderation in corporate loan growth.
Forecast changes and valuation. We cut our earnings estimates in 24-26F on the back of slower loan growth accompanied by a slower recovery income. We maintained our HOLD rating for BBRI due to potential dividend plays in the Indonesia banking sector. However, we lowered our TP to IDR3,600 from IDR4,500. We derived our newest TP using the Gordon Growth Model (GGM) with a cost of equity assumption of 14.8% (prev. 14.2%), ROE 18.5% (prev. 19.5%), and growth 9%. Our latest TP implies a 1.6x P/BV 2025F.
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Related Stories
- Bank Rakyat Indonesia: Elevated provision and opex continue to impede BRI's earnings.30 May 2025
- Bank Rakyat Indonesia: Bank Rakyat Indonesia (BBRI IJ): <Result analysis> 1Q25: Earnings in-line amid weak loan growth and NIM trend [HOLD, TP IDR3,600]02 May 2025
- Bank Rakyat Indonesia: <Results First Take> Bank Rakyat Indonesia (BBRI): 1Q25 Earnings in line but loan growth and NIM were weak30 Apr 2025
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- Bank Rakyat Indonesia: Elevated provision and opex continue to impede BRI's earnings.30 May 2025
- Bank Rakyat Indonesia: Bank Rakyat Indonesia (BBRI IJ): <Result analysis> 1Q25: Earnings in-line amid weak loan growth and NIM trend [HOLD, TP IDR3,600]02 May 2025
- Bank Rakyat Indonesia: <Results First Take> Bank Rakyat Indonesia (BBRI): 1Q25 Earnings in line but loan growth and NIM were weak30 Apr 2025