According to BBRI, the government has finalized the KUR (People’s Business Credit) disbursement target of IDR300tr for 2025 (same amount as 2024’s). For BBRI, the total disbursement target is set at IDR175tr (a slight reduction from 2024’s IDR186tr). This suggests that KUR micro loan outstanding in 2025 may still rise again, but we think Kupedes (commercial micro) should also recover. Still, we think broad micro loan portfolio may grow at a slower pace of ~5.0% p.a. in 2025, down from the historical CAGR of ~13% during 2016-2022. Understandably, much of the rise in 2019-2022 was driven by micro KUR; which recorded a CAGR of ~53% (much more than the historical CAGR of ~10% in 2016-2022) – refer to chart inside for details. Thus, going forward, we believe projected micro growth of mid-single digit would be more balance (and healthier) between KUR and Kupedes (commercial micro). 

All things remain equal, this suggests incremental credit risks for KUR and/or micro loan portfolio should not worsen. Indeed, we have seen in recent quarters that BBRI has demonstrated more stable write-off rates (albeit still elevated at ~3.3% on an annualized basis). On a positive note, management has kept prudent policies whereby its credit costs (CoC) has been kept at a similar rate as write-off rate. Unlike some of its peers that rely on provision releases (i.e. CoC lower than write-off rates, resulting in depleting LLR), this suggests that when BBRI’s write-off rate drops, we could see a decent Coc decline, and thereby a possible large profit turnaround. We think this could come in 2026/7F.

Still, with stabilizing write-off rates as well as micro loan downgrade rates, we think earnings risks for the bank should be muted. For these reasons, we retain our long-term Buy call on the stock.

Valuation and risks

We derive our TP of IDR5,400 based on DuPont analysis with a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 9.3%, beta 0.8x and a CAR-adjusted ROAE of 18.0%. We have also used 2025F book as reference. The implied multiples at our TP would be 2.5x 2025F book and 13.1x 2025F earnings. Risks are worsening macroeconomic trends, unfavorable regulatory changes, and tighter liquidity competition, which could increase funding costs, worsening credit quality which would raise credit costs, and higher opex. Changes in management may affect the bank’s write-off policies and thus, credit costs. This would ultimately affect near term earnings for the bank; which in turn, could put pressures on the share prices.

Fig. 1: BBRI KUR

Fig. 2: BBRI - Micro vs Micro KUR growth %

Fig. 5: BBRI - 12MMA CoC vs WO Prudent provisioning

Fig. 6: 3MMA Micro DG to NPL % of total loans

Fig. 7: 3MMA Micro DG to SML % of total loans

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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Nicholas Santoso (nicholas.santoso@verdhana.id)

Erwin Wijaya (erwinl.wijaya@verdhana.id)