A Reversal That Arrives With an Asterisk
The FY2017 post ended on Corporate Non-SoE gross NPL closing the year at 6.48%, the worst reading of any loan-mix category BRI discloses and the first time in this entire series that segment has held that title. This quarter's investor presentation shows the same category at 5.83% - a genuine one-point improvement, and on its face the kind of single-quarter reversal this series has seen before (Q1 2017's own 5.61%→3.69% drop, later fully given back by Q3). But this filing discloses something the FY2017 filing didn't: a loan re-segmentation effective this quarter, moving the size thresholds that define Small Commercial, Medium, and Corporate loans (Small Commercial's ceiling rose from Rp5 billion to Rp15 billion; Medium's band moved from Rp5-50 billion to Rp15-200 billion; Corporate's floor rose from above Rp50 billion to above Rp200 billion). The presentation applies the new thresholds retroactively across its own historical NPL series - so Corporate's FY2017 reading under the new definition is actually 6.44%, not the 6.48% the FY2017 post reported under the old one - which means 6.44%→5.83% is the cleanest like-for-like comparison this filing actually supports, and it's still a real improvement. What it isn't is proof the segment's underlying loan book got safer in any way a reader could independently verify: a loan that shifted from "Medium" to "Corporate" (or the reverse) under the new thresholds changes which bucket's NPL ratio it counts against, without the loan itself changing risk at all. Whether this quarter's drop reflects genuine credit-quality improvement, or is partly mechanical from the resegmentation, isn't something the presentation deck - the only place this NPL series is disclosed - lets a reader untangle.
Consolidated net income attributable to owners grew 11.4% year-over-year (Rp7,400,907M vs Rp6,645,700M), continuing the double-digit growth the FY2017 post recorded for the full year. Total interest, Sharia, and premium income grew 8.5%, and operating income grew a faster 14.7% - a rare quarter where the cost/provisioning lines didn't outrun revenue growth, unlike almost every prior quarter this series has tracked.
The Prescription
BRI should publish a clean bridge - even a single footnote line - showing how much of the Corporate Non-SoE NPL move each quarter comes from genuine repayment/write-off/recovery activity versus loans migrating in or out of the segment from a threshold change. The bank clearly has this data internally (it restated the entire historical NPL series under the new thresholds for this presentation), so withholding the bridge isn't a data-availability problem, it's a disclosure choice - and it's the same kind of gap the FY2017 post flagged when it asked BRI to name which sectors were actually driving Corporate Non-SoE's deterioration. A bank that resegments its own worst-performing loan category in the same quarter that category's ratio improves owes its readers more than a footnote acknowledging the change happened.
What BRI should stop doing: treating a definitional change to a closely-watched credit-quality metric as a routine operational footnote rather than a disclosure event worth flagging in its own right. The re-segmentation note sits buried under a chart title in the loan-mix section of the presentation - not called out in the "Key Take Aways" summary, not mentioned in the filed financial statements' own notes at all (Note 41's segment income table uses the old, unchanged Micro/Retail/Corporate/Others/Subsidiaries operating-segment structure, so it isn't even internally consistent with the presentation's loan-mix reclassification). A reader comparing this quarter's headline NPL number to last quarter's without knowing the definition moved underneath it would draw the wrong conclusion.
Key Financial Metrics
Q1 2018 vs. Q1 2017 (P&L, consolidated), and Mar 2018 vs. Dec 2017 / Mar 2017 (balance sheet, consolidated)
FX: IDR 13,767.50 = USD 1 (the rate this filing discloses for March 31, 2018).
| Metric | Q1 2018 (IDR) | Q1 2018 (USD) | Q1 2017 (IDR) | YoY |
|---|---|---|---|---|
| Net Interest, Sharia and Premium Income, net ("Net Revenue" equivalent) | Rp18,870,807M | ~$1,371M | Rp17,392,267M | ✅ +8.5% |
| Other Operating Income | Rp4,987,997M | ~$362M | Rp3,968,472M | ✅ +25.7% |
| Total Other Operating Expenses | Rp9,329,126M | ~$678M | Rp8,106,873M | ⚠️ +15.1% |
| Operating Income (Income from Operations) | Rp9,143,702M | ~$664M | Rp7,969,594M | ✅ +14.7% |
| Net Income (attributable to owners) | Rp7,400,907M | ~$538M | Rp6,645,700M | ✅ +11.4% |
| Total Comprehensive Income (attributable to owners) | Rp6,214,142M | ~$451M | Rp7,741,615M | ⚠️ -19.7%¹ |
| EPS (basic, quarterly, consolidated) | Rp60.47 | ~$0.0044 | Rp54.30 | ✅ +11.4% |
¹ Not a new revaluation base-effect like FY2016's - this quarter's own other comprehensive income swung to a Rp1,193,745M loss (mostly a Rp1,476,446M unrealized mark-to-market loss on available-for-sale securities and government recap bonds), against a Rp1,107,506M gain in the year-ago quarter. Bond-portfolio mark-to-market swings, not an operating result.
| Balance sheet metric | Mar 2018 (IDR) | Mar 2018 (USD) | Dec 2017 (IDR) | QoQ | Mar 2017 (IDR) | YoY |
|---|---|---|---|---|---|---|
| Total Assets | Rp1,119,240,112M | ~$81.29B | Rp1,126,248,442M | ➖ -0.6% | Rp995,999,711M | ✅ +12.4% |
| Loans (gross, incl. sharia financing and finance lease) | Rp757,677,626M | ~$55.03B | Rp739,336,520M | ✅ +2.5% | Rp681,269,438M | ✅ +11.2% |
| Total Deposits (Demand + Savings + Time) | Rp827,059,605M | ~$60.08B | Rp841,656,450M | ⚠️ -1.7% | Rp733,954,610M | ✅ +12.7% |
| Total Liabilities | Rp958,606,454M | ~$69.63B | Rp958,900,948M | ➖ 0.0% | Rp851,897,576M | ✅ +12.5% |
| Total Equity (attributable to owners) | Rp160,020,851M | ~$11.62B | Rp166,748,817M | ⚠️ -4.0% | Rp143,685,785M | ✅ +11.4% |
| Total Cash and Cash Equivalents (per cash flow statement) | Rp175,477,339M | ~$12.75B | Rp186,410,433M | ⚠️ -5.9% | Rp160,215,195M | ✅ +9.5% |
The Mar 2017 balance-sheet column is pulled from the Q1 2017 post's own recorded figures, since this filing (like that one) only carries Dec-31 comparative columns on its statement of financial position, not a prior-year Mar 31 column - the total cash figure cross-checks exactly against this quarter's own comparative column (Rp160,215,195M both places), confirming the two filings agree.
Total cash fell 5.9% quarter-over-quarter and equity fell 4.0% - the same seasonal pattern the Q1 2017 post flagged a year ago: a Rp13,048,441M FY2017 dividend, approved at the March 22, 2018 AGM, paid out this quarter and drawing down both cash (via the financing-activities cash flow line) and retained earnings faster than the quarter's own Rp7,400,907M of net income could replace. Deposits fell 1.7% QoQ (demand deposits alone fell Rp18,005,028M) while loans grew 2.5% - the recurring Q1 pattern of BRI originating loans faster than it's collecting deposits, seen in every first quarter this series has covered.
Net income grew a healthy double digits for a fourth straight quarter, and for once operating income grew faster than expenses - but the quarter's marquee credit-quality number arrives with a definitional change baked in that the deck doesn't spell out clearly (see A Reversal That Arrives With an Asterisk above).
Key Operational Metrics
Bank-only, per BRI's own investor presentation, unless stated
- CASA»: 57.61% (Bank, Mar 2018) vs 60.65% (Bank, Dec 2017) and 56.63% (Bank, Mar 2017) - a normal seasonal Q1 dip (savings and demand deposits both fell more than time deposits this quarter), still up modestly year-over-year.
- Loan-to-deposit ratio (LDR)»: 92.26% (Bank, Mar 2018) vs 88.13% (Bank, Dec 2017) and 93.15% (Bank, Mar 2017) - back above management's own target band, the same recurring Q1 pattern (loans growing while deposits pull back) this series has now recorded every first quarter.
- Net Interest Margin (NIM)»: 7.49% (Bank, Mar 2018) vs 7.93% (Bank, FY2017) and 7.79% (Bank, Mar 2017) - continuing the gradual compression this series has tracked since 2015, still using the reclassified basis the FY2017 post noted isn't comparable to earlier raw figures.
- ROA» (before tax): 3.35% (Bank, Mar 2018) vs 3.69% (Bank, FY2017) and 3.34% (Bank, Mar 2017) - essentially flat year-over-year, breaking the multi-year decline pattern for the first time this series has seen.
- ROE» (Tier 1): 18.73% (Bank, Mar 2018) vs 20.03% (Bank, FY2017) and 18.77% (Bank, Mar 2017) - essentially flat year-over-year, still well below the pre-2016 levels the FY2017 post noted are structurally out of reach given the enlarged Tier 1 capital base.
- CAR» (Total, Bank): 20.74% (Mar 2018) vs 22.96% (Dec 2017) and 20.89% (Mar 2017) - a genuine quarter-on-quarter decline, mirroring the same dividend-driven mechanic the Q1 2017 post documented in detail a year ago (large AGM dividend payout landing in Q1, shrinking capital before the year's retained earnings can rebuild it). Tier 1 CAR fell to 19.76% from 21.95%.
- NPL ratio - gross: 2.39% (Bank, Mar 2018) vs 2.10% (Bank, Dec 2017) and 2.16% (Bank, Mar 2017) - up on both counts, and management's own presentation attributes the rise directly to "seasonality and gradual cleansing," not a new credit event.
- NPL ratio - net: 1.16% (Bank, Mar 2018) vs 0.88% (Bank, Dec 2017) and 1.22% (Bank, Mar 2017) - up QoQ, still slightly better than a year ago.
- NPL coverage ratio: 182.2% (Bank, Mar 2018), per the presentation's own "Key Take Aways" slide, up from 181.5% at Mar 2017 - management specifically flags credit cost falling to 3.0% from 3.2% a year earlier.
- Cost-to-income (Opex/Opr. Income, bank-only): 70.43% (Bank, Mar 2018) vs 69.14% (Bank, FY2017) and 71.46% (Bank, Mar 2017) - a modest year-over-year improvement, still above the full-year FY2017 level (typical of Q1's seasonally lower revenue base).
- Loan-mix NPL by category (re-segmented basis): Micro 1.35%, Consumer 1.24%, Small Commercial 3.81%, Medium 5.20%, Corporate Non-SoE 5.83%, SoE 0.51% (all Bank, Mar 2018, per BRI's investor presentation, under the new size thresholds - see A Reversal That Arrives With an Asterisk above). Corporate Non-SoE remains BRI's worst-performing loan-mix category for a second straight quarter, but the gap to Medium (5.20%) narrowed sharply from FY2017's near-1.3-point spread to just 0.63 points.
- Segment income (Micro/Retail/Corporate/Others/Subsidiaries): available this quarter - see Five Segments, One Quiet Quarter below. Unlike the loan-mix table above, this note's segment definitions were not changed by the re-segmentation.
- Geographic segment: Indonesia, USA, Hong Kong, Singapore, and Timor Leste - the same five regions the FY2017 post first recorded Timor Leste in; see Beyond the Usual below for how fast it's scaling.
Five Segments, One Quiet Quarter
BRI reports five operating segments: Micro, Retail, Corporate, Others (mainly treasury and non-lending activities), and Subsidiaries - the officially-reported segment note, distinct from the loan-mix NPL categories discussed above (this quarter's "Corporate" segment here is the broader classification, not directly comparable line-for-line to "Corporate Non-SoE"). Because this is an interim filing, Note 41 only carries a Dec 31, 2017 comparative column (the full year), not a genuine Q1 2017 quarter - the same limitation the Q1 2017 post flagged about its own filing, so the figures below are read as a share of the quarter's total rather than against a true year-ago quarter.
Micro remains BRI's largest segment by income: Rp10,953,310M total income and Rp3,709,656M income for the quarter, a 33.9% net margin - roughly a quarter of FY2017's full-year Rp15,644,848M net income in a single quarter, consistent with a normal run-rate.
Retail posted Rp8,660,545M total income and Rp2,452,088M income for the quarter, a 28.3% net margin, essentially matching FY2017's full-year 28.0% margin.
Corporate posted Rp1,706,084M total income and just Rp134,400M income for the quarter - a 7.9% net margin, the lowest of any segment and below even FY2017's already-weak 9.46% full-year margin. Provisioning of Rp647,787M for the quarter is below the roughly Rp819,700M quarterly run-rate FY2017's full-year Rp3,278,755M charge implies - a smaller absolute provisioning charge, but one that's now eating a larger share of a smaller income base, which is why the margin compressed further even as the loan-mix NPL reading (above) improved.
Others posted Rp1,501,118M total income and Rp856,142M income for the quarter (57.0% margin) - the highest margin of any segment, consistent with its non-lending, low-provisioning treasury and securities business.
Subsidiaries posted Rp1,037,747M total income and Rp269,724M income for the quarter (26.0% margin), tracking close to a quarter of FY2017's full-year Rp575,099M.
Corporate is again the outlier: Micro, Retail, and Others each posted quarterly income equal to 23.7%-27.4% of their own FY2017 full-year total - a normal-looking quarterly share - but Corporate's Rp134,400M is only 18.3% of FY2017's already-weak full-year Rp734,018M, the lowest share of any segment. The segment's profitability kept deteriorating this quarter even as the loan-mix NPL category most associated with it (Corporate Non-SoE) reported an improving ratio. Those two readings pulling in opposite directions is itself worth flagging: whatever drove the loan-mix NPL number down didn't show up in the segment's own income statement.
Beyond the Usual
A loan re-segmentation moved the goalposts under the quarter's marquee NPL number
BRI's investor presentation discloses, in a single note under its loan-mix chart, that Small Commercial, Medium, and Corporate loan-size thresholds all changed this quarter (Corporate's floor moved from above Rp50 billion to above Rp200 billion). The deck retroactively restates its own historical NPL series under the new thresholds, which is how Corporate Non-SoE's FY2017 reading changes from the 6.48% the FY2017 post reported to 6.44% here. The filed financial statements' own segment note (Note 41), by contrast, keeps its Micro/Retail/Corporate/Others/Subsidiaries structure unchanged - so this quarter's two segment-adjacent disclosures now use two different definitions of "Corporate" that don't reconcile to each other, and neither document explains the change's magnitude in Rupiah terms (how much loan balance actually moved segments versus how much NPL genuinely resolved). See A Reversal That Arrives With an Asterisk above.
The Corporate segment's own income kept shrinking even as its loan-mix NPL improved
The officially-reported Corporate segment posted a 7.9% net margin this quarter, down from FY2017's already-weak 9.46% full-year margin, and its Rp134,400M quarterly income is running well below a normal share of FY2017's pace (see Five Segments, One Quiet Quarter above). That's the opposite direction from the loan-mix Corporate Non-SoE NPL reading, which improved this quarter under the new thresholds. A segment whose profitability keeps deteriorating while its associated NPL ratio improves is a genuine inconsistency worth watching over the next few quarters, not a case closed by one improving ratio.
BRI signed a Rp112,900M, 380-calendar-day contract with PT PP (Persero) on February 14, 2018 for the first package of construction services on the BRI Gatot Subroto Tower Building - the first headquarters-construction agreement this series has recorded, distinct from the run of ATM, EDC, mainframe, and network-equipment procurement contracts the FY2017 post and earlier posts have tracked. Three more technology and telecom agreements were also signed this quarter: network-communication service extension for 1,219 remote areas (PT Satkomindo Mediyasa, Rp23,364M), a 24-month communication-channel lease supporting BRISPOT and BRI's mobile app (PT Telekomunikasi Indonesia, Rp275,895M), and a 3-year Integrated Network Management System contract (PT Transtel Universal, Rp25,370M) - the technology-buildout pattern this series has tracked since 2016 shows no sign of slowing.
BRI's Timor Leste branch, first disclosed in the FY2017 post with a full year of Rp5,155M total income, generated Rp5,023M in this single quarter alone - nearly matching all of FY2017's income in three months - while its total assets grew 50.1% quarter-over-quarter (Rp379,288M to Rp569,238M). The branch posted a small pre-tax loss (Rp115M) this quarter, but the scale of the quarter-over-quarter growth suggests a genuinely fast early-stage ramp, not just a rounding-error presence anymore.
The bank's pending-litigation allowance grew just 3.4% quarter-over-quarter (Rp971,354M to Rp1,004,354M), a sharp deceleration from the 58.3% full-year growth the FY2017 post flagged as running well ahead of the bank's asset growth. Management's language on the underlying claims (ordinary contractual-compliance disputes, no material effect on operations expected) is unchanged from prior filings.
Target Valuation Range
P/E ~13.46x, P/B ~2.50x - fairly valued, with a slightly cheaper P/E than the FY2017 post recorded even as the share price barely moved, because trailing earnings grew faster than the stock did this quarter.
BRI's share price closed around Rp3,273 on March 30, 2018 (the last trading session before the Good Friday holiday and the quarter's calendar end; already in nominal post-split terms, since the November 2017 1:5 split predates this entire quarter) - down 1.1% from the FY2017 post's Rp3,309 close, and up 38.7% from Rp2,359 a year earlier (also post-split-equivalent). That's a real move short of the ~30-40% peak-to-trough threshold this series uses to warrant its own dedicated section, so it's folded into the valuation read here - the stock essentially paused this quarter after two straight quarters of sharp gains.
Shares outstanding remain 123,345,810,000 issued, of which 1,108,590,000 sit in treasury (122,237,220,000 outstanding) - unchanged from the FY2017 post, since no buyback or issuance activity occurred this quarter.
| Market cap → enterprise value | Q1 2018 |
|---|---|
| Share price (period-end) | Rp3,273 |
| Shares outstanding | 122,237,220,000 |
| Market capitalization | ~Rp400,082B (~$29.06B) |
| Total liabilities | Rp958,606B |
| Less: cash and equivalents | Rp175,477B |
| Enterprise value | ~Rp1,183,211B (~$85.94B) |
Total equity attributable to owners (book value) is Rp160,021B, giving the P/B ~2.50x used below.
Trailing-twelve-month EPS is approximately Rp243.10 (FY2017's Rp236.93, minus Q1 2017's Rp54.30, plus this quarter's Rp60.47), giving a P/E» of ~13.46x against the Rp3,273 close.
| Peer-multiple sanity check | FY2017 | Q1 2018 | Change |
|---|---|---|---|
| P/E» | ~13.95x | ~13.46x | ✅ down - trailing earnings grew faster than the flat share price |
| P/B» | ~2.43x | ~2.50x | ⚠️ up - Q1 dividend payout shrank the book-value denominator faster than the roughly-flat price fell |
The two multiples moved in opposite directions this quarter - P/E down slightly, P/B up slightly - a genuinely mixed read rather than the clean "both expand" or "both compress" pattern most prior quarters in this series have shown. A same-period peer read is available again: BBCA's Q1 2018 post reported ROE of 16.06% against BRI's 18.73% (Tier 1), NIM of 6.06% against BRI's 7.49%, and gross NPL of 1.54% against BRI's 2.39% - the same higher-margin/higher-return/higher-delinquency trade-off this series has tracked all year, though the gap narrowed slightly since BCA's NPL also worsened this quarter. BCA's P/E of ~24.1x against BRI's ~13.46x remains a wide premium, similar to the ~1.66x-1.83x range this series has tracked since Q3 2017.
A full DCF still isn't included here for the reason the FY2017 post gave and this quarter reinforces from a different angle: a loan re-segmentation that changes what counts inside the bank's worst-performing loan-mix category, landing in the same quarter that category's officially-reported segment income kept deteriorating even as its NPL ratio improved, isn't a stable base for multi-year credit-quality 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 interim consolidated financial statements as of March 31, 2018 and for the three-month period then ended (unaudited, with review report), together with its Q1 2018 investor presentation.