BBRI released its bank-only Feb-25 results. In short, we see a notable improvement in Feb-25 compared with the Jan-25 results. Feb-25 profit jumped to IDR4.6tn (+129% m-m). This, according to BBRI, is attributed to improving credit costs (CoC) in Feb-25 at ~330bp – a significant decline from the Jan-25 CoC level of ~560bp, as the management overlay associated CoC has normalized. Nevertheless, despite the decline in CoC on a monthly basis, we expect asset quality concerns to continue due to the current macroeconomic backdrop. This has, so far, brought YTD Feb-25 CoC to ~4.4% (flat y-y). We think FY25F CoC could hover at ~3.5-3.7%, which is above management’s guidance of ~3.3%.

On a YTD basis, however, headline bank-only profit was only IDR6.6tn (-18% y-y from IDR8.1tn in Jan-Feb FY24 period). And, the decline can be largely attributed to CoC as explained above. However, at the operating level, headline YTD Feb-25 net interest income and PPOP reached IDR18.3tn (-2% y-y) and IDR17.5tn (-7% y-y), respectively. This can be attributed to a lower headline NIM of 6.3% (-20bp y-y) as a result of lower asset yields (whilst funding costs have been stable at ~3.1-3.3%).

On the asset quality side, we note continually high estimated (annualized) write-off rates of 3.6% in YTD Feb-25, according to BBRI, compared with ~3.2% a year ago. This leads to risk-adjusted NIM of 3.2% YTD Feb-25 (-40bp y-y). With a still high CoC, the bank has maintained a prudent provisioning policy, resulting in an elevated stable loan-loss-reserve-ratio (LLR) of 6.0% — the highest amongst the major banks in Indonesia. We believe a high LLR is necessary to offset the risks of additional potential consensus downgrades and/or write-offs in 2025. One area of key concern to us, post the results, is that, write-off rates remain elevated.

On B/S, the bank recorded loans and deposits growth of +5.2% y-y (+0.2% YTD) and +1.5% y-y (-0.6% YTD). This translates into an LDR of 88.2% (+490bp y-y).

Post the results, despite the decline in the stock, we think BBRI continues to face challenges.

Valuation and risks

Our TP of IDR5,000 is based on a DuPont analysis assuming 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 have also used 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 near-term earnings for the bank.

Fig. 3: BBRI – 12MMA Loan vs NII growth %

Fig. 4: BBRI – 12MMA CoC vs 12MMA WO %

Fig. 5: BBRI – LLR 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. 

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Erwin Wijaya (erwin.wijaya@verdhana.id)