BBRI - Expecting solid 1H23 results

We expect the ongoing motionless benchmark rate hikes will overall made cost of deposit to be static and thus will provide more room for NIM expansion. 5M23 NIM improvement and loan growth which remain arrives within management guidance should become as a solid start to enter the 2H23 period. We expect 1H23 earnings growth at 17.1% yoy (consensus 20.0% yoy). BBRI remain as one of the most held stocks by foreign and we expect such trend to sustained. BBRI stock price has surpassing our TP and thus we raise our BBRI’s intrinsic value. Maintain BUY, with higher TP of IDR6,140 pegged at 2.9x ‘23F P/B vs. currently (2.7x) at below its +2SD 5-yr hist. mean of 2.9x. Acceptable single digit earnings growth BBRI’s bank only net interest income grew by 10.3%yoy in 5M23 and around 2.7% lower compared to the growth in 4M2. Lower NII in the same period (-2.1% yoy) was mainly driven by mounting interest expenses (78.4% yoy in 5M23 vs 68.4% yoy in 4M23), as transmission on benchmark rate hikes remain take place. With the help from non-interest income and controllable CIR, PPOP growth arrives at 6.0% yoy to IDR38.8tn. Likewise, manageable provisions as a result of continuing asset quality improvement have brought BBRI’s earnings grew by 5.1% yoy. Loan growth remain within management guidance We like BBRI achievement on its 5M23 loan amounting IDR1,086.7tn, or grew by 10.1% yoy and 259bps higher vs 4M23 growth at 7.5% yoy. The 10.1% yoy growth was within BBRI’s guidance which expect 2023 total loan growth in the range of 10%-12% (KBVS : 10.1% yoy). On the liabilities side, TPF grew by 7.6% yoy, driven by demand deposits growth of 11.5% yoy and bring CASA growth at 5.2% yoy. The bank did not provide guidance on its deposit growth this year. Nevertheless, we believe the continuing ample liquidity likely to be supported by low funding cost. That said, our ‘23F TPF growth for BBRI of 7.9% yoy will be driven by CA and SA growth of 10% yoy and 9% yoy, respectively. Applause for solid key metrics BBRI reported another solid key performance metrics. Bank only NIM at around 6.74% was improved in a three straight month from the latest quarterly result in 1Q23 at 6.67% and we expect to remain on its growth track. Similarly, BBRI saw a better cost of credit by closed to 20bps lower to 3.0% vs 3.2% in 5M22. Our focus is now turned to BBRI’s bank only CoF which crawled up by 14bpss to around 2.6% in 5M23. Yet, we think transmission on benchmark rate hikes has been made previously and thus we might see a soften rise and stable CoF in the following months. Expecting another solid earnings in 1H23 Excluding the year of pandemic, 2Q contributes by an average of around 22.5% to its full year. Using the figures and adding with 1Q23A, BBRI 1H23 bank only earnings could arrive at IDR 26.8tn or 12.8%yoy, while using the same amount with 1Q23A of IDR13.8tn which is also unlikely, 1H23 earnings growth is equal to around 15.8% yoy. Our 1H23F earnings growth for BBRI is equal to around 17.1% yoy and considerably more conservatives than consensus expectation at 20% yoy. The most held stock remains BBRI continue to become one of the most held stocks. KSEI data revealed that foreign held around 36.7% or an increase by around 255bps compared to June22 and around 117bps higher versus Jan23. Despite portfolio restructuring is commonly happened and the likelihoods of sector rotation will continue in place, we might see fund flow to banking stocks, in this case is BBRI will likely to continue on the back of: (1) the ongoing expectation on motionless benchmark rate which will made transmission rate to get quitter, (2) stable loan yield repricing, (3) uninterrupted asset quality improvement, (4) manageable provisions and (5) solid loan demand appetite. Maintain BUY with higher target price of IDR6,140 On yesterday closing, BBRI price has surpassing our TP by around 1.5% and thus we raise our TP for BBRI to IDR6,140. Our new BBRI’s intrinsic value is derived from GGM with fair P/B ‘23F of 2.9x, while its currently trading at 2.7x or below its +2SD 5-year historical of 2.9x ‘23F P/B. Risks to our call: a) lower-than-expected loan growth, NIM, loan yield, b) higher than expected CoC, deteriorating AQ.