Willy Suwanto, Prasetya Gunadi | BCA S

Facts: 2018 NP of IDR31.4tn, with loan growth of 14.1%

· Net profit: IDR8.9tn (+3.7% YoY, +2.4% QoQ) in 4Q18, translating to 2018 net profit of IDR31.4tn (+11.6% YoY), in line with 99.9% of our and 99.8% of street’s full-year estimates, driven by solid non-interest income from fee-based income (+15.5% YoY) and recovery income (+25% YoY). Provisioning expense rose to IDR18.3tn in 2018, +6.3% YoY. NIM slumped to 7.30% in 2018 vs. 7.78% in 2017, due to limited adjustments in loan yield but higher CoF (3.43% in 2018 vs. 3.27% in 2017).

· Above-industry loan growth (+14.0% YoY, +4.2% QoQ) end Dec-18, supported by micro (+14.5% YoY), consumer (+14.1% YoY) and small commercial (+18.9% YoY). On the deposit side, growth reached +12.2% YoY, +8.2% QoQ end Dec-18, resulting in higher LDR, to 89.3% end Dec-18 vs. 87.8% but better than 92.7% end Sep-18. CASA continued upward to 60.1% end Dec-18 vs. 59.0% end Dec-17 and 56.5% end Sep-18.

· NPL settled to 2.27% end Dec-18, vs. 2.54% end Sep-18, thanks to a fat IDR4.2tn write-off in 4Q18 (IDR12.2tn in 2018) – still slightly higher than the 2.23% marked on end Dec-17. Meanwhile, SML stood at 3.62%, down from 4.92% end Sep-18, and from 4.09% end Dec-17. A property player contributed new SML of IDR800bn in corporate segment in 4Q18. Note that NPL coverage has touched 200.61% and may remain elevated with the implementation of IFRS 9.

Outlook: Manageable NIM pressure in 2019F

With Gov’t assurance on 2019F KUR allocation of IDR87tn (+8.4% YoY), BBRI will continue its focus in micro-loans. Hence, we expect micro-loans will grow ~15% YoY to support our projected overall loan growth of 12.2% in 2019F. Further, BBRI plans to impose higher interest rates on some of its Kupedes customers, in the effort to mitigate loan risks. Kupedes customers with tenor of 2-5 years will see a 5-10bps rate hike and customers with tenor of >5 years will see a 10bps hike. Reengineered business process in BRISpot has yielded results, streamlining the loan application process from 2 weeks to less than 2 days. Reflecting successful micro loan implementation in rural areas, BBRI plans to extend the consumer and small commercial segment process, including to customers in major cities.

Recommendation: Maintain BUY rating, IDR4,400 TP

We maintain our BUY rating with TP of IDR4,400, based on implied 2019F PBV of 2.6x. Downside risks: unexpected deceleration in loan growth or higher-than-expected CoF, resulting in more NIM pressure.

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