BBRI has reported Rp2.1trn profit in Q1 CY10, driven by strong operating performance. Profit is 25% of consensus but is based on better operating performance and higher credit cost. This is in contrast to some other banks relying more on lower credit cost as asset yields come under pressure.
BBRI is a beneficiary of a low interest rate environment and the agreement by banks to cap Time Deposit at 7%. We maintain our Hold recommendation as the high LDR makes it vulnerable to volatility in global liquidity environment.
Net Interest Income in Q1 CY10 is up 24% q-o-q and 8% y-o-y supported by asset growth and declining cost of funds. NIMs as per CIRA calculations were 9.3% in Q1 CY10, against 9.37% in Q4 CY09 and 9.75% in Q1 CY09. Asset Yields are declining, 13.2% in Q1 CY10 from 13.7% in Q4 CY09 and 15% in Q1 CY09. However, Cost of Funds has declined to 4.2% in Q1 CY10, vs 4.9% in Q4 and 5.5% in Q1 of 2009. Re-pricing of expensive deposits has reduced interest expenses.
Gross Income is up 25% y-o-y and 9% q-o-q. Operating expenses tend to be higher in Q4, resulting in more volatile Pre-Provision Profit, up 41% y-o-y and 54% q-o-q. Credit Cost has again risen to 2.7% (vs. 3.1% average in 2009 and 0.85% in Q4 CY09). Our forecast CY10 is for 2%.
Loan growth momentum remains strong, up 28% from March 2009 and 2% from December 2009 levels. CASA deposits though are lagging at 12%, resulting in heavier reliance on Time Deposits. Gross Loan to Deposit ratio is back to 87%, from 81% in December 2009.
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