Bank Rakyat Indonesia (BBRI IJ): Focusing on micro loan disbursement in 2021
Better total loan restructuring in FY20 than previous estimate
For FY2020, BBRI had restructured IDR186.6tn in loans (21.2% of total loans), around 44% of which came from the micro segment followed by the small commercial segment (43%) and corporate segment (5%). The number actually fell from IDR193.7tn (22.4% of loans) in Sep-20, as some debtors started to pay back their interest as well as their principal in 4Q20, as well as lower than the initial projection of total loans to be restructured in FY2020 of IDR200tn.
Higher super-micro KUR quota from government in 2021
In 2020, BBRI recorded super-micro KUR disbursement of IDR8.6tn, which is intended for people who have never received KUR and do not currently have commercial loans, with a maximum amount of IDR10mn/ KUR recipient. For 2021, the government will allocate IDR40tn of super-micro KUR quota for BBRI, which is a positive catalyst for BBRI to improve its asset yield, as it receives 19% yield for super-micro KUR (6% from debtors and 13% from the government subsidy) vs. regular KUR’s yield of 16.5%.
Better preliminary guidance for 20201F
The company gave a preliminary loan growth target of 6-7% in 2021, supported by the micro segment expected to grow double digits supported by the government KUR program, and the contribution of the micro segment to the total loan portfolio is expected to reach more than 40% by 2022. NIM is also expected to reach more than 6% in 2021, which is better than the guidance for 2020 of 5.7%, as CoF will continue to decline in 2021, and a higher proportion of higher yield assets will partly help to improve NIM going forward. Credit cost preliminary guidance is also lower at 2.5%-3% in 2021 vs. 3.2% in 2020, as the company believes that it has made adequate provision buffers to anticipate the Covid-19 impact, and ~97.5% of the debtors in the micro segment which were being restructured have recovered, hence the risk of asset quality downgrades is low going forward.
BBRI: maintain our BUY rating with higher TP of IDR5,200
We reiterate our BUY rating on BBRI with a higher target price of IDR5,200/share based on a 2021F PBV of 2.9x, due to lower-than-expected total loans restructured in FY20, which leads to lower risk of asset quality downgrades going forward, as well as a better preliminary outlook for 2021. BBRI indicated that it still has room to pay at least a 60% dividend payout ratio for 2020 net profit, as they are still able to maintain their CAR ratio above 17% even though it pays a 100% dividend pay-out ratio. Key downside risks to our call would be a higher-than-expected CoC and more restructuring of loans, lowering NIM even further.