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

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 Dec	FY24		FY25F		FY26F		FY27F
Currency (IDR)	Actual	Old	New	Old	New	Old	New
PPOP (bn)	11,172	14,217	14,102	16,885	16,451	0	18,278
Reported net profit (bn)	7,006	8,029	8,215	9,121	9,187	0	10,302
Normalised net profit (bn)	7,006	8,029	8,215	9,121	9,187	0	10,302
FD normalised EPS	151.88	174.06	178.08	197.72	199.15		250.48
FD norm. EPS growth (%)	22.8	19.0	17.3	13.6	11.8		25.8
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 (%)	16.7	16.5	16.8	15.9	16.1		15.4
ROA (%)	1.8	1.9	1.9	1.9	1.9		2.0

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. 2: BRIS - Quarterly summary

BRIS Q-Q SUMMARY
(IDR bn)	4Q23	1Q24	2Q24	3Q24	4Q24	Q-Q %	Y-Y %	YTD24	YTD23	Y-Y %
Margin inc	5,987	6,308	6,336	6,652	7,177	8%	20%	26,473	23,153	14%
Margin exp	1,696	1,927	1,934	1,978	2,056	4%	21%	7,895	5,993	32%
Net margin inc	4,291	4,381	4,402	4,674	5,121	10%	19%	18,578	17,160	8%
Non-int inc	894	987	1,001	1,165	1,228	5%	37%	4,381	3,271	34%
Total op inc	5,185	5,368	5,403	5,838	6,350	9%	22%	22,959	20,431	12%
Non-margin exp	2,805	2,553	2,583	3,001	3,548	18%	26%	11,685	10,188	15%
PPOP	2,380	2,815	2,820	2,838	2,801	-1%	18%	11,274	10,243	10%
Provisions	372	549	584	567	296	-48%	-21%	1,996	2,652	-25%
NP	1,504	1,707	1,687	1,713	1,899	11%	26%	7,006	5,704	23%

Gross financing/loans	226,184	231,980	242,182	251,063	260,949	3.9%	15.4%	15.4%	15.4%
Funding	293,776	297,339	330,460	301,221	327,454	8.7%	11.5%	11.5%	12.3%

Source: Company data, Verdhana research

Fig. 3: BRIS - ratios

BRIS Ratios (%)	4Q23	1Q24	2Q24	3Q24	4Q24
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.

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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

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

Solid FY24 results

Key data on Bank Syariah Indonesia

Fig. 1: BRIS - FY24 results summary

Fig. 2: BRIS - Quarterly summary

Fig. 3: BRIS - ratios

Fig. 4: BRIS - earnings changes

Fig. 5: BRIS - loan assumptions

Fig. 6: BRIS - TP derivation

Rating Table

Relative performance chart

Research Analysts

yudi Administrator

Bank Central Asia BBCA IJ - Buy - Solid YTD Jul-24 results

Bank Rakyat Indonesia -BBRI IJ- Buy - Towards more commercial micro

Bank Negara Indonesia BBNI IJ - Buy - Operating 1H24 results were below

Bank Rakyat Indonesia -BBRI IJ- Buy - YTD Jul-24 bank only results - steady progress

Bank Rakyat Indonesia -BBRI IJ- Buy - ROAE uptrend on positive micro trends

Bank Central Asia -BBCA IJ- Buy - Steady growth reiterate Buy new TP IDR13200

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

Fig. 1: BRIS - FY24 results summary

Fig. 2: BRIS - Quarterly summary

Fig. 3: BRIS - ratios

Fig. 4: BRIS - earnings changes

Fig. 5: BRIS - loan assumptions

Fig. 6: BRIS - TP derivation

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