Bank Rakyat Indonesia (BBRI IJ) (Buy) - From de-rating to recovery; maintain Buy

From de-rating to recovery; maintain Buy

Raise FY27-28F earnings by ~5-15%; TP maintained

BBRI has underperformed peers by a wide margin over the past 12 months (-26% vs. BMRI/BBNI [both rated Buy] down 15%/14%, and JCI index down 12%), reflecting macro headwinds in the rural/micro segments, Kredit Usaha Rakyat (KUR) policy risk, and a sustained high-rate environment keeping CoF elevated. We view the de-rating as largely priced in and expect earnings to trough in FY26F, with a re-acceleration driven by below structural catalysts:

Digital-led CoF compression. BRImo is structurally migrating transactional CASA balances into a lower-cost digital ecosystem, reducing the reliance on term deposit promotions and relationship-based rural time deposits. The transformation remains early-stage — BBRI's Tier 3–4 micro/SME customer base is among the last to digitise in Indonesia banking — implying a long CoF tailwind runway. Critically, NIM headroom expansion from this channel is loan-growth-independent, and this minimises policy-driven lending rate risk. Credit cost cycle normalization. The 12MMA CoC has peaked and is in a clear descent, driven by improving micro collections and the maturation of restructured Covid-era exposures. Gross write-offs — which spiked through 2022–2024 as the post-Covid micro book seasoned — are declining on both absolute and loan-mix-adjusted bases. Leading indicators corroborate: LAR contraction and improving collection recovery rates provide dual confirmation that asset quality is normalizing. Provision normalization. We expect total provision expense to be flat-to-declining through FY27–28F. The post-Covid coverage rebuild cycle is complete; management has signalled no intent to re-provision with the absence of macro deterioration, and coverage ratios are adequate at prevailing NPL levels. A provision-stable scenario mechanically drives earnings growth even under conservative NII/fee income assumptions.

Valuation and risks

We derive our TP of IDR4,500 using DuPont analysis, with unchanged key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 0.9x and a CAR-adjusted ROAE of 18.0%. Our TP implies 2.1x 2026F P/B (vs 1.3x currently) and 11.6x 2026F P/E (vs 7.3x currently). Risks are worsening macroeconomic trends, unfavorable regulatory changes, and tighter liquidity competition, which could increase funding costs, worsening credit quality which would raise credit costs, and higher opex. Changes in management could affect the bank’s write-off policies and thus, credit costs. This would ultimately affect the bank’s near-term earnings, in our view.

Estimate revisions. We revise FY27-28F CoC to IDR 45–48tn (from ~IDR 52tn previously), reflecting 12MMA trend normalization and write-off stabilization. The ~IDR 4–7tn provision reduction flows almost entirely to net profit. Nevertheless, we maintain our TP at IDR4,500.

At current levels, we believe BBRI trades at undemanding multiples relative to its recovery trajectory. We view this as a compelling point for investors to accumulate the stock.

Year-end 31 Dec	FY25		FY26F		FY27F		FY28F
Currency (IDR)	Actual	Old	New	Old	New	Old	New
PPOP (bn)	119,972	126,134	126,134	129,299	129,288	133,805	133,715
Reported net profit (bn)	56,652	58,694	58,694	59,583	62,748	60,136	68,896
Normalised net profit (bn)	56,652	58,694	58,694	59,583	62,748	60,136	68,896
FD normalised EPS	375.39	388.92	388.92	394.90	415.88	397.24	455.10
FD norm. EPS growth (%)	-5.5	3.6	3.6	1.5	6.9	0.6	9.4
FD normalised P/E (x)	7.6	–	7.3	–	6.9	–	6.3
Price/adj. book (x)	1.3	–	1.3	–	1.3	–	1.2
Price/book (x)	1.3	–	1.3	–	1.3	–	1.2
Dividend yield (%)	12.1	–	11.2	–	11.6	–	12.4
ROE (%)	17.7	17.9	17.9	17.7	18.6	17.4	19.6
ROA (%)	2.7	2.7	2.7	2.5	2.7	2.4	2.7

Source: Company data, Verdhana estimates

Key data on Bank Rakyat Indonesia

Profit and loss (IDRbn)
Year-end 31 Dec	FY24	FY25	FY26F	FY27F	FY28F
Interest income	199,266	207,783	219,424	227,293	236,995
Interest expense	-56,608	-57,285	-57,812	-60,527	-63,818
Net interest income	142,659	150,498	161,613	166,766	173,177
Net fees and commissions	20,391	21,447	22,678	24,265	25,964
Trading related profits	3,397	5,459	5,750	5,750	6,000
Other operating revenue	32,030	30,472	29,000	30,000	31,000
Non-interest income	55,818	57,378	57,428	60,015	62,964
Operating income	198,477	207,877	219,040	226,781	236,141
Depreciation	-5,843	-5,843	-5,847	-5,853	-5,860
Amortisation	0	0	0	0	0
Operating expenses	-34,057	-39,948	-41,418	-42,173	-42,950
Employee share expense	-38,617	-42,114	-45,643	-49,467	-53,616
Pre-provision op profit	119,960	119,972	126,134	129,288	133,715
Provisions for bad debt	-41,744	-46,724	-50,647	-48,531	-45,004
Other provision charges	0	0	0	0	0
Operating profit	78,216	73,248	75,486	80,757	88,711
Other non-op income	-964	-455	0	0	0
Associates & JCEs	0	0	0	0	0
Pre-tax profit	77,252	72,793	75,486	80,757	88,711
Income tax	-16,946	-15,660	-16,240	-17,374	-19,085
Net profit after tax	60,306	57,132	59,246	63,383	69,626
Minority interests	-362	-480	-552	-635	-730
Other items	0	0	0	0	0
Preferred dividends	0	0	0	0	0
Normalised NPAT	59,945	56,652	58,694	62,748	68,896
Extraordinary items	0	0	0	0	0
Reported NPAT	59,945	56,652	58,694	62,748	68,896
Dividends	-55,773	-52,021	-48,155	-49,890	-53,336
Transfer to reserves	4,171	4,631	10,540	12,858	15,560
Growth (%)
Net interest income	3.9	5.5	7.4	3.2	3.8
Non-interest income	21.5	2.8	0.1	4.5	4.9
Non-interest expenses	-3.7	17.3	3.7	1.8	1.8
Pre-provision earnings	12.8	0.0	5.1	2.5	3.4
Net profit	-0.3	-5.5	3.6	6.9	9.8
Normalised EPS	-0.3	-5.5	3.6	6.9	9.4
Normalised FDEPS	-0.3	-5.5	3.6	6.9	9.4
Loan growth	7.8	12.9	2.2	6.5	6.9
Interest earning assets	3.0	6.6	8.2	6.6	6.7
Interest bearing liabilities	1.8	7.5	8.6	7.0	7.0
Asset growth	1.4	7.2	7.2	6.2	6.3
Deposit growth	0.5	7.4	7.5	7.5	7.5
Source: Company data, Verdhana estimates

Balance sheet (IDRbn)
As at 31 Dec	FY24	FY25	FY26F	FY27F	FY28F
Cash and equivalents	29,784	32,044	89,140	95,825	103,012
Inter-bank lending	0	0	0	0	0
Deposits with central bank	88,879	31,930	88,820	95,481	102,643
Total securities	343,323	372,668	373,720	394,894	413,936
Other int earning assets	83,448	63,488	75,160	82,753	90,354
Gross loans	1,350,480	1,517,756	1,562,980	1,672,389	1,789,456
Less provisions	-76,903	-79,329	-93,091	-106,634	-114,991
Net loans	1,273,577	1,438,427	1,469,889	1,565,755	1,674,465
Long-term investments	8,077	8,835	394	471	539
Fixed assets	62,478	63,294	56,731	50,978	45,218
Goodwill	0	0	0	0	0
Other intangible assets	0	0	0	0	0
Other non IEAs	102,622	124,685	134,713	143,532	153,013
Total assets	1,992,187	2,135,371	2,288,568	2,429,689	2,583,179
Customer deposits	1,365,450	1,466,844	1,576,857	1,695,121	1,822,256
Bank deposits, CDs, debentures	72,226	86,436	121,303	130,400	140,180
Other int bearing liabilities	128,372	129,673	129,673	129,673	129,673
Total int bearing liabilities	1,566,047	1,682,953	1,827,833	1,955,195	2,092,109
Non-int bearing liabilities	102,825	121,477	121,724	121,990	122,276
Total liabilities	1,668,872	1,804,430	1,949,557	2,077,185	2,214,385
Minority interest	6,287	6,908	7,460	8,094	8,824
Common stock	83,458	83,524	83,524	83,524	83,524
Preferred stock	0	0	0	0	0
Retained earnings	218,032	222,663	230,181	243,039	258,598
Reserves for credit losses	0	0	0	0	0
Proposed dividends	0	0	0	0	0
Other equity	15,538	17,846	17,846	17,846	17,846
Shareholders' equity	317,028	324,034	331,551	344,409	359,969
Total liabilities and equity	1,992,187	2,135,371	2,288,568	2,429,689	2,583,179
Non-perf assets	38,102	45,884	48,786	52,201	55,855
Balance sheet ratios (%)
Loans to deposits	98.9	103.5	99.1	98.7	98.2
Equity to assets	15.9	15.2	14.5	14.2	13.9
Asset quality & capital
NPAs/gross loans (%)	2.8	3.0	3.1	3.1	3.1
Bad debt charge/gross loans (%)	3.09	3.08	3.24	2.90	2.51
Loss reserves/assets (%)	3.86	3.71	4.07	4.39	4.45
Loss reserves/NPAs (%)	201.8	172.9	190.8	204.3	205.9
Tier 1 capital ratio (%)	15.2	13.3	17.6	19.3	16.8
Total capital ratio (%)	16.1	14.0	18.3	20.1	17.5
Per share
Reported EPS (IDR)	397.30	375.48	389.01	415.88	455.10
Norm EPS (IDR)	397.30	375.48	389.01	415.88	455.10
FD norm EPS (IDR)	397.21	375.39	388.92	415.88	455.10
DPS (IDR)	369.65	344.78	319.16	329.56	352.32
PPOP PS (IDR)	795.07	795.14	835.98	856.88	883.27
BVPS (IDR)	2,101.18	2,147.61	2,197.43	2,275.03	2,377.82
ABVPS (IDR)	2,101.18	2,147.61	2,197.43	2,275.03	2,377.82
NTAPS (IDR)	2,101.18	2,147.61	2,197.43	2,275.03	2,377.82
Valuations and ratios
Reported P/E (x)	7.2	7.6	7.3	6.9	6.3
Normalised P/E (x)	7.2	7.6	7.3	6.9	6.3
FD normalised P/E (x)	7.2	7.6	7.3	6.9	6.3
Dividend yield (%)	13.0	12.1	11.2	11.6	12.4
Price/book (x)	1.4	1.3	1.3	1.3	1.2
Price/adjusted book (x)	1.4	1.3	1.3	1.3	1.2
Net interest margin (%)	7.96	8.01	8.01	7.70	7.50
Yield on assets (%)	11.11	11.06	10.88	10.50	10.26
Cost of int bearing liab (%)	3.65	3.53	3.29	3.20	3.15
Net interest spread (%)	7.47	7.53	7.58	7.30	7.11
Non-interest income (%)	28.1	27.6	26.2	26.5	26.7
Cost to income (%)	39.6	42.3	42.4	43.0	43.4
Effective tax rate (%)	21.9	21.5	21.5	21.5	21.5
Dividend payout (%)	93.0	91.8	82.0	79.5	77.4
ROE (%)	19.1	17.7	17.9	18.6	19.6
ROA (%)	3.03	2.75	2.65	2.66	2.75
Operating ROE (%)	24.9	22.9	23.0	23.9	25.2
Operating ROA (%)	3.95	3.55	3.41	3.42	3.54
Source: Company data, Verdhana estimates

Company profilePT Bank Rakyat Indonesia (Persero) Tbk (BBRI IJ) is one of the largest banks in Indonesia. It specialises in small scale and microfinance style borrowing and lending.

Valuation MethodologyWe derive our TP of IDR4,500 using DuPont analysis, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 0.9x and a CAR-adjusted ROAE of 18.0%. Our TP implies 2.1x 2026F P/B and 11.6x 2026F P/E. The benchmark for the stock is the JCI.

Risks that may impede the achievement of the target priceRisks are worsening macroeconomic trends, unfavorable regulatory changes, and tighter liquidity competition, which could increase funding costs, worsening credit quality which would raise credit costs, and higher opex. Changes in management may affect the bank’s write-off policies and thus, credit costs. This would ultimately affect the bank’s near-term earnings, in our view.

ESGBRI has launched various activities and programs in its contribution towards the global commitments and the national objectives as stipulated in the Presidential Regulation Number 59 year 2017 which regulates the Implementation of the Sustainable Development Goals. BRI is the Chair of the Indonesian Sustainable Finance Initiative (IKBI) which aims to help the government’s efforts to achieve the SDGs. BRI prioritizes customers that offer environmentally friendly products / have environmental certifications. BRI collaborates with Bank Indonesia and the Indonesian Economic and Trade Office (Kantor Dagang dan Ekonomi Indonesia - KDEI) in Taiwan to organize education sessions for Indonesian migrant workers on theimportance of cashless remittance transfers. BRI collaborates / actively participates in programs at community, national- and global- levels to enhance the development of sustainable finance. These programs including METI, CDP Pilot Project, UNDP, ADLIGHT, NPAP and CASE Programs.

Fig. 2: 12MMA CoC vs 12MMA WO %

Source: Company data, Verdhana research

Fig. 3: BBRI— FY26-28 forecasts

Source: Company data, Verdhana estimates

Fig. 4: BBRI fwd P/E (x)

Source: Bloomberg, Verdhana research

Fig. 5: BBRI fwd P/B (x)

Source: Bloomberg, Verdhana research

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general.

GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.

This report is not to be construed as an offer or a solicitation of an offer to buy or sell any securities or financial products. PTVSI and its associates, its directors, and/or its employees may from time to time have interests in the securities mentioned in this report or it may or will engage in any securities transaction or other capital market services for the company (companies) mentioned herein.

ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

RESTRICTIONS ON DISTRIBUTION

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Rating Table

Rating Remains	Buy
Target price Remains	IDR 4,500
Closing price 12 June 2026	IDR 2,850
Implied upside	+57.9%
Market Cap (USD mn)	23,936.4
ADT (USD mn)	55.9

Stock performance chart

Source: LSEG, Verdhana

M cap (USDmn)	23,936.4
Free float (%)	43.3
3-mth ADT (USDmn)	55.9

(%)	1M	3M	12M
Absolute (IDR)	-11.5	-20.2	-30.0
Absolute (USD)	-13.3	-24.5	-36.4
Rel to Jakarta Stock Exchange Composite Index	0.9	-1.8	-13.4

Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

Tags: BANKS, Bank Rakyat Indonesia, BBRI, BBRI JK, BBRI IJ, Erwin Wijaya

Bank Rakyat Indonesia (BBRI IJ) (Buy) - From de-rating to recovery; maintain Buy

From de-rating to recovery; maintain Buy

Key data on Bank Rakyat Indonesia

Fig. 1: Major banks’ share price comparison

Fig. 2: 12MMA CoC vs 12MMA WO %

Fig. 3: BBRI— FY26-28 forecasts

Fig. 4: BBRI fwd P/E (x)

Fig. 5: BBRI fwd P/B (x)

Rating Table

Stock performance chart

Research Analysts

yudi Administrator

Bank Central Asia BBCA IJ - Buy - Solid YTD Jul-24 results

Bank Rakyat Indonesia -BBRI IJ- Buy - Towards more commercial micro

Bank Negara Indonesia BBNI IJ - Buy - Operating 1H24 results were below

Bank Rakyat Indonesia -BBRI IJ- Buy - YTD Jul-24 bank only results - steady progress

Bank Rakyat Indonesia -BBRI IJ- Buy - ROAE uptrend on positive micro trends

Bank Central Asia -BBCA IJ- Buy - Steady growth reiterate Buy new TP IDR13200

Bank Rakyat Indonesia (BBRI IJ) (Buy) - From de-rating to recovery; maintain Buy

Fig. 1: Major banks’ share price comparison

Fig. 2: 12MMA CoC vs 12MMA WO %

Fig. 3: BBRI— FY26-28 forecasts

Fig. 4: BBRI fwd P/E (x)

Fig. 5: BBRI fwd P/B (x)

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