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Bank Syariah Indonesia (BRIS IJ) (Buy) - Solid FY24 results

Bank Syariah Indonesia (BRIS IJ) (Buy) - Solid FY24 results

Banks EW 342 7th Feb, 2025

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Solid FY24 results

We adjust our earnings forecast post-FY24 results

BRIS continued to deliver solid 4Q24 results with headline profit of IDR1.9tr (+11% q-q / +26% y-y), bringing FY24 profit to IDR7.0tr (+23% y-y). At the operating level, the bank reported FY24 net financing income of IDR18.6tn (+8% y-y) and PPOP of IDR11.3tn (+10% y-y), relatively robust compared to its major peers. We attribute this to its better yields that resulted in a NFM (net financing margin) of 5.8% in 4Q24 (up from 5.5% a year ago). Among major banks, we think BRIS has proportionally more fixed-yielding earnings assets than most conventional banks. We estimate ~55-60% of total financings are fixed-yielding in nature. Further, we expect BRIS to continue delivering higher financing growth than the sector average and stabilizing funding costs, which would minimize pressure on NFM. In our view, these will be the key earnings drivers in the medium terms for the bank. Meanwhile, we expect asset quality to improve further, which could potentially keep provisions expense (CoC) at <100bp.

On balance sheet, the bank delivered financing (i.e. loans) and deposit growth of 15% and 12% y-y, respectively, in 4Q24. This brings LFR to 80% in 2024 (up from 77% in 2023). Still, this is one of the lowest amongst major banks. The bank’s capital ratio remained elevated at 21% as of end-4Q24. Asset quality was strong as well with NPL at 2.0% (down 20bp y-y) and coverage at ~2x in 4Q24.

Factoring in the strong FY24 results, we raise FY25-26F earnings by 1-2%. We also add a new forecast year, FY27F. We maintain our Buy rating and TP of IDR3,800.

Valuation and Risks

We derive our TP of IDR3,800 using DuPont methodology, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 1.2x and a CAR-adjusted ROAE of 18.1%. We have also used 2025F book value in deriving our TP. Our TP implies a FY25F P/B of 3.4x and a FY25F P/E of 21.5x. Risks are worsening macroeconomic trends, unfavorable regulatory changes, tighter liquidity competition that could increase funding costs, worsening credit quality that could raise credit costs, material management changes, and/or persistently high opex.

Year-end 31 DecFY24FY25FFY26FFY27F
Currency (IDR)ActualOldNewOldNewOldNew
PPOP (bn)11,17214,21714,10216,88516,451018,278
Reported net profit (bn)7,0068,0298,2159,1219,187010,302
Normalised net profit (bn)7,0068,0298,2159,1219,187010,302
FD normalised EPS151.88174.06178.08197.72199.15250.48
FD norm. EPS growth (%)22.819.017.313.611.825.8
FD normalised P/E (x)19.0–16.2–14.5–11.5
Price/adj. book (x)2.9–2.5–1.9–1.6
Price/book (x)2.9–2.5–1.9–1.6
Dividend yield (%)–––––––
ROE (%)16.716.516.815.916.115.4
ROA (%)1.81.91.91.91.92.0
Source: Company data, Verdhana estimates

Key data on Bank Syariah Indonesia

Profit and loss (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Interest income
22,252
25,298
28,268
31,857
35,021
Interest expense
-5,993
-7,889
-7,394
-8,133
-8,947
Net interest income
16,259
17,409
20,874
23,723
26,074
Net fees and commissions
3,113
4,266
4,266
4,266
4,266
Trading related profits
Other operating revenue
1,092
1,291
1,291
1,291
1,291
Non-interest income
4,204
5,556
5,556
5,556
5,556
Operating income
20,463
22,966
26,431
29,280
31,630
Depreciation
-838
-1,050
-1,239
-1,301
-1,366
Amortisation
Operating expenses
-4,376
-5,460
-5,631
-5,797
-5,968
Employee share expense
-5,035
-5,284
-5,458
-5,731
-6,017
Pre-provision op profit
10,214
11,172
14,102
16,451
18,278
Provisions for bad debt
-2,622
-1,894
-3,218
-4,279
-4,629
Other provision charges
Operating profit
7,591
9,278
10,884
12,172
13,650
Other non-op income
-2
4
0
0
0
Associates & JCEs
Pre-tax profit
7,589
9,282
10,884
12,172
13,650
Income tax
-1,885
-2,277
-2,669
-2,985
-3,348
Net profit after tax
5,704
7,006
8,215
9,187
10,302
Minority interests
Other items
Preferred dividends
Normalised NPAT
5,704
7,006
8,215
9,187
10,302
Extraordinary items
Reported NPAT
5,704
7,006
8,215
9,187
10,302
Dividends
0
0
0
0
0
Transfer to reserves
5,704
7,006
8,215
9,187
10,302
Growth (%)
Net interest income
4.3
7.1
19.9
13.6
9.9
Non-interest income
13.6
32.2
0.0
0.0
0.0
Non-interest expenses
3.3
24.8
3.1
2.9
3.0
Pre-provision earnings
8.6
9.4
26.2
16.7
11.1
Net profit
33.9
22.8
17.3
11.8
12.1
Normalised EPS
33.9
22.8
17.3
11.8
25.8
Normalised FDEPS
33.9
22.8
17.3
11.8
25.8
Loan growth
15.9
16.0
12.5
12.3
12.4
Interest earning assets
15.5
14.6
12.7
10.5
10.3
Interest bearing liabilities
15.9
14.8
7.2
9.5
9.6
Asset growth
15.7
15.6
11.3
10.0
10.0
Deposit growth
12.2
11.4
10.0
10.0
10.0
Source: Company data, Verdhana estimates
Balance sheet (IDRbn)
As at 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Cash and equivalents
5,256
8,081
2,331
2,198
2,184
Inter-bank lending
Deposits with central bank
32,441
49,966
58,758
55,400
50,783
Total securities
71,169
62,217
77,280
90,489
103,992
Other int earning assets
2,304
3,866
2,077
1,958
1,626
Gross loans
232,799
269,333
303,753
342,475
386,038
Less provisions
-4,361
-4,265
-5,560
-7,674
-9,867
Net loans
228,437
265,067
298,193
334,801
376,170
Long-term investments
2,190
3,122
3,454
3,766
4,107
Fixed assets
6,481
9,826
6,349
5,596
4,805
Goodwill
Other intangible assets
Other non IEAs
5,346
6,468
6,352
6,047
6,595
Total assets
353,624
408,613
454,794
500,255
550,262
Customer deposits
294,556
328,132
360,946
397,040
436,744
Bank deposits, CDs, debentures
Other int bearing liabilities
13,865
25,788
18,411
18,411
18,411
Total int bearing liabilities
308,421
353,920
379,356
415,451
455,155
Non-int bearing liabilities
6,464
9,652
22,882
23,062
23,062
Total liabilities
314,885
363,572
402,238
438,513
478,217
Minority interest
0
0
0
0
0
Common stock
17,132
24,575
29,491
38,678
48,980
Preferred stock
Retained earnings
19,337
25,917
29,977
39,164
49,466
Reserves for credit losses
-1,458
-2,598
-2,598
-2,598
-2,598
Proposed dividends
-426
-856
0
0
0
Other equity
2,696
-4,596
-6,913
-16,099
-26,402
Shareholders' equity
38,739
45,042
52,555
61,742
72,044
Total liabilities and equity
353,624
408,613
454,794
500,255
550,262
Non-perf assets
2,953
3,325
2,343
2,343
Balance sheet ratios (%)
Loans to deposits
79.0
82.1
84.2
86.3
88.4
Equity to assets
11.0
11.0
11.6
12.3
13.1
Asset quality & capital
NPAs/gross loans (%)
1.3
1.2
0.8
0.7
0.0
Bad debt charge/gross loans (%)
1.13
0.70
1.06
1.25
1.20
Loss reserves/assets (%)
1.23
1.04
1.22
1.53
1.79
Loss reserves/NPAs (%)
197.0
206.4
348.2
438.5
–
Tier 1 capital ratio (%)
19.9
20.3
17.8
19.0
20.2
Total capital ratio (%)
21.0
21.4
18.7
20.0
21.1
Per share
Reported EPS (IDR)
123.65
151.88
178.08
199.15
250.48
Norm EPS (IDR)
123.65
151.88
178.08
199.15
250.48
FD norm EPS (IDR)
123.65
151.88
178.08
199.15
250.48
DPS (IDR)
0.00
0.00
0.00
0.00
0.00
PPOP PS (IDR)
221.42
242.19
305.71
356.62
444.41
BVPS (IDR)
839.79
976.42
1,139.31
1,501.17
1,751.66
ABVPS (IDR)
839.79
976.42
1,139.31
1,501.17
1,751.66
NTAPS (IDR)
839.79
976.42
1,139.31
1,501.17
1,751.66
Valuations and ratios
Reported P/E (x)
23.3
19.0
16.2
14.5
11.5
Normalised P/E (x)
23.3
19.0
16.2
14.5
11.5
FD normalised P/E (x)
23.3
19.0
16.2
14.5
11.5
Dividend yield (%)
–
–
–
–
–
Price/book (x)
3.4
2.9
2.5
1.9
1.6
Price/adjusted book (x)
3.4
2.9
2.5
1.9
1.6
Net interest margin (%)
5.13
4.78
5.04
5.14
5.11
Yield on assets (%)
7.02
6.94
6.83
6.90
6.87
Cost of int bearing liab (%)
2.09
2.38
2.02
2.05
2.06
Net interest spread (%)
4.94
4.56
4.81
4.85
4.81
Non-interest income (%)
20.5
24.2
21.0
19.0
17.6
Cost to income (%)
50.1
51.4
46.6
43.8
42.2
Effective tax rate (%)
24.8
24.5
24.5
24.5
24.5
Dividend payout (%)
0.0
0.0
0.0
0.0
0.0
ROE (%)
15.8
16.7
16.8
16.1
15.4
ROA (%)
1.73
1.84
1.90
1.92
1.96
Operating ROE (%)
21.0
22.1
22.3
21.3
20.4
Operating ROA (%)
2.30
2.43
2.52
2.55
2.60
Source: Company data, Verdhana estimates
Company profileBank Syariah Indonesia (BSI) is a state-owned Islamic bank in Indonesia. The bank was officially founded on 1 February 2021 as a result of merger between three state-owned sharia banks.The three state-owned sharia banks are subsidiaries of larger banks: BRIsyariah (of Bank Rakyat Indonesia/BBRI), Bank Syariah Mandiri (of Bank Mandiri/BMRI) and BNI Syariah (of Bank Negara Indonesia/BBNI).
Valuation MethodologyWe derive our TP of IDR3,800 using DuPont methodology, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 1.2x, and a CAR-adjusted ROAE of 18.1%. Our TP implies 3.4x FY25F P/B and 21.5x FY25F P/E.
Risks that may impede the achievement of the target priceDownside risks are worsening macroeconomic trends, unfavorable regulatory changes, tighter liquidity competition that could increase funding costs, worsening credit quality that could raise credit costs, material management changes, and/or persistently high opex.
ESGPT Bank Syariah Indonesia (BSI) is committed to implementing the sharia banking principles. The essence of the presence of sharia banking is to carry out sharia goals or Maqasid Ash Syariah, consisting of Hifdz Diin (upholding religion), Hifdz Nafs (nurturing the soul), Hifdz Aql (nurturing logic), Hifdz Nasb (raising offspring), and Hifdz Maal (maintaining wealth). This sharia principle aligns with our commitment in realizing the sustainability context and creating a synergy between growing the Bank’s business and supporting the Sustainable Development Goals (SDGs). The sustainability strategy of BSI is manifested through the making and implementation of Sustainable Finance Action Plan (RAKB). RAKB is prepared by adhering to the Financial Services Authority (POJK) Regulation Number 51/POJK.03/2017 with the priority scale on the aspects of policy adjustments and governance, sustainable finance products and services development, as well as the Bank’s internal capacity building. The sustainable finance strategy focuses on three pillars, which are business refocusing, fixing the fundamental, and strengthen enablers. RAKB also serves as a guideline for all Bank’s work units to control risks, mainly the environmental, social, and governance (ESG) risk.

Fig. 1: BRIS - FY24 results summary

Source: Company data, Verdhana research

 

Fig. 2: BRIS - Quarterly summary

 BRIS Q-Q SUMMARY           
  (IDR bn) 4Q231Q242Q243Q244Q24Q-Q %Y-Y %YTD24YTD23Y-Y %
 Margin inc 5,9876,3086,3366,6527,1778%20%26,47323,15314%
 Margin exp 1,6961,9271,9341,9782,0564%21%7,8955,99332%
 Net margin inc 4,2914,3814,4024,6745,12110%19%18,57817,1608%
 Non-int inc 8949871,0011,1651,2285%37%4,3813,27134%
 Total op inc 5,1855,3685,4035,8386,3509%22%22,95920,43112%
 Non-margin exp 2,8052,5532,5833,0013,54818%26%11,68510,18815%
 PPOP 2,3802,8152,8202,8382,801-1%18%11,27410,24310%
 Provisions 372549584567296-48%-21%1,9962,652-25%
 NP 1,5041,7071,6871,7131,89911%26%7,0065,70423%
          
 Gross financing/loans 226,184231,980242,182251,063260,9493.9%15.4%15.4%15.4%
 Funding 293,776297,339330,460301,221327,4548.7%11.5%11.5%12.3%
Source: Company data, Verdhana research

 

Fig. 3: BRIS - ratios

 BRIS Ratios (%) 4Q231Q242Q243Q244Q24
 NFM %                5.5               5.3               5.3               5.6               5.8
 LFR %              77.0             78.0             73.3             83.3             79.7
 Loan YTD %              15.4               2.6               7.1             11.0             15.4
 Loan y-y %              15.4             15.1             15.6             15.0             15.4
 Loan q-q %                3.6               2.6               4.4               3.7               3.9
 Deposit YTD %              12.3               1.2             12.5             15.2             25.2
 Deposit y-y %              12.3             10.4             30.9             14.9             11.5
 Deposit q-q %              12.1               1.2             11.1             (8.8)               8.7
 CIR %              54.1             47.6             47.8             51.4             55.9
 CAR %              21.0             21.3             21.3             21.4             21.4
 NPL %                2.2               2.1               2.1               2.1               2.0
 NPL cov %            197.4           200.1           197.1           196.1           195.9
 LAR %                9.1               8.6               8.4               7.9               7.3
 LAR cov %              44.9             46.7             46.9             49.1             51.3
 ROAE %              15.8             17.2             16.4             16.1             17.2
 ROAA %                1.8               1.9               1.9               1.9               1.9
 LLR %                4.4               4.3               4.2               4.1               4.0
 Asset to equity x                9.1               8.8               8.7               8.5               9.1
 Credit cost %                0.7               1.0               1.0               0.9               0.5
 BVPS IDR               840              879              903              943              976
Source: Company data, Verdhana research

 

Fig. 4: BRIS - earnings changes

Source: Company data, Verdhana estimates

 

Fig. 5: BRIS - loan assumptions

Source: Company data, Verdhana estimates

 

Fig. 6: BRIS - TP derivation

BRIS - TP derivation 
Risk free rate %               6.5
Equity risk premium %               7.8
Beta x               1.2
Cost of capital %             16.0
Growth rate %             15.1
CAR-adj ROAE %             18.1
Target P/B x                3.4
Target price IDR (rounded)           3,800
Source: Company data, Verdhana estimates

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. 

GENERAL DISCLOSURE/DISCLAIMER 
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.


This report is not to be construed as an offer or a solicitation of an offer to buy or sell any securities or financial products. PTVSI and its associates, its directors, and/or its employees may from time to time have interests in the securities mentioned in this report or it may or will engage in any securities transaction or other capital market services for the company (companies) mentioned herein.

ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.


RESTRICTIONS ON DISTRIBUTION

By accepting this report, the recipient hereof represents and warrants that you are entitled to receive such report in accordance with the restrictions and agrees to be bound by the limitations contained herein. Neither this report nor any copy hereof may be distributed except in compliance with applicable Indonesian capital market laws and regulations. 

Rating Table

Rating
Remains
Buy
Target price
Remains
IDR 3,800
Closing price
6 February 2025
IDR 2,880
Implied upside+31.9%
Market Cap (USD mn)8,056.6
ADT (USD mn)3.6

Relative performance chart


Source: LSEG, Nomura
M cap (USDmn)
8,056.6
Free float (%)
9.9
3-mth ADT (USDmn)
3.6
(%)
1M
3M
12M
Absolute (IDR)
6.3
-0.7
24.7
Absolute (USD)
5.4
-3.7
20.1
Rel to Jakarta Stock Exchange Composite Index
7.1
4.2
27.8

Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

Tags: Banks, BRIS, BRIS JK, BRIS IJ, Erwin Wijaya
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