Bank Syariah Indonesia (BRIS IJ)
Attractive entry point into Indonesia’s Sharia Growth Story
- BRIS’s 20.1% share price decline YTD offers a better entry point into the bank, amid intact fundamentals.
- The bank’s growth story remains intact, with above-peer loan and earnings growth and lower risk of potential government intervention.
- Upgrade rating on BRIS from Hold to Buy with an unchanged TP of Rp2,900, as the stock trades attractively below its fair value.
More attractive entry point amid the selling pressure
YTD, BRIS's share price has seen the largest decline at -20.1%, followed by BMRI (-18.9%), BBCA (-13.4%), BBRI (-10.3%), and BBNI (-6.2%). We believe this is mainly due to the foreign investors’ outflows, as the bank’s foreign ownership significantly rose in the past year. As of Feb25, foreign mutual fund positions in BRIS had steadily increased (+32bps yoy), in contrast to other SOE banks, which had decreased by 330bps yoy on average. By 20th Mar25, foreign investors’ outflows from the bank YTD had reached Rp183bn, with Rp377bn occurring in Mar25.
BRIS: poised for strongest growth among big banks
We expect BRIS to deliver the highest loan growth at 15.0% yoy in FY25F, above our projections for BMRI (+9.7%), BBCA (+8.5%), BBNI (+7.9%), BBTN (+9.6%), and BTPS (+2.8%). This robust loan growth is anticipated to positively impact profitability. In FY25F, we forecast BRIS to sustain net profit growth of 12.2%, considerably higher than BBCA (+6.4%), BBNI (+2.6%), and BMRI (+1.1%), albeit lower than consensus estimates of +17.7%.
Intact growth story with less risk versus peers
BRIS’s growth drivers in FY25F are its gold business (which has a high yield and low CoC), deposit growth from its Wadiah and Haj SA, and growth in fee-based income supported by insurance fees and treasury income. Furthermore, thanks to BRIS’ unique business model, we believe that it has limited exposure to government programs, which could weigh on the profitability of its peers. Moreover, in terms of liquidity, BRIS’s status as a Sharia bank provides ample benefits, especially due to a lower GWM requirement of 7.50% compared to conventional banks' 9.00%.
Upgrade to BUY on valuation, unchanged TP at Rp2,900
We upgrade our rating from Hold to Buy, as the stock is now attractively trading below its fair value, with strong performance and growth potential in its niche market segment. We maintain our TP at Rp2,900, based on a CoE of 8.0% (inverse CoE since the merger), LTG of 3%, and FY25F ROE of 16.5%, resulting in an FV PBV of 2.8x. Risks to our view are government intervention and foreign funds’ outflows.
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