BBRI - 1Q23 solid result likely to continue

BBRI booked solid 1Q23 results with PATMI beating ours and street forecast by 3.4%/3.7%. Strong earnings backed by solid growth from top to bottom, while qoq performance was saved by higher non-interest income and lower opex. We expect solid result to continue in the following quarters with smooth transition on another rate transmission if needed. Loan growth could arrive at double digit in 2023, with key metrics likely to continue within the range of FY22 and 1Q23 figures. Maintain BUY, with target price of IDR5,550, pegged at 2.7x ‘23F P/B vs. currently at 2.5x ‘23F P/B, or at its +1SD 10-year historical. Solid yoy growth from top to bottom, backed by manageable opex on qoq basis Amid soften earnings growth concern in 2023, BBRI proven its resiliency performance by reporting solid 1Q23 result. Net profit at IDR15.5 tn which grew by 29.0% yoy was mainly driven by solid growth from top to bottom and with the help from provisions expenses dropped by 25.1% yoy. On quarterly basis, amid some adjustment on deposits rate which make interest expenses 13.4% qoq higher, net interest income remain grew by 16.7% qoq and stronger compared to year-on-year basis, thanks to solid interest income growth at 15.9% qoq. Worth noting that quarter-on-quarter basis, PATMI growth at 29.0% qoq also backed by higher non-interest income and lower opex. Expecting ‘23F earnings growth of 13.5% yoy BBRI’s 1Q23 earnings beat both ours and street estimates by 3.4%/3.7%, while in 1Q stand-alone PATMI at IDR15.5tn was surpassing our 1Q23F for BBRI by 3.4% and by 4.9% for consensus. Following its solid 1Q23 result we expect BBRI’s ‘23F net profit to grow by 13.5% yoy (Cons’ 13.3% yoy) will be underpinned by 15.6% yoy growth in net interest income and manageable opex growth at 9.2% yoy (FY22 8.3% yoy), which will bring PPOP to grow by 16.7% yoy. We might see another double-digit loan growth Total loans stood at IDR1,180 tn in 1Q23 (9.7% yoy, 3.6% qoq), slightly arrives below BBRI’s lower range target (10%-12%) on seasonality impact, in our view. Of the total, micro remain the key driver, accounted 47.7% of total loans and grew by 11.2% yoy, backed by KUR segment (4.1% yoy) and Kupedes strong growth at 29.4%. BBRI maintains its ‘23F loan growth within the range of 10%-12% or similar to industry growth expectation (Bank Indonesia forecast). Our conservative projection for BBRI ‘23F loan growth at 10.1% yoy will be underpinned by its micro loan business as the backbone (12.5% yoy), while on consumer segment we expect loan demand will be 9.9% yoy higher (1Q23 13.7% yoy). Continuing vigorous key performance BBRI recorded another solid key performance metrics across the boards. Amid the first quarter seasonality effect, NIM continue to expand by 10bps higher to 7.82% and arrives within management range guidance at 7.7%-7.9%. Asset quality measurement also recorded less risky, whereas NPL improves 23bps from 3.09% to 2.86% in 1Q23, with solid coverage at 282.5%. Liquidity was also not a concern and continue to be more ample with better CASA, thanks to a quarter-to-quarter TD sharp drop to IDR309.9tn from IDR349.8tn in 4Q22. Last but not least, CoC also reported dropped sharply to 2.44% from 2.96% in 1Q22. BBRI guiding CoC to hover between 2.2%-2.4% (KBVS: 2.4%). Consistent Asset Quality improvement On risk metrics side, BBRI continue to enjoy LAR recovery momentum. Total LAR stood at 16.4% far below 22.6% in 1Q22 and with coverage mounted to 49.2% and 107bps stronger compared to 1Q22. In terms of total amount, total restructured loan continuously moves on the downhill track recorded at IDR99.8tn or 6.9% qoq better, while on year-on-year basis it dropped sharply from IDR144.3tn in 1Q22 or dropped 30.8% yoy lower. We do not see any doubt for the bank to effortlessly walk through the business-as-usual activity by the time relaxation policy for all sector will be fully lifted. Maintain BUY with target price of IDR5,550 Our target price is derived from GGM with fair P/B ‘23F of 2.7x, while its currently attractively trading at its +1SD 10-year historical of 2.5x ‘23F P/B. Risks to our call: a) lower-than-expected loan growth, NIM, loan yield, b) higher than expected CoC, deteriorating AQ.