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Fundamental View
AS OF 08 Jun 2023- Bank Rakyat Indonesia (BRI) is rated Baa2 (sta)/ BBB- (sta)/ BBB (sta). As the second largest bank in Indonesia that is majority-owned (53.19%) by the Indonesian government, and key role in servicing the ultra-micro and micro segments, we expect a very high likelihood of government support in times of need.
- BRI’s credit strength had been its very high margins (>7%; rose after consolidating Pegadaian and PNM) and capital buffers (>20% CET 1 ratio) which are ahead of its country peers and among the highest in APAC.
- The bank has a leading franchise in the country’s micro and small commercial segments with a long operating track record, well managed credit costs and that has in turn helped to support its high margins.
Business Description
AS OF 08 Jun 2023- The history of Bank Rakyat Indonesia can be traced back to 1895. It is now the second largest bank in Indonesia by assets.
- BRI was listed on the Jakarta Stock Exchange in 1992, now the Indonesia Stock Exchange in 2003. The Indonesian government held a 53.2% stake in the bank as of end-December 2022. Foreign investors hold 35.7% of the bank's shares and domestic investors 11.1%.
- Its core business focus is on the ultra-micro, micro and small commercial segments, which now account for just over two-thirds of its total loan book.
Risk & Catalysts
AS OF 08 Jun 2023- The Indonesian economy continues to be on good recovery momentum which is supportive for asset quality and loan growth; management targets 10-12% FY23 loan growth and credit costs of 220-240 bp (FY22: 255 bp).
- BRI’s high exposure to ultra-micro and micro (~48% of loans) and small commercial loans (19%) leads to higher credit costs compared to its peers, but the bank is more than compensated by the higher margins generated. We are comfortable with the credit given its very high capital buffers.
- Funding cost pressure is salient, but BRI’s interest margins have been resilient thanks to its increased focus on the higher yielding micro segment so its returns have continued to be strong. It expects a broadly stable NIM in FY23.
Key Metrics
AS OF 08 Jun 2023IDR bn | FY19 | FY20 | FY21 | FY22 | 1Q23 |
---|---|---|---|---|---|
PPP ROA | 4.8% | 4.2% | 4.7% | 5.2% | 5.8% |
ROA | 2.5% | 1.2% | 1.9% | 2.9% | 3.4% |
ROE | 17.7% | 8.6% | 12.0% | 17.4% | 21.4% |
Equity/Assets | 14.6% | 14.1% | 17.2% | 16.0% | 15.3% |
CET1 Ratio | 21.7% | 20.1% | 26.2% | 24.5% | 23.9% |
NPL Ratio | 2.80% | 2.88% | 3.00% | 2.67% | 2.86% |
Provisions/Loans | 2.47% | 3.43% | 3.47% | 2.51% | 2.45% |
LDR | 88% | 91% | 92% | 87% | 94% |
CreditSights View
AS OF 28 Apr 2023BRI has become the 2nd largest bank in Indonesia by assets, having been overtaken by Bank Mandiri after the latter’s sharia business consolidation. About 48% of its consolidated loan book consists of micro loans and another 19% of small commercial loans, leading to its higher Loan at Risk (LaR) at ~16% of its loan book. While we do not expect a high slippage rate from the LaR book, BRI and its country banking peers have the highest capital ratios in the region (23.9% CET1 ratio for BRI) and are therefore in the position to absorb losses. We like BRI because of its very strong profitability and capital. Spreads are relatively tight but the duration is short. We maintain our M/P reco.
Recommendation Reviewed: April 28, 2023
Recommendation Changed: July 08, 2022
Who We Recommend
Mitsubishi UFJ Financial Group
State Bank of India
Mizuho Financial Group

