To be Champion in Ultra Micro Ecosystem
9M21 Performance Highlights: Earnings Missed Our Expectation
• BBRI’s consolidated net profit stood at IDR6.78tn in 3Q21 (+20.1% QoQ/+72.3% YoY). Cumulatively BBRI booked a net profit of IDR19.07tn in 9M21 (+34.7% YoY).
• BBRI’s earning figure was below our expectation (68% of our FY21E target) and missed consensus estimate (64% run rate).
• The net loss booked by BBRI’s subsidiary of Bank Raya (AGRO IJ) of ~IDR1.8tn dragged down group’s profitability.
• However, the jump in net profit was attributable to lower interest expense despite remain high provision.
• Bank only loan yields rose along with the increase in credit disbursement to micro segment which recorded a growth of 15.5% YoY. Meanwhile at the same time , CASA grew 5.3% YoY and accounted 60% from Third Party Fund.
• CoF dropped 130 bps YoY to 2.14% on the back of improving CASA growth and loan yields. BBRI’s NIM improved by 110 bps to 6.86% (vs 6.7% management guidance).
• BBRI’s consolidated loan grew 9.7% YoY, while bank only loan growth recorded to expand by 6.1% YoY.
• BBRI LaR dropped by 415 bps to 25.62% from 29.77% and restructured loans declined 400 bps to 17.51% from 21.51%.
• However NPL has risen by 27 bps from 3.02% in 9M20 to 3.29% in 9M21. BBRI maintained adequate coverage ratio.
• Overall, BBRI’s financial performance in 9M21 was in line with management guidance except for credit cost (+9bps higher than management guidance).
Road to Ultra Micro Ecosystem and Higher Profitability
• The Ultra Micro (UMi) Holding was officially established in Sep-21. BBRI has consolidated Pegadaian and PNM financial statement proportionately in 3Q21.
• BBRI would be benefitted from the consolidation of Pegadaian and PNM and would strengthen the bank position in micro segment.
• Despite having higher NIM (Pegadaian 19%; PNM 17%; BBRI 6.7%), cost efficiency remained a challenge for BBRI as Pegadaian and PNM CIR was significantly higher (Pegadaian 63%; PNM 78.8%; BBRI 42.9%).
• However, the success of recent right issue transaction with the proceeds value of IDR96tn, BBRI has strong capital position. As of Sep-21, BBRI CAR stood at 24.37% (+399 bps YoY).
• We believe with strong capital position, BBRI could boost loan disbursement particularly to micro segment that offer lucrative yield.
Maintain BUY with TP: IDR4,800
We move our coverage on banking sector, especially BBRI from Victoria Venny to Tirta Citradi and maintain BUY call with TP: IDR4,800 (excluding Pegadaian & PNM consolidation), which implied PBV FY21E/FY22F at 2.80x/2.62x. We are reviewing our model to incorporate the impact of Pegadaian and PNM consolidation. BBRI IJ key upside potentials include improving loan yield on the back of micro loan disbursement along with economic recovery. While risks remained on asset quality and higher cost of credit. BBRI IJ is currently traded at 2.5x PBV or close to +1STD of 5-year PBV.
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