BBRI has released its bank-only May25 results, which came in behind our projections (and consensus). YTD May-25 results highlighted ongoing challenges faced by the bank. We think these will persist for the remaining 2025F (at the very least). On an YTD May-25 basis, the bank reported profit of IDR18.6tn (-15% y-y). The large profit drop resulted not only from its operating level but also from persistently high credit costs (reflecting ongoing issues with the bank’s loan qualities). The large decline also reflects the absence of non-loan reversal related to one of the construction costs in YTD May-25, while in YTD Apr-24, the bank reported a reversal of ~IDR1.7tn. Adjusting for this, headline profit would come down by ~9%.

Still, such a profit drop reflects persistently high estimated write-off rates and likely ongoing NPL formations. Indeed, we estimate BBRI’s 12MMA monthly write-off rate stood at ~3.6% in May-25. So far, it doesn’t seem to be abating, which would mean elevated credit costs (CoC) for BBRI. We think the two areas that witnessed high write-off rates and/or NPL formations rates were micro and small loan portfolios. Given the above, we think BBRI’s medium-term earnings growth trajectory will remain subdued. Our projected 3-year (2024-27F) consolidated earnings CAGR is ~0.4%.

Longer term, we retain our view that BBRI might need to start tapping into other segments as deposit growth in its mass-market segment is structurally slower than other segments given that deposit growth in the mass-market segment has been ~2-3% y-y — suggesting that loan growth for this segment will be <5% pa.

Post results, we think BBRI could continue to underperform its major peers at least in 2025F (and potentially into 2026)F given the still slow growth rate in its high-yield mass-market loan segment as well as elevated credit costs.  

Valuation and risks

We derive our TP of IDR5,000 using DuPont analysis with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 9.3%, beta of 0.85x and a CAR-adjusted ROAE of 18.0% . Our TP implies 2.3x FY25F P/B and 12.8x FY25F P/E (vs current price valuation of 12.5x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

Fig. 1: BBRI YTD Y-Y Performance %

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)