Bank Rakyat Indonesia (BBRI IJ)
3Q24 earnings: Strong recovery income offset the higher CoC, FY24 guidance maintained
- BBRI reported net profit of Rp15.4tr in 3Q24, bringing its 9M24 NP to Rp45.1tr (+2% yoy), in line with consensus FY24F.
- CoC rose to 3.2% in 3Q24 (2Q24: 3.1%), bringing 9M24's to 3.4%. Mgmt. maintains its FY24 target at 3.0% citing improvements in 4Q24.
- BBRI currently trades at 2.1x FY25F PBV, or at its 5-year mean, with an implied CoE of 10.7% (-1.5SD of its 5-year mean).
3Q24 net profit remained robust, despite higher CoC
BBRI reported a net profit of Rp15.4tr in 3Q24 (+11% qoq, +5% yoy), with higher NIM and a lower CIR offsetting the higher CoC. CoC increased slightly from 3.1% in 2Q24 to 3.2% in 3Q24, driven mainly by Pegadaian and PNM, while the bank-only CoC declined to 2.9%. The 9M24 net profit reached Rp45.1tr (+2% yoy), in line with consensus FY24F (74%), as NII rose 5% yoy and other operating income grew 29% yoy, offsetting the 28% yoy higher provisions.
MSME segment asset quality remained the biggest concern
BBRI's consolidated NPL improved to 2.9% in 3Q24 from 3.0% in 2Q24, though subsidiaries' NPL increased from 1.5% to 1.6% in the same period. The bank-only NPL decreased to 3.0% in 3Q24 (from 3.2% in 2Q24), driven by the corporate segment, where NPL declined from 3.1% in 2Q24 to 2.5% in 3Q24. NPL for the micro and medium segments rose to 3.0% and 1.9%, respectively, in 3Q24, from 2.9% and 1.7% in 2Q24, while the small segment's NPL decreased from 5.0% to 4.6%. Consolidated SML increased from 5.4% in 2Q24 to 5.6% in 3Q24, with subsidiaries' SML surging to 7.9% from 5.5% in the previous quarter, indicating a potential deterioration in ultra-micro quality.
Maintain FY24 guidance unchanged
BBRI maintains its FY24F CoC guidance of 3%, despite the 9M24 CoC of 3.4%. The bank believes it could achieve 3% or slightly higher CoC in FY24 considering: 1) a 10-15bps impact from modification loss, 2) a 10bps+ impact from NPL downgrades, and 3) potential macroeconomic adjustments in Nov or Dec24 that could lead to a reversal. Loans grew 1% qoq to Rp1,353tr (+8% yoy), driven by the corporate segment (+17% yoy) and consumer segment (+10% yoy), offsetting slower micro loan growth (+6% yoy). The bank expects FY24F loan growth to be at the lower end of its guidance (10-12%) or slightly below.
Trading at below -1.5SD of its 5-year historical implied CoE
BBRI trades at 2.1x PBV, which is at the 5-year mean, while the implied CoE of 10.7% is at -1.5SD of the 5-year avg. of 8.5%. BBRI ought to benefit from an interest rate cut due to its high portion of time deposits in its third-party funds, but elevated CoC and deteriorated subsidiaries' asset quality may raise concerns about the recovery in the micro and ultra-micro segments.
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