Two Quarters of Silence, Then a Number That Explains the Wait
The H1 2017 post closed with a genuine unknown: the Corporate Non-SoE NPL» reversal that the Q1 2017 post flagged (5.61% → 3.69% in one quarter) had gone dark, because BRI's H1 2017 filing was the short-form OJK regulatory publication with no loan-mix note - and this analysis has no investor presentation for that quarter at all. This quarter's filed statement is also the short-form publication (15 pages, the same "not a complete presentation of the Consolidated Financial Statements" disclaimer as H1), so the filing itself still can't answer the question. But this quarter's investor presentation - genuinely absent for H1 - carries the loan-mix NPL table BRI's own deck has disclosed in most other quarters this series has covered, and it closes the gap directly: Corporate Non-SoE gross NPL moved 3.69% (Q1'17) → 3.44% (H1'17) → 4.44% (9M'17). The reversal held through June, then partially unwound in Q3 - a full percentage point of deterioration in a single quarter, the segment's sharpest quarterly move in this series' entire two-year record of it.
That single number reframes both silent quarters at once. It means the "problem solved" reading the Q1 2017 post warned against banking too early would have been wrong to relax on - Corporate Non-SoE's credit quality was never on a clean one-way trajectory, it improved for two quarters and then gave back roughly a third of that improvement in the third. On a year-over-year basis the picture is gentler: 4.44% (9M'17) is still better than 4.78% (9M'16), so the segment hasn't round-tripped all the way back to 2016's worst levels. But the quarter-over-quarter direction is the one that matters for judging whether Q1's reversal was durable, and it wasn't, not entirely.
Consolidated net income attributable to owners grew 8.2% year-over-year for the nine months (Rp20,508,121M vs Rp18,950,861M) - slower than H1's 10.2% pace, and Q3-standalone net income (derived: 9M cumulative minus the already-published H1 figure) grew just 4.6% YoY (Rp7,085,433M vs Rp6,775,322M), the softest quarterly growth rate this series has recorded since Q1 2016. Loan-loss provisioning kept outrunning revenue by roughly the same margin this series has tracked for two years: +36.9% (Rp15,713bn vs Rp11,474bn, 9M) against net revenue growth of 11.9% - a gap that widened slightly from H1's 3-to-1 ratio.
The Prescription
BRI should treat its investor presentation, not the short-form regulatory filing, as the primary interim disclosure of loan-mix credit quality - and publish it every single quarter without exception. This quarter is proof the deck can carry exactly the data the filed statement won't: the same loan-mix NPL table that answered the Corporate Non-SoE question above simply wasn't part of this analysis's H1 2017 materials, and that gap - not any actual change in BRI's disclosure practice - is what left last quarter's post unable to check the number at all. A bank that already produces this table for most quarters shouldn't let it go missing for even one.
What BRI should stop doing: letting Corporate Non-SoE's credit quality whipsaw a full percentage point in a single quarter without any accompanying explanation in either the filing or the deck. The presentation states the fact (3.44% to 4.44%) but not the cause - no mention of a specific borrower, sector concentration, or reclassification behind the move. A segment this volatile, sitting at the second-highest NPL rate among BRI's six disclosed loan categories, deserves more than a data point with no narrative attached.
Key Financial Metrics
9M 2017 vs. 9M 2016 (P&L, consolidated, cumulative nine months), and Sep 2017 vs. Dec 2016 (balance sheet, consolidated)
FX: IDR 13,471.50 = USD 1 (the rate the filed statement itself discloses for September 30, 2017).
| Metric | 9M 2017 (IDR) | 9M 2017 (USD) | 9M 2016 (IDR) | YoY |
|---|---|---|---|---|
| Net Interest, Sharia and Premium Income, net ("Net Revenue" equivalent) | Rp55,196,123M | ~$4,097M | Rp49,295,210M | ✅ +12.0% |
| Operating Income (Income from Operations) | Rp24,644,838M | ~$1,829M | Rp23,175,672M | ⚠️ +6.3% |
| Net Income (attributable to owners) | Rp20,508,121M | ~$1,522M | Rp18,950,861M | ✅ +8.2% |
| Total Comprehensive Income (attributable to owners) | Rp22,091,739M | ~$1,640M | Rp35,572,717M | ⚠️ -37.9%¹ |
| EPS (basic, 9M cumulative, consolidated) | Rp838.87 | ~$0.0623 | Rp775.16 | ✅ +8.2% |
¹ The same base effect the H1 2017 post flagged: 9M 2016's comprehensive income still carries the one-off Rp13,824,692M land-and-buildings revaluation gain booked in Q2 2016 (see the H1 2016 post). Strip it out and this quarter's comprehensive income is the higher of the two.
| Balance sheet metric | Sep 2017 (IDR) | Sep 2017 (USD) | Dec 2016 (IDR) | QoQ/YTD |
|---|---|---|---|---|
| Total Assets | Rp1,038,672,623M | ~$77.10B | Rp1,003,644,426M | ✅ +3.5% |
| Loans (gross, incl. sharia financing and finance lease) | Rp693,673,132M | ~$51.49B | Rp662,811,340M | ✅ +4.7% |
| Total Deposits (Demand + Savings + Time) | Rp745,271,237M | ~$55.32B | Rp732,558,804M | ✅ +1.7% |
| Total Equity (attributable to owners) | Rp158,034,772M | ~$11.73B | Rp146,421,342M | ✅ +7.9% |
| Total Cash and Cash Equivalents (per cash flow statement) | Rp158,462,507M | ~$11.76B | Rp188,654,879M | ⚠️ -16.0% |
Total cash fell sharply from both Dec 2016 and Jun 2017's Rp185,963,183M (a further -14.8% quarter-over-quarter) - the cash flow statement shows this coming from a Rp16,266,775M net use in investing activities (mostly a Rp15,077,865M build-up in available-for-sale and held-to-maturity securities) plus a Rp14,878,511M net use in financing activities, only partly offset by a small positive Rp893,689M from operations. None of this is a liquidity concern on its own - LDR» actually improved this quarter (see below) - but it's a far sharper single-quarter cash decline than H1 2017's -1.6% QoQ move.
Like both prior quarters this year, this filing's P&L only carries itemized line items for other operating income/expense rather than the clean subtotals the full audited Q1 2017 filing showed, so those rows are omitted here rather than approximated.
Net income grew year-over-year for a seventh straight quarter, but at the slowest pace since Q1 2016 - and the one number that could confirm whether Q1's credit-quality turnaround held came back worse, not better.
Key Operational Metrics
- CASA»: 56.98% (Bank, Sep 2017) vs 57.62% (Bank, Jun 2017) and 60.57% (Bank, Dec 2016) - drifting down from 2016's peak for a third straight quarter, per BRI's own presentation.
- Loan-to-deposit ratio (LDR)»: 90.39% (Bank, Sep 2017) vs 89.76% (Bank, Jun 2017) and 87.77% (Bank, Dec 2016) - back above management's ~90% target band, on loan growth (+0.9% QoQ) slightly outpacing deposit growth (+0.1% QoQ, bank total).
- Net Interest Margin (NIM)»: 8.13% (Bank, Sep 2017) vs 8.12% (Bank, Jun 2017) and 8.24% (Bank, Sep 2016) - essentially flat sequentially, still below year-ago, management's own presentation crediting a lower cost of funds (3.47% vs 3.89% YoY) for holding the line.
- ROA» (before tax): 3.34% (Bank, Sep 2017) vs 3.31% (Bank, Jun 2017) and 3.59% (Bank, Sep 2016) - flat QoQ, continuing the gradual YoY decline this series has tracked since 2015.
- ROE»: 19.27% (Bank, Sep 2017) vs 19.12% (Bank, Jun 2017) and 23.97% (Bank, Sep 2016) - a small sequential improvement, still well below year-ago for the same reason H1 2017 gave: 2016's revaluation enlarged the capital base this ratio divides by.
- CAR» (Total, Bank): 22.17% (Sep 2017) vs 21.67% (Jun 2017) and 21.88% (Sep 2016) - a second straight quarterly increase since Q1's dividend-driven dip, and Tier 1 CAR (bank-only) rose again too, from 20.68% to 21.17%.
- NPL ratio - gross: 2.23% (Bank, Sep 2017) vs 2.23% (Bank, Jun 2017) and 2.22% (Bank, Sep 2016) - flat quarter-over-quarter, the first quarter since Dec 2016 this ratio hasn't risen.
- NPL ratio - net: 1.06% (Bank, Sep 2017) vs 1.16% (Bank, Jun 2017) - down again despite gross NPL holding flat, consistent with the rising coverage ratio below.
- Cost-to-income (BOPO»): 72.32% (Bank, Sep 2017) vs 71.55% (Bank, Sep 2016), per this filing's own regulatory ratio table - up year-over-year, essentially flat from Jun 2017's 72.55%.
- Loan-mix NPL by category: Micro 1.37%, Consumer 1.34%, Small Commercial 3.49%, Medium 6.06%, Corporate Non-SoE 4.44%, SoE 0.55% (all Bank, Sep 2017, per BRI's investor presentation - see Two Quarters of Silence, Then a Number That Explains the Wait above). Medium remains the single worst-performing category BRI discloses, a pattern flagged since Q1 2017, though it improved this quarter (7.02% Jun'17 → 6.06% Sep'17) even as Corporate Non-SoE moved the other direction.
- Segment income (Micro/Retail/Corporate/Other/Subsidiaries): not available this quarter - the presentation discloses loan mix and NPL by segment, but not segment-level profit; only the annual audited statement has historically carried that note.
- Related-party asset exposure, purchase commitments, litigation allowance: none of these are disclosed in this short-form filing - see Beyond the Usual below for what the filing's own related-party quality-of-assets table does show.
Beyond the Usual
The loan-mix data returned through the presentation, not the filed statement
The filed statement remains the short-form OJK publication for a second straight quarter, with no loan-mix or segment note of its own. What changed is that BRI's investor presentation - a separate document, missing from this series' H1 2017 materials - was available again this quarter and carries the loan-mix NPL and Special Mention tables the filing itself doesn't. This is a data-availability quirk in what this series has been able to draw on each quarter, not a change in what BRI discloses in principle: most other quarters in this series have had both documents. It's worth noting because it's the direct explanation for why last quarter's post had a genuine gap and this one doesn't.
Corporate Non-SoE credit quality reversed its own reversal
Corporate Non-SoE gross NPL improved from 3.69% (Q1'17) to 3.44% (H1'17), then jumped to 4.44% (9M'17) - the sharpest single-quarter move this series has recorded for the segment. Year-over-year it's still an improvement (4.78% at Sep 2016), so this isn't a return to 2016's worst levels, but it does mean the "problem solved" read that would have followed from Q1's reversal alone was premature. Special Mention for the Corporate category also worsened over the same window, from 5.29% (Q1'17) to 9.91% (Q2'17) before settling to 8.60% (Q3'17) - still more than double where it started the year (3.59% at Dec 2016), per BRI's own presentation.
Related-party lending is a smaller book with worse composition than a year ago
The filing's own quality-of-assets table shows Non-UMKM related-party Rupiah loans falling 22.9% year-over-year (Rp909,044M at Sep 2016 to Rp700,720M at Sep 2017) - a shrinking book. But its composition worsened: only 14.8% sits in the "Current" category (Rp103,466M of Rp700,720M) versus 29.1% a year ago, while 59.3% sits in Special Mention (up from 49.2%) and 25.9% is already classified Loss (up from 21.7%). A smaller related-party book that's carrying a larger share of impaired and watch-list loans than a year ago is worth tracking into next quarter, even though the absolute numbers are small next to BRI's Rp664,510bn total bank-only loan book.
Target Valuation Range
~2.15x P/B (~12.23x P/E) - fairly valued, with both P/E and P/B compressing slightly from the H1 2017 post - the first quarter this year the share price hasn't outrun earnings and book-value growth.
The Stock Finally Paused
BRI's share price (converted to the nominal terms actually quoted at the time, adjusting for the November 2017 1:5 stock split, since price data pulled today for this period reflects that split retroactively) closed around Rp13,886 on September 29, 2017 - up just 0.2% from the roughly Rp13,863 close the H1 2017 post reported for June 30, 2017, a sharp deceleration from H1's own 17.5% quarterly gain. Year-over-year the stock is still up 25.2% from September 30, 2016's roughly Rp11,091 (per the FY2016 post's Q3 2016 close), a smaller multiple of net income growth than H1's 4x gap - 25.2% against 8.2% net income growth is roughly 3x, still outrunning the business but by less than earlier this year. This falls short of this series' own ~30-40% threshold for a dedicated stock-price section, so it's folded in here rather than given its own heading. Shares outstanding remain 24,669,162,000 issued, of which 221,718,000 sit in treasury (24,447,444,000 outstanding) - unchanged from every prior quarter this series has covered.
| Market cap → enterprise value | Q3 2017 |
|---|---|
| Share price (period-end) | Rp13,886 |
| Shares outstanding | 24,447,444,000 |
| Market capitalization | Rp339,477B (~$25.20B) |
| Total liabilities¹ | Rp880,638B |
| Less: cash and equivalents | Rp158,463B |
| Enterprise value | Rp1,061,652B (~$78.81B) |
¹ Not itemized separately in this quarter's filing - derived as Total Assets (Rp1,038,673B) less Total Equity (Rp158,035B).
| Valuation multiple | Q2 2017 | Q3 2017 | Change |
|---|---|---|---|
| P/E (TTM) | ~12.35x | ~12.23x | ✅ down slightly |
| P/B | ~2.26x | ~2.15x | ✅ down slightly |
- P/E: ~12.23x, using a trailing-twelve-month EPS of approximately Rp1,135.22 (FY2016's Rp1,071.51 full-year EPS, minus 9M 2016's Rp775.16, plus this period's Rp838.87) - down slightly from the H1 2017 post's ~12.35x.
- P/B: ~2.15x, using book value per share of ~Rp6,466 (Rp158,034,772M total equity attributable to owners ÷ 24,447,444,000 shares outstanding) - down from the H1 2017 post's ~2.26x, as equity grew faster than the roughly flat share price.
Both multiples had expanded for two straight quarters before this one; this quarter is the first compression in the series since Q1 2017. A same-period peer read is available again: BBCA's Q3 2017 post reported ROE of 19.1% (Sep 2017) against BRI's 19.27%, NIM of 6.19% against BRI's 8.13%, and gross NPL of 1.53% against BRI's 2.23% - essentially the same higher-margin/higher-return/higher-delinquency trade-off the H1 2017 post found, with both banks' asset-quality metrics drifting the same direction (BCA's NPL also hit a new high this quarter) while BRI's stayed flat. BCA's P/E of ~22.4x against BRI's ~12.23x is a wide gap for two banks whose credit-quality trends both worsened this quarter - the market is pricing BCA's cleaner absolute NPL level and lower cost of risk far more richly than BRI's higher-margin book, and neither this post nor BCA's own valuation section treats that gap as obviously resolved.
A full DCF still isn't included here for the same reason the H1 2017 post gave: this quarter's filed statement adds no segment income data, and while the presentation resolves the loan-mix question, a segment that just moved a full point in one direction in a single quarter isn't a stable base for multi-year assumptions. The peer-multiple read above, alongside Beyond the Usual, is the honest valuation lens for this quarter.
PT Bank Rakyat Indonesia (Persero) Tbk's consolidated interim financial information as of September 30, 2017 and for the nine-month period then ended (with comparative December 31, 2016 balance sheet and September 30, 2016 income statement figures), per the Financial Services Authority's regulatory publication requirements, together with the bank's own Q3 2017 investor presentation.