At a Glance
* 1Q10 was within our and consensus estimates
* Growth is expected to pick up in subsequent quarters.
* Maintain Buy and Rp10,400 TP
Comment on Result
1Q09 net profit of Rp2.2tr was in line. NIM remained exceptionally strong at 9.4% due to significantly lower cost of funds, which fell to 4.8% from 6.0% in 4Q09. We had expected the strong NIM because a large chunk of term deposits was re-priced at lower rates in Jan-Feb 2010. Loans grew 1.7% q-o-q. Like other banks, we expect loan growth to pick up in the coming quarters. BBRI's key loan growth drivers remain its forte, micro credit and small commercial loans. We note that over 360,000 KUR borrowers had migrated to small commercial loans up to Mar-10. Deposits contracted by
5% q-o-q due to seasonality, and CASA to total deposits fell to 55% from 60% in the previous quarter.
However, asset quality disappointed with NPL ratio inching up to 4.1% (from 3.5% in 4Q09). We believe this could be attributed to the continued stress in loans to the 'medium segment'. However, absolute NPLs increased only 1.7% q-o-q. We note that provisions have 'normalised' with a charge-off rate of 2.9% (annualized). BBRI's cost-to-income ratio declined further to 38.2% with continued strong revenue growth coupled with good operating costs management. CAR is robust at 15.4% (excl. operational risk: 16.6%) after including Rp2tr sub-debt issued in Dec09.
We expect BBRI's NIM to moderate from 1Q10 level and stabilize at 8.5-9.0% in FY10F. No change to our earnings for now, and our loan and deposit growth targets for FY10F remain at 20%.
Recommendation
Maintain Buy and Rp10,400 TP based on the Gordon Growth Model with implied 4x FY10 P/BV. BBRI's prospects remain healthy with strong NIM (albeit declining), and its ROE profile remains among the best thanks to high yield microcredit loans, which remain BBRI's forte.
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