BRIS continued to deliver strong performance, with 1Q25 numbers coming in roughly in line with our 1Q25 preview and FY25 projection. The bank reported net profit of IDR1.9tn (-1% q-q; +10% y-y), one of the highest profit growth rates among the major Indonesia banks in our coverage. Among major banks, we think BRIS has a higher proportion of fixed-yielding earnings assets than most conventional banks. Further, we estimate ~55-60% of total financings are fixed-yielding in nature. We expect BRIS to continue delivering higher financing growth than the sector average, and stabilized funding costs, which should ease the pressure on NFM (net financing margin). We believe these will be the key earnings drivers for the bank in the medium term. Meanwhile, we expect the bank’s asset quality to improve further, potentially keeping provision expenses (CoC) at <100bp.

1Q25 results summary

• Net financing/margin income (NFI) stood at IDR4.8tn (-7% q-q; +9% y-y), accounting for ~23% of our FY25F projections. The y-y growth primarily came from: 1) higher margin income of IDR7.1tn (-1% q-q; +12% y-y), and 2) stable funding costs (which resulted in one of the lowest funding costs among Indonesia banks under our coverage). We attribute BRIS’ low funding costs to the bank’s dominant position in the syariah banking. It is alsothe main transactional bank in syariah banking space.

• Pre-provision operating profit (PPOP) rose to IDR3.1tn (+12% q-q; +11% y-y), accounting for 22% of our FY25F projections. Combined with the lower provision expense of 1.0%, the bank’s net profit reached IDR1.9tn (-1% q-q; +10% y-y), accounting for 23% of our FY25F projections. Thus, we think BRIS is on track to deliver FY25 results that could meet if not exceed our FY25F projections. Overall, the implied ROAA stood at a strong 1.9% (flat y-y), with ROAE of 16.3% (-90bp y-y).

• On the balance sheet, BRIS booked financing growth of 16% y-y, higher than the sector growth. On funding, the bank reported funding (deposits) growth of +7% y-y. This implies a loan-to-funding ratio (LFR) of 84.2% (+450bp q-q: +620bp y-y). still relatively high compared to the broader banking sector in Indonesia.

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 (vs current multiples of 2.3x and 14.4x respectively). 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.

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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ANALYST CERTIFICATION
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Erwin Wijaya (erwin.wijaya@verdhana.id)