Overcorrected to 2std below mean with price -23% (YTD) — The market has, in our
opinion, over reacted to weak micro loan growth considering 1) its strong network that
can be energized to revive micro loans, 2) strong CASA growth that continues to
support earning asset growth at low costs, and 3) declining NPLs supporting lower
credit cost. While 2012F may remain relatively subdued, BBRI’s franchise is robust
enough to deliver 25% pa book value growth. Our 2012F base case assumed a 50bps
decline in loan yield and another 100bps decline will impact earnings by 16%.
Loan Growth Guidance of 18-20% —This will be driven by Micro loans (23%) and
Corporate Loans. Micro loan disbursements in April 2012 matched that of entire Q1
CY12, indicating a pick-up in demand. Salary loans (yields 18-20%) are also picking up
post an increase in tenor from 8 years to 10 years. Small Commercial/Middle will
remain a laggard, 12-15%, as mgmt. is still not satisfied with risk management.
Explaining the Decling in Micro loan Growth — Decision not to increase borrowing
limits of borrowers lacking repayment capacity has led to customer attrition. Past
experience of a sharp rise in NPLs in Small Commercial (mostly those upgraded from
Micro) is behind the decision not to “chase growth”. The strategy now is to focus on
semi urban/rural areas, within and outside Java, leveraging the network.
CASA Growth Strong with TD rates cut further — Remains a major strength with
23% growth, despite lowest Saving Deposit rate of 1.6%. Time Deposit rates for limited
retail have been cut to 4.7% (prev. 5.1%), as incremental CASA is funding more of
incremental loan demand.
NPLs have bottomed and 2012 Credit Cost will be lower — NPLs remain on a
declining trend. Credit Cost for 2012 is expected in the 1.5-1.8%. The Q1 CY12 Credit
Cost of 0.8% was lower due to compliance with IFRS (micro loan provisions adjusted to
historic trend vs previous rule based provisions). Opex growth guidance remains 15%.
Download file : BBRI Citi
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