BBRI kicked off 2025 with soft 1Q25 consolidated results. This was largely due to persistently large credit costs (CoC) of ~3.6% (on an annualized basis) – up from ~3.2% in FY24. As we highlighted in our previous note, we believe BBRI will still face the issue of maturing micro/ultra-micro loans. The high CoC in 1Q25 can be primarily attributed to higher downgrades for restructured micro loans, which reached 35-40%, as opposed to ~30% in mid-2024. Signs of rising downgrades could be seen in Dec24 (albeit it was partially masked by some reversal from non-loan related provisions). Given the still largely uncertain macroeconomic environment, we think BBRI may still have elevated credit costs for the remainder of this year. We also believe the decline in profits can be attributed to potentially negative growth in its high-yielding loan portfolio, which would partly explain the bank’s lower NIM of ~7.7% (from ~8.0% in 1Q24/4Q24).

Post results, we think BBRI may continue to underperform its major peers, at least in the near term, given still ongoing slow growth in its high-yield mass-market loan segments.  

1Q25 result summary

• NII came at IDR35.9tn (-0.3% y-y / -1.2% q-q) – implying NIM of 7.7% (compared to 8.0%). Tight liquidity in the system also resulted in elevated funding costs of 3.5% (-10bp y-y / -20bp q-q).

• Pre-provision operating profit (PPOP) came at IDR29.9tn (-6.7% y-y / +0.2% q-q).

• Provision expenses came at IDR12.3tn (+2.2% y-y / +32.0% q-q) – implying CoC of 360bp (+13bp y-y), bringing risk-adjusted NIM to 10.7% (-40bp y-y).

• Profit came at IDR13.7tn (-14.1% y-y / -9.4% q-q).

• Loans came at IDR1,374tn (+5.0% y-y / +1.4% q-q) – on a y-y basis, this was the slowest growth among major banks, largely due to negative micro loan growth (as the bank is doing write-offs). This also partly explains BBRI’s lower NIM on a y-y / q-q basis, as the loan mix profile would have changed.

• Deposits came at IDR1,421tn (+0.4% y-y / +4.1% q-q) with CASA ratio of 65.8%, bringing the loan-to-deposits ratio (LDR) to 96.6% (+420bp y-y / -260bp q-q).

• LLR (loan-loss reserves) stood at 5.9% (-40bp y-y / -10bp q-q).

• LAR (loans at risk) stood at 11.3% (-140bp y-y / +40bp q-q). The decline in LAR is due to high write-off rates in 1Q25 of ~360bp.

Valuation and risks

Our TP of IDR5,000 is based on DuPont analysis, with a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 9.3%, beta 0.85x and a CAR-adjusted ROAE of 18.0%. We also use 2025F book as reference. The implied multiples at our TP would be 2.3x 2025F book and 12.5x 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 the bank’s near-term earnings.

Fig. 1: BBRI – 1Q25 summary %

Fig. 2: BBRI – Bank-only vs consolidated comp

Fig. 6: BBRI – CoC (annualized)

Fig. 7: BBRI –LLR (as % of loans)

Fig. 8: BBRI – LLR vs 12MMA WO %

Fig. 9: BBRI – 12MMA CoC vs 12MMA WO %

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. 

Erwin Wijaya (erwin.wijaya@verdhana.id)