Feb 05, 2016 08:50:11
BBRI: Micro Help for Earnings

EPS growth from micro segment
FY15 net profit of IDR25.4t (+5% YoY) is in line with our FY15F. Corporate
NPLs increased and are likely to remain a main risk in 2016. But as with
last year, we believe this could be compensated by strong micro-loan
growth, providing stock catalysts. BBRI remains our top banking BUY with
GGM TP still at IDR13,000

FY15 in line
BBRI managed to keep its NIM above 8% on the back of: 1) a 17% YoY loan
increase in micro-loans; 2) a 5ppt increase in its CASA portion to 59%;
and 3) a 60bp cut in term-deposit rates since 1Q15 to 8.5%. NPLs fell
further from their 2Q15 peak of 2.3% to 2%, accompanied by a 221bp
drop in SML to 4.8%. This was made possible by the restructuring of
IDR20t loans in FY15, which minimised provisioning in 4Q15 and kept NPL
coverage at 150%. The result was a IDR25.4t (+5% YoY) net profit for FY15
or IDR24.7t if we strip out IDR700b of other operating income arising
from accounting adjustments. This is still in line with our IDR24.7t

Corporate NPLs the main risk, but BBRI has buffer
Corporate NPLs - excluding SOEs - spiked 3ppts to 4.8% by end-2015,
mostly from property and commodity businesses. We see this as the main
threat, not just to BBRI but also other banks serving corporates. While
we think corporate asset quality could deteriorate further, such loans
only make up 13% of BBRI’s portfolio. As such, its total NPLs might only
inch up to 2.2% by end-2016 from 2%, in our estimation.

Maintain BUY; TP at IDR13,000
We believe strong micro growth will prop up BBRI’s NIM and keep its NPLs
lower than the sector. It remains our top BUY with our GGM TP still at
IDR13,000 (12.4x FY16F P/E, 2.4x P/BV) for an attractive 21% ROE for