JAKARTA: Bank Rakyat Indonesia (BRI) remains Indonesia’s leading micro, small and medium enterprise (MSME) financier, with its credit portfolio growing to Rp1,308.65 trillion by March 2024, up 10.89% year-on-year. Over 83% of this, or Rp1,089.41 trillion, was allocated to MSMEs.
Supported by an extensive branch network and empowerment initiatives, BRI has achieved an impressive return on equity (ROE) and maintained a net interest margin (NIM) consistently above 7%, exceeding the industry average of around 6%.
“Therefore, we expect the ROE to be maintained above 20%, relatively in line with the average of other major banks,” said Edward Lowis from Sucor Securities’ research.
BRI’s ultra-micro portfolio through Pengadaian and PNM is on a growth trajectory, with this segment achieving higher margins and outpacing typical bank credit growth.
“The total asset contribution of these subsidiaries has reached almost 10% of the total in the first quarter of 2024 (compared to 6% in 2020), while the contribution to net income has also grown to 14% of the total (compared to 10% in 2022),” he wrote.
Lowis acknowledges challenges in managing BRI’s asset quality but expects moderate revenue growth of 5% to 10% YoY in 2024 and 2025.
He expects BRI to maintain above-average NIM and growth due to its dominance in microloans.
“Adequate loan loss coverage and a strong capital position will help the bank weather near-term challenges,” he added.
Therefore, Sucor Securities recommends buying BRI shares with a target price of Rp6,400, reflecting a 2.8x PBV for 2024, based on a sustainable ROE of 23% and a cost of equity of 12%.
Similarly, Jayden Vantarakis of Macquarie has a target price of Rp7,100 for BRI shares, while Victoria Venny of MNC Securities has a ‘buy’ rating with a target price of Rp6,300. A Bloomberg consensus of 35 analysts sets a 12-month price target of Rp6,175, with 33 analysts unanimously recommending a buy on a bullish outlook.
BRI’s Finance Director Viviana Dyah Ayu RK said management’s focus is to ensure the company can grow better and healthier in the long run, even if it requires small corrections in the short run.
“For long-term shareholders, the refinements and improvements we are making now should provide greater benefits,” she said.
