BBRI posted strong results in FY09 despite substantial provisioning expenses allocated during the year. Even though NIM tended to decline, we remained positive with the bank’s outlook as the bank managed to expand its earning assets, which led to higher ROAE. We therefore changed our earning forecast and upgraded our TP to Rp9,400/share from Rp8,700/share previously. Despite that, we downgraded our recommendation from buy to netural as the stock only provides limited upside potential from the current share price.
Strong net profit growth despite high provisioning expenses. Despite high provisioning expenses (+106.4% yoy) allocated in 2009, BBRI’s net profit remained strong at Rp7.3tn (+22.7% yoy), thanks to 16.6% yoy growth in net interest income and 30.7% yoy growth in fee-based income. The bank managed to complete its online system at all branches in Nov09, allowing it to charge additional fees to custome! rs (from Rp5,000/month to Rp8,000/month for any new ATM subscribers).
Still posted the highest loan growth in the sector. Such strong performance was also supported by strong loan growth of 27.6% yoy Rp205.5tn at end 2009, the highest in the sector. Small consumer loans posted the highest growth of 36.3% yoy to Rp41.6tn, representing 20.0% of total loans at end 2009. Majority of small consumers loans were payroll loans, thus basically secure (NPL only recorded at 1.4% at end 2009).
Lower NIM but ROAE remained high. BBRI’s valuation had been derated for the past few years along with the continuous decline in the bank’s NIM (from 12.0% in 2005 to 9.1% in 2009). While NIM will likely stay around 9% going forward, it is worth to see that the bank’s ROAE has actually showed improvement in the past two years, enabled by strong growth in earning assets (28.7% yoy in 2009 and 58.4% yoy in 2008) boosted by corporate loans. Whi! le negati ve sentiment arose with the bank’s higher exposure to corporate loans, the bank assured that the contribution of corporate loans to total loans will not exceed 20% and majority of the loans will be extended to State Owned Enterprises (note: NPL from corporate was at 4.4% at end 2009 vs NPL total of 3.5%)
Downgraded to neutral. We adjusted our forecast on BBRI to incorporate 2009 results and projected lower provisioning expenses. Consequently, we upgraded our TP to Rp9,400/share from Rp8,700/share previously. Despite that, we downgraded our recommendation from buy to netural as the stock only provides limited upside potential from the current share price.
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