BMRI - FY22 result beats estimates

BMRI recorded a solid FY22 result with 4Q22 and FY22 earnings surpassing our and street forecasts. Profitability metrics and asset quality remain intact in the improvement trajectory. We trust BMRI could sail well this year and is likely to book another solid earnings growth. We also like BMRI for its solid risk coverage and LAR improvement, on top of our believe that NIM expansion likely to persist and well-managed asset quality which will provides ample of room for further lower COC. Maintain BUY, with a target price of IDR11,250 (2.3x 2023F P/B) while it is currently trading at 2.0x 2023F P/B, or below +1SD of 10-year historical mean. FY22 earnings beats estimates BMRI’s 4Q22 NPAT was at 34.3% to its FY22 and above our and consensus' expectations of 29.0% and 28.5% (historically, 4Q NPAT accounted for an average of 29% of the full-year NPAT). Albeit flat qoq, solid 4Q22 NPAT growth in year-on-year basis (19.5% yoy) has brought FY22 NPAT to IDR41.17 tn or grew by 46.89% yoy and beating KBVs and street forecast at 104.1%/104.5%. The cumulative growth was mainly driven by 20.31% yoy and 24.68% yoy growths in net interest income and PPOP coupled with the helped from 17.50% drop in provision expenses. Well shape loan growth BMRI 4Q22 loan came in at IDR1,202.2 tn or grew strongly by 14.5% yoy, surpassing our expectation of 10.2% yoy (vs. management guidance of 11% and industry growth of 11.3%). The stellar loan growth was boosted by subsidiaries, micro and corporate segment which grew 21.4%, 15.3% and 11.9% yoy, respectively. The bank is guiding ‘23F loan growth within the range of 10%-12% yoy which will be supported by value-chain base and higher-yield segments in commercial, micro, SME and consumer. We believe BMRI’s corporate loan will remain as the growth backbone and forecasted to grow by 12% yoy in 2023F. Improving key performance metrics BMRI saw better cost of credit and non-performing loan (NPL) in FY22, as a result of continuing improvement in asset quality. FY22 cost of credit was at 1.44%, 62bps better vs 2.05% in FY21 and arrived within management’s guidance of 1.4-1.7% (KBVs ‘22F CoC: 1.72%). NPL also saw a better figures at 1.92% from 2.72% in FY21 or improved by 80bps yoy. Management expects ‘23F cost of credit in the range of 1.3-1.5%. NIM expanded at 5.5% from 5.1% in FY21 while the management forecasts ‘23F NIM to hovers at 5.3-5.6%, driven by loan repricing, stable CASA ratio and higher LDR. Three focus strategy to ride the uncertain year To remain stand out in the cautiously optimistic year, we like BMRI focus on three main strategies. Firstly, the bank is focusing on sustainable growth through expanding market share on loan and deposit as well as asset quality management, aside from maintaining high RoE level and cost leadership. Secondly is margin improvement and liquidity management which will underpin by CASA sustainability through transaction and digital innovation, loan repricing and maintaining LDR at manageable level as well as healthy CAR. Lastly, the bank would like to improve innovation to serve customer and better synergy with subsidiaries Maintain BUY with higher target price of IDR11,250 Our target price is based on Gordon Growth Model with fair 2023F P/B of 2.3x. BMRI is currently trading at 2.0x 2023F P/B, or below its +1SD 10-year historical mean. Risks to our call are: a) lowerthan-expected loan growth, NIM and loan yield, b) higher than expected CoC and c) higher inflation, slowing economic activity and d) deteriorating asset quality.