A Gap That Closed in Q1 Reopened in Q2 - For a Different Reason Than It Widened the First Time
The Q1 2019 post closed with the most decisive move this series had recorded in BRI's loan-mix NPL table: the 1.30 percentage-point gap between Medium and Corporate Non-SoE - BRI's two worst-performing loan categories through all of 2018 - collapsed to just 0.37 points as Medium's NPL fell 96 basis points in a single quarter with no disclosed explanation. This quarter, that gap widened back out to 0.73 points (Medium 5.55%, Corporate 4.82%, bank-only, at June 30, 2019) - but not because Medium got worse again. Medium's NPL actually kept improving, falling further to 5.55% from 5.82% at March 2019. Corporate Non-SoE just improved faster, dropping from 5.45% to 4.82%, a 63-basis-point move against Medium's 27. Both of BRI's worst loan categories got better this quarter; the gap between them widened anyway, because "better" wasn't evenly distributed.
This is a genuinely different shape of divergence than anything the prior three quarters produced. FY2018 widened the gap through one category worsening while the other held. Q1 2019 closed it through one category's sharp, unexplained improvement. This quarter widens it again through both categories improving at different speeds - the first time in this series the gap has moved without either side actually deteriorating. That's a better outcome on the surface (both segments cleaner than a quarter ago), but it also means the brief convergence flagged last quarter wasn't the start of a new stable relationship between the two segments - it was one quarter's coincidence, undone by the very next one.
The two segments' Special Mention loans (the tier just below NPL) tell a less comfortable version of the same story - see Beyond the Usual below.
The Prescription
BRI's own materials have now shown three consecutive quarters where the Medium/Corporate Non-SoE gap moved by a different mechanism each time - Corporate deteriorating relative to Medium, Medium improving sharply relative to Corporate, and now Corporate improving faster than Medium. A bank that wants a reader to trust its loan-mix disclosures should publish the reasons behind category-level NPL swings this large, not just the percentages - three different explanations in three quarters, none of them disclosed, is not a track record that supports treating any single quarter's reading as signal rather than noise.
What BRI should stop doing: continuing to report Special Mention loans by segment as a bare percentage table without narrative context, while both Medium and Corporate's Special Mention ratios move by multiple points in the same quarter their NPL ratios improve (see Beyond the Usual). A watch-list category rising while the delinquency category it feeds into falls is exactly the kind of divergence a bank's own investor materials should flag explicitly - not leave for a reader to notice by comparing two tables on the same page.
Key Financial Metrics
H1 2019 vs. H1 2018 (P&L, consolidated, cumulative Jan-June), and June 2019 vs. December 2018 (balance sheet, consolidated)
FX: 1 USD = Rp14,127.50, the exchange rate this filing itself discloses for June 30, 2019.
| Metric | H1 2019 (IDR) | H1 2019 (USD) | H1 2018 (IDR)¹ | YoY |
|---|---|---|---|---|
| Interest, Sharia and Premium Income, net ("Net Revenue" equivalent) | Rp40,042,630M | ~$2,834M | Rp38,666,839M | ✅ +3.56% |
| Other Operating Income | Rp12,384,724M | ~$877M | Rp10,277,818M | ✅ +20.50% |
| Total Other Operating Expenses | Rp32,521,452M | ~$2,302M | Rp30,396,394M | ⚠️ +6.99% |
| Operating Income | Rp19,905,902M | ~$1,409M | Rp18,480,144M | ✅ +7.72% |
| Net Income (attributable to owners) | Rp16,164,575M | ~$1,144M | Rp14,889,928M | ✅ +8.56% |
| Total Comprehensive Income (attributable to owners) | Rp21,598,977M | ~$1,529M | Rp10,836,934M | ✅ +99.31%² |
| EPS (basic, H1 cumulative, attributable to owners) | Rp132.21 | ~$0.0094 | Rp121.81 | ✅ +8.54% |
¹ These H1 2018 comparative figures were restated by BRI under PSAK 38 ("Business Combinations of Entities Under Common Control") to reflect the December 2018 acquisitions of Danareksa Sekuritas and BRI Ventura Investama as if they'd been consolidated from the start - see Beyond the Usual for what that means for this quarter's YoY comparisons. ² The same bond-portfolio mark-to-market swing Q1 2019 already flagged reversing - a Rp3,003,512M gain on available-for-sale securities this half (before tax) against a Rp5,402,440M loss in the same period a year earlier, as Indonesian bond yields continued easing through H1 2019.
| Balance sheet metric | Jun 2019 (IDR) | Jun 2019 (USD) | Dec 2018 (IDR) | QoQ |
|---|---|---|---|---|
| Total Assets | Rp1,288,196B | ~$91.18B | Rp1,296,898B | ⚠️ -0.67% |
| Loans (gross, incl. sharia financing and finance lease) | Rp887,924B | ~$62.85B | Rp843,032B | ✅ +5.33% |
| Total Deposits (Demand + Savings + Time + Sharia) | Rp945,054B | ~$66.90B | Rp944,269B | ✅ +0.08% |
| Total Liabilities | Rp1,097,355B | ~$77.68B | Rp1,111,623B | ⚠️ -1.28% |
| Total Equity (incl. non-controlling interest) | Rp190,841B | ~$13.51B | Rp185,275B | ✅ +3.00% |
| Total Cash and Cash Equivalents (per cash flow statement) | Rp166,626B | ~$11.80B | Rp215,757B | ⚠️ -22.77% |
Total assets shrank again quarter-over-quarter, extending Q1's first-ever QoQ decline in this series, even as gross loans grew a healthy 5.33% - the shrinkage is concentrated in non-loan earning assets (government bonds, securities) rather than the core lending book. But the real story is cash: the whipsaw flagged since Q4 2018's record +54.3% jump and continued with Q1's -7.66% fall has now produced its sharpest move yet - Rp166,626B at June 2019, down 22.77% from December's Rp215,757B. Three consecutive quarters, three different magnitudes, no settled direction: +54.3%, -7.66%, -22.77%. Year-over-year, cash is actually up modestly (Rp166,626B vs Rp153,856B at June 2018, +8.30%), so even this violent a quarterly swing hasn't broken the longer-run uptrend - it's just made the quarter-to-quarter reading essentially useless as a standalone signal.
Net income attributable to owners grew a solid 8.6% YoY, but this quarter's real story is the loan-mix gap Q1 closed reopening for a new reason, and cash falling by its largest quarterly amount in this entire series (see A Gap That Closed in Q1 Reopened in Q2 above).
Key Operational Metrics
Bank-only, per BRI's own investor presentation and filed financial ratios, unless stated
- CASA»: 58.72% (Jun 2019) vs 61.84% (Dec 2018) and 59.51% (Jun 2018) - down from year-end, roughly a point below the year-ago reading.
- Loan-to-deposit ratio (LDR)»: 93.90% (Jun 2019) vs 89.57% (Dec 2018) and 95.27% (Jun 2018) - up from year-end as loan growth (+5.33% QoQ) outran deposit growth (+0.08% QoQ), still inside management's 90%±2% target band, improved YoY.
- Net Interest Margin (NIM)»: 7.02% (Jun 2019, filed ratio) vs 7.45% (Dec 2018) and 7.64% (Jun 2018) - a slight recovery from Q1 2019's series-low 6.89%, though still well below the year-ago reading and outside management's own ±7.2% full-year target.
- ROA» (before tax): 3.31% (Jun 2019) vs 3.68% (Dec 2018) and 3.37% (Jun 2018) - down modestly YoY.
- ROE» (Tier 1): 19.02% (Jun 2019) vs 20.49% (Dec 2018) and 19.33% (Jun 2018) - down modestly YoY, unlike Q1's small YoY gain.
- CAR» (Total, bank-only, filed ratio): 20.77% (Jun 2019) vs 21.68% (Mar 2019) and 20.12% (Jun 2018) - down from Q1's reading but still up YoY, continuing the capital rebuild flagged since 9M 2018.
- NPL ratio - gross (bank-only, filed ratio): 2.33% (Jun 2019) vs 2.14% (Dec 2018) and 2.33% (Jun 2018) - worse than year-end (the same Q1/Q2 seasonal build-up this series flagged last quarter), but exactly flat year-over-year at 2.33%.
- NPL ratio - net (bank-only, filed ratio): 1.11% (Jun 2019) vs 0.92% (Dec 2018) and 1.10% (Jun 2018) - essentially flat YoY, worse than year-end.
- BOPO» (Opex/Opr. Income, bank-only): 71.12% (Jun 2019) vs 68.48% (Dec 2018) and 70.50% (Jun 2018) - worse both QoQ and YoY, the weakest efficiency reading in this series outside a full-year print.
- Loan-mix NPL by category (bank-only): Micro 1.40%, Consumer 1.35%, Small Commercial 3.75%, Medium 5.55%, Corporate Non-SoE 4.82%, SoE 0.97% (Jun 2019) vs Micro 1.01%, Consumer 1.03%, Small Commercial 3.14%, Medium 6.78%, Corporate Non-SoE 5.48%, SoE 1.05% (Dec 2018) - every category improved from year-end except SoE, which worsened. See above for the Medium/Corporate Non-SoE gap dynamics.
- Special Mention loans by category (bank-only): Micro 4.60%, Consumer 3.08%, Small Commercial 6.41%, Medium 6.51%, Corporate Non-SoE 10.63%, SoE 3.63% (Jun 2019) vs Micro 3.51%, Consumer 2.49%, Small Commercial 4.28%, Medium 2.86%, Corporate Non-SoE 7.71%, SoE 0.82% (Dec 2018) - every single category worsened from year-end, several sharply. See Beyond the Usual for what this means alongside the improving NPL readings above.
- Write-off recovery rate (bank-only): 50.2% of the half-year's own gross write-offs recovered (Rp2,845,694M recovered against Rp5,668,393M written off), vs 43.2% a year ago (Rp2,428,342M against Rp5,627,330M) - improved YoY, above BRI's own 50% internal target.
- Geographic segment data: not disclosed in either source document this quarter - the same gap flagged at Q1 2019 and unresolved since 9M 2018. Still no update on Timor Leste.
- Segment income (Micro/Retail/Corporate/Others/Subsidiaries): not disclosed this quarter either, continuing the gap flagged at Q1 2019 - unlike the FY2018 filing, no interim quarter this year has carried a segment income breakdown.
Business Lines: Loan Growth and Credit Quality
Micro loans grew 13.6% YoY to Rp292.6 trillion, still the largest and fastest-growing book, with micro borrowers up 6.6% YoY. Micro's NPL held essentially flat at 1.40% (vs 1.41% a year ago) - the segment BRI's corporate plan is explicitly betting on (targeting ~40% of the loan book by 2022) continues to combine size, growth, and credit cleanliness better than any other segment.
Small Commercial loans grew 14.5% YoY to Rp190.3 trillion with NPL essentially flat at 3.75% (vs 3.77% a year ago). Medium loans grew just 2.5% YoY to Rp19.7 trillion - still the slowest-growing book by a wide margin, even as its NPL kept improving (5.55% vs 6.02% a year ago). A book barely growing while still carrying the second-highest delinquency rate of any segment remains the weakest link in BRI's SME ambitions, regardless of which direction its NPL moves in any given quarter.
Consumer loans grew 8.7% YoY to Rp135.1 trillion, 73.0% of it salary-based lending, with NPL up slightly to 1.35% from 1.27% a year ago - still the most stable book in the portfolio, but the direction (however small) is worth watching after several quarters of near-total flatness.
SoE and Corporate loans combined grew 8.1% YoY to Rp206.8 trillion. Corporate's NPL improved from 5.38% to 4.82% YoY - the driver of this quarter's gap-reopening (see above) - while SoE's NPL more than doubled YoY in percentage terms, from 0.44% to 0.97%, mirroring the same pattern flagged at Q1 2019 where SoE, meant to be BRI's lowest-risk lending relationship, keeps drifting the wrong direction even while staying the cleanest book in absolute terms.
Subsidiaries held total assets of Rp63.53 trillion at June 2019, per the presentation's asset breakdown, with the group's two largest subsidiaries contributing Rp38.87 trillion and Rp24.87 trillion respectively, while Danareksa Sekuritas and BRI Ventura - both acquired in December 2018 - contributed a combined Rp1.22 trillion (Rp1.01 trillion and Rp208.5 billion respectively). No segment-level profit contribution figure is disclosed this quarter, unlike Q1 2019's Rp341.61 billion subsidiary profit/fee figure.
Beyond the Usual
The Year-Ago Comparative Base Was Quietly Restated Mid-Series
This quarter's filed statement discloses that BRI adopted PSAK 38 ("Business Combinations of Entities Under Common Control") because of the December 2018 acquisitions of Danareksa Sekuritas and BRI Ventura Investama, and that "the consolidated financial statements as of June 30, 2018 and for the year then ended have been restated and adjusted to PSAK 38" as a result. Every H1 2018 comparative figure used in this post's Key Financial Metrics table - net revenue, operating income, net income, EPS - is therefore drawn from a restated base, not the figures BRI's own H1 2018 filing originally published. This is a legitimate accounting treatment for a common-control combination, not a governance issue, but it means a reader comparing this post's YoY percentages against [the original H1 2018 post's](/analysis/bbri/2018-06/) own numbers may find small discrepancies that reflect the restatement, not an error in either post.
Special Mention Loans Jumped for Every Segment - Including the Two Whose NPL Just Improved
Every loan-mix category's Special Mention ratio (the watch-list tier one step above NPL classification) worsened from December 2018 to June 2019 - but the two segments this series has tracked most closely, Medium and Corporate Non-SoE, worsened the most. Medium's Special Mention ratio more than doubled, from 2.86% to 6.51%; Corporate Non-SoE's rose from 7.71% to 10.63%, now the highest Special Mention reading of any segment in the book. Both categories' *NPL* ratios improved over the same period (see [above](#a-gap-that-closed-in-q1-reopened-in-q2-for-a-different-reason-than-it-widened-the-first-time)) - meaning the loans actually migrating into default got cleaner, while the pipeline of loans one late payment away from default got meaningfully worse. Neither BRI's presentation nor its filed statement connects these two readings; a reader has to compare two separate tables to see it.
The Cash Whipsaw Has Now Run Three Different Directions in Three Quarters
BRI's period-end cash and cash equivalents jumped 54.3% in Q4 2018, fell 7.7% in Q1 2019, and fell a further 22.8% this quarter - three consecutive quarters with three different magnitudes of swing and no settled trend, even though the year-over-year comparison (+8.3%) still shows growth. The scale of movement (a quarter-end reading that can drop by nearly a quarter of its value in three months) is large enough that a reader relying on any single quarter's cash figure as a liquidity signal, rather than the underlying loan/deposit/CASA» trend covered above, would be reading noise.
Danareksa Sekuritas and BRI Ventura Contributed a Modest Rp1.22 Trillion Combined, Six Months After Acquisition
Of BRI's Rp63.53 trillion in total subsidiary assets at June 2019, the two subsidiaries acquired in December 2018 - Danareksa Sekuritas (67% owned) and BRI Ventura Investama (97.6% owned) - together account for just Rp1.22 trillion, against the group's two largest subsidiaries at Rp38.87 trillion and Rp24.87 trillion. Two quarters after acquisition, the newest additions to BRI's subsidiary stable remain a rounding error next to the established ones - unsurprising for a securities house and a venture capital vehicle relative to the group's core banking and insurance subsidiaries, but worth noting given FY2018's post flagged the two acquisitions as a deliberate diversification move.
Related-Party Lending Remains a Rounding Error Against the Third-Party Book
BRI's related-party loan exposure (loans to affiliated entities and connected parties, per the filing's "Quality of Assets" schedule) totaled Rp138.8 million at June 2019, against Rp889.9 billion in related-party placements and other receivables combined - both trivial next to the bank's Rp887.9 trillion total gross loan book. No related-party loan sits in a non-Current classification. This is a clean footnote, not a finding worth flagging beyond noting it was checked.
The Stock's Two-Year Round Trip
Over the two years ending this quarter, BRI's share price traced a genuine round trip rather than a steady climb: Rp2,772.68 at June 2017, down to a trough of Rp2,581.77 at the end of Q2 2018 (the 2018 emerging-market selloff this series has tracked through every post covering that year), then a recovery to a peak of Rp3,972.66 in April 2019, before settling at Rp3,963.57 at this quarter's close on June 28, 2019 - a peak-to-trough move of roughly 53.9%. None of that swing is specific to this quarter's own numbers; it's the market re-rating BRI (and Indonesian bank equities generally) as 2018's rupiah/EM stress eased into 2019, well before this quarter's loan-mix or cash-flow story existed. BRI's most recent stock split (5-for-1, November 2017) predates this quarter and needs no further adjustment for the prices quoted here; a later 1-for-5 split in December 2021 postdates this quarter and does not affect the nominal prices used throughout this post, all of which reflect what was actually quoted on the Indonesia Stock Exchange at the time.
Target Valuation Range
P/E ~14.41x, P/B ~2.57x - BRI's multiples kept expanding for a fourth straight quarter, but the gap to BCA held roughly steady rather than narrowing or widening further - both banks are getting more expensive together, not converging.
BRI's share price closed at Rp3,963.57 on June 28, 2019 - up 6.1% from the Q1 2019 post's Rp3,736 close, and up 53.5% year-over-year against the Q2 2018 trough covered above¹.
¹ Consistent with the methodology used throughout this series, using BRI's own closing price at the last trading day of the comparative quarter.
Trailing-twelve-month EPS is approximately Rp275.06 (FY2018's Rp264.66 basic EPS, minus H1 2018's restated Rp121.81, plus this quarter's Rp132.21), giving a P/E» of ~14.41x against the Rp3,963.57 close.
| Market cap → book value | H1 2019 |
|---|---|
| Share price (period-end) | Rp3,963.57 |
| Shares outstanding | ~122,264,000,000 (derived from this quarter's own EPS/net-income relationship) |
| Market capitalization | ~Rp484,602B |
| Total equity attributable to owners (book value) | Rp188,504B |
| P/B | ~2.57x |
| Peer-multiple sanity check | Q1 2019 | H1 2019 | Change |
|---|---|---|---|
| P/E» | ~13.79x | ~14.41x | ⚠️ up - fourth straight quarter of expansion |
| P/B» | ~2.37x | ~2.57x | ⚠️ up |
A same-period peer read is available: BBCA's Q2 2019 post reported bank-only NIM of 6.24% against BRI's 7.02%, ROE of 16.85% against BRI's 19.02% (Tier 1), and gross NPL of 1.41% against BRI's 2.33% - the same higher-margin/higher-return/higher-delinquency trade-off this series has tracked in every prior comparison. BCA's H1 2019 P/E of ~28.7x (annualized half-year basis) against BRI's ~14.41x (genuine TTM basis) puts the gap at roughly 1.99x - essentially unchanged from Q1 2019's ~2.03x gap, meaning both banks' multiples expanded together this quarter rather than one closing the distance to the other.
A full DCF still isn't included here for the reason every prior post in this series has given: a loan-mix table that has now moved by a different mechanism in three consecutive quarters, with none of those mechanisms disclosed by BRI itself, isn't a stable base for multi-year credit-quality assumptions. The peer-multiple read above, alongside Beyond the Usual, remains the honest valuation lens for this quarter.
PT Bank Rakyat Indonesia (Persero) Tbk's published financial statements as of June 30, 2019 and for the six-month period then ended (audited, OJK transparency-format), together with its 1H 2019 investor presentation.