BRI, Focusing on loan quality, CLSA

BBRI reported strong net profit growth of 31.5% YoY for FY11, 10%
above consensus estimates, thanks to low impairment expenses and high
recovery from written off assets. The bank claimed to be in consolidation
period last year causing its loans growth (17% YoY) to be below the
industry’s 25% YoY. We are projecting higher pre-impairment profit this
year on the back of higher loan growth and further improvement in asset
quality. We upgrade our 2012CL by 10.5% and maintained our TP at
Rp8,500/share. BUY.


Conservative loan growth in 2011 due to consolidation
Being in consolidation period last year, BBRI’s loan growth was very slow at
17% YoY. However, micro loans still grew higher at 20% YoY, while corporate
SOE loans grew even higher at 57% YoY as the management sees the
opportunity to grow its assets optimally through a lower Risk weighted assets
like SOE segment.

Improved assets quality
Despite high NPL from small and medium segment, the overall loan quality
actually improved from 2.8% at end 2010 to 2.3% at end 2011. Note
however that the NPL from small and medium segment in fact declined from
its peak in Sep11. At end 2011, NPL from small and medium segment fell to
4.5% and 7.1% from 7.3% and 10.1%, respectively in 2011.

Strong profitability was maintained
Even though the bank’s NIM fell as a result of increasing exposure to
corporate segment and slower loan growth, the bank’s profitability remained
strong with net profit growing by 31.5% YoY in 2011, thus bringing its ROAE
and ROAA to 34.9% % and 3.5%, respectively.

Maintain buy.
We upgraded our forecast by 10.5% for 2012CL to incorporate better than
expected FY11 results and maintain our TP of Rp8,500/share for 2012CL The
bank has been de-rated quite sharply due to regulatory overhang and its
increasing exposure to corporate segment. While the regulatory issues may
still overshadow all bank stock, the corporate segment exposure should no
longer be over-estimated, in our view. The bank’s exposure to corporate
segment will provide higher yield than placement in SBI or term deposits
amid current low interest rate environment. Maintain buy..

Download file : Indonesia BBRI 060312