The Warning Last Quarter Raised Just Turned Into a Default
The Q2 2019 post closed with a finding it couldn't fully explain: Corporate Non-SoE's Special Mention ratio - the watch-list tier one notch above NPL - had jumped to 10.63% even as the segment's own NPL ratio improved to 4.82%, a divergence "neither BRI's presentation nor its filed statement connects." This quarter answers the question that finding left open, and not in Corporate's favor. Corporate Non-SoE's gross NPL» ratio (bank-only) jumped from 4.82% to 10.46% - more than doubling in a single quarter, the sharpest move any loan-mix category has produced in this entire series - while its Special Mention ratio fell back to 4.43%, roughly where it sat before Q2's spike. Read together, the two numbers tell a clean story: a meaningful chunk of the loans that got flagged as watch-list risk in Q2 didn't get cured over the summer. They defaulted.
This is a genuinely different shape of move than anything the Medium/Corporate gap has produced across seven quarters of this series. FY2018 widened the gap through one category worsening while the other held. Q1 2019 closed it through Medium's unexplained sharp improvement. Q2 2019 reopened it modestly (0.73 points) through both categories improving at different speeds. This quarter blows through all of that: Medium kept improving to 5.26% (from 5.55%), while Corporate cratered to 10.46% - a swing from Corporate being 0.73 points better than Medium last quarter to Corporate being 5.20 points worse this quarter. The bank-wide headline NPL ratio (bank-only) moved with it, jumping from 2.33% to 2.94% - itself the largest single-quarter move this series has recorded for the consolidated ratio. BRI's own filed statement confirms the deterioration is real, not a presentation-only artifact: the fully consolidated NPL ratio (BRI, BRI Agro, and BRI Syariah combined) jumped from 2.27% to 3.07%, an even larger move than the bank-only figure shows.
What makes this quarter's number harder to write off as noise is what didn't move: BRI's gross write-offs actually fell 29.7% YoY this quarter (Rp8,601,315M vs Rp12,243,478M a year ago), even as the recovery rate on written-off loans improved to 55.3% (from 52.8% a year ago). A bank managing a genuine, isolated write-off event usually shows the opposite pattern - write-offs rising to clear out the bad book. Here, the newly-NPL Corporate loans are still sitting on the balance sheet as NPL, not yet worked through via write-off, which means this quarter's number is a fresh problem still being carried, not a housekeeping event already resolved.
The Prescription
BRI's own materials have now shown the Medium/Corporate Non-SoE gap move by five different mechanisms in five different quarters - Corporate deteriorating relative to Medium, Medium improving sharply, Corporate improving faster than Medium, and now Corporate collapsing outright while its own watch-list ratio simultaneously improves. A bank whose single worst loan-mix category can move 564 basis points in one quarter, in the same period its early-warning indicator for that category moves the opposite direction, owes readers and regulators an explicit narrative connecting the two - which borrowers actually defaulted, what sector or exposure drove it, and whether it's genuinely one-off. Continuing to publish the two tables side by side without commentary, as BRI has done for five straight quarters now, treats a real credit event as a data point rather than a story that needs telling.
What BRI should stop doing: presenting Corporate Non-SoE's NPL and Special Mention ratios as if they're independent metrics rather than adjacent stages of the same migration pipeline. This quarter is the clearest evidence yet that they aren't independent - the Special Mention spike flagged at Q2 wasn't noise sitting next to an improving NPL number, it was the leading indicator of exactly what happened next. A bank that connected these dots publicly, rather than leaving Beyond the Usual below to do it after the fact, would give a reader real warning instead of a look back.
Key Financial Metrics
9M 2019 vs. 9M 2018 (P&L, consolidated, cumulative Jan-Sep), and Sep 2019 vs. Dec 2018 / Jun 2019 (balance sheet, consolidated)
FX: 1 USD = Rp14,195.00, the exchange rate this filing itself discloses for September 30, 2019.
| Metric | 9M 2019 (IDR) | 9M 2019 (USD) | 9M 2018 (IDR) | YoY |
|---|---|---|---|---|
| Interest, Sharia and Premium Income, net ("Net Revenue" equivalent) | Rp60,869,517M | ~$4,288M | Rp58,534,365M | ✅ +3.99% |
| Other Operating Income | Rp18,920,783M | ~$1,333M | Rp16,352,760M | ✅ +15.71% |
| Total Other Operating Expenses | Rp33,090,843M | ~$2,331M | Rp31,130,502M | ⚠️ +6.30% |
| Operating Income | Rp31,079,784M | ~$2,189M | Rp29,887,724M | ✅ +3.99% |
| Net Income (attributable to owners) | Rp24,780,555M | ~$1,746M | Rp23,466,861M | ✅ +5.60% |
| Total Comprehensive Income (attributable to owners) | Rp30,194,117M | ~$2,127M | Rp19,376,751M | ✅ +55.83%¹ |
| EPS (basic, 9M cumulative, attributable to owners) | Rp202.69 | ~$0.0143 | Rp191.98 | ✅ +5.58% |
¹ The same bond-portfolio mark-to-market swing Q1 and Q2 2019 already flagged continued: a Rp3,270,744M gain (before tax) on available-for-sale securities and government bonds this period against a Rp5,770,222M loss a year earlier, as Indonesian bond yields kept easing through 2019.
| Balance sheet metric | Sep 2019 (IDR) | Sep 2019 (USD) | Dec 2018 (IDR) | YTD | Jun 2019 (IDR) | QoQ |
|---|---|---|---|---|---|---|
| Total Assets | Rp1,305,667B | ~$91.97B | Rp1,296,898B | ✅ +0.68% | Rp1,288,196B | ✅ +1.36% |
| Loans (gross, incl. sharia financing and finance lease) | Rp903,139B | ~$63.62B | Rp843,598B | ✅ +7.06% | Rp887,924B | ✅ +1.71% |
| Total Deposits (Demand + Savings + Time + Sharia) | Rp959,238B | ~$67.57B | Rp944,269B | ✅ +1.58% | Rp945,054B | ✅ +1.50% |
| Total Liabilities | Rp1,106,127B | ~$77.92B | Rp1,111,623B | ⚠️ -0.49% | Rp1,097,355B | ⚠️ +0.80% |
| Total Equity (incl. non-controlling interest) | Rp199,540B | ~$14.06B | Rp185,275B | ✅ +7.69% | Rp190,841B | ✅ +4.56% |
| Total Cash and Cash Equivalents (per cash flow statement) | Rp176,296B | ~$12.42B | Rp215,757B | ⚠️ -18.29% | Rp166,626B | ✅ +5.80% |
The cash whipsaw this series has tracked since Q4 2018 finally reversed direction: after +54.3% (Q4'18), -7.66% (Q1'19), and -22.77% (Q2'19), cash rose 5.80% quarter-over-quarter this quarter, its first sequential gain since the Q4 2018 spike. It's still down 18.3% for the year against December's high base, and up a healthy 26.1% year-over-year against Sep 2018 - so this quarter reads as a partial stabilization, not proof the multi-quarter swing has fully settled. Total assets and gross loans both grew for the first time in three quarters after Q1 and Q2's back-to-back QoQ shrinkage, with loan growth (+7.06% YTD) still comfortably outpacing deposit growth (+1.58% YTD).
Net income attributable to owners grew a steady 5.6% YoY, but this quarter's real story is Corporate Non-SoE's loan-mix NPL doubling in one quarter - see The Warning Last Quarter Raised Just Turned Into a Default above.
Key Operational Metrics
Bank-only, per BRI's own investor presentation and filed financial ratios, unless stated
- CASA»: 59.49% (Sep 2019) vs 61.84% (Dec 2018) and 59.51% (Sep 2018) - down from year-end but essentially flat YoY.
- Loan-to-deposit ratio (LDR)»: 93.84% (Sep 2019) vs 89.57% (Dec 2018) and 93.15% (Sep 2018) - up from year-end as loan growth continued outrunning deposit growth, still comfortably inside management's 90%±2% target band, up slightly YoY.
- Net Interest Margin (NIM)»: 7.02% (Sep 2019, filed ratio) vs 7.45% (Dec 2018) and 7.61% (Sep 2018) - exactly flat quarter-over-quarter against Q2 2019's 7.02%, the first quarter this series has recorded zero sequential NIM movement, but still well below the year-ago reading and outside management's own ±7.2% full-year target.
- ROA» (before tax): 3.42% (Sep 2019) vs 3.68% (Dec 2018) and 3.60% (Sep 2018) - down on both counts.
- ROE» (Tier 1): 19.16% (Sep 2019) vs 20.49% (Dec 2018) and 20.10% (Sep 2018) - down YoY, though up slightly from Q2 2019's 19.02%.
- CAR» (Total, bank-only, filed ratio): 21.62% (Sep 2019) vs 21.68% (Mar 2019) and 21.02% (Sep 2018) - up YoY, continuing the capital rebuild flagged since 9M 2018. Tier 1 CAR rose to 20.59% from 19.97% a year earlier.
- NPL ratio - gross (bank-only, filed ratio): 2.94% (Sep 2019) vs 2.14% (Dec 2018) and 2.46% (Sep 2018) ⚠️ - a fresh high for this entire series, driven almost entirely by Corporate Non-SoE (see above). Consolidated NPL ratio (BRI, BRI Agro and BRI Syariah, per this filing's own separate disclosure): gross 3.07% (Sep 2019) vs 2.27% (Dec 2018); net 1.28% vs 1.04% - confirming the deterioration on the fully consolidated basis too, not just the bank-only presentation figure.
- NPL ratio - net (bank-only, filed ratio): 1.13% (Sep 2019) vs 0.92% (Dec 2018) and 1.16% (Sep 2018) ⚠️ - worse than year-end, roughly flat YoY (net ratios move less than gross because provisioning absorbs part of the increase).
- NPL Coverage Ratio: 160.0% (9M 2019) vs 200.61% (FY2018) and 181.9% (9M 2018) ⚠️ - falling for a second straight comparable period even before this quarter's NPL spike, and now meaningfully behind where provisioning stood a year ago. See Beyond the Usual.
- BOPO» (Opex/Opr. Income, bank-only): 70.50% (Sep 2019) vs 68.48% (Dec 2018) and 69.12% (Sep 2018) - worse on both counts.
- Loan-mix NPL by category (bank-only): Micro 1.30%, Consumer 1.40%, Small Commercial 3.71%, Medium 5.26%, Corporate Non-SoE 10.46%, SoE 1.04% (Sep 2019) vs Micro 1.25%, Consumer 1.35%, Small Commercial 3.75%, Medium 5.55%, Corporate Non-SoE 4.82%, SoE 0.97% (Jun 2019). Every category held steady or improved from last quarter except Corporate, which more than doubled - see above.
- Special Mention loans by category (bank-only): Micro 4.12%, Consumer 3.09%, Small Commercial 6.53%, Medium 5.22%, Corporate Non-SoE 4.43%, SoE 3.97% (Sep 2019) vs Micro 4.60%, Consumer 3.08%, Small Commercial 6.41%, Medium 6.51%, Corporate Non-SoE 10.63%, SoE 3.63% (Jun 2019) - Corporate's ratio collapsed back down as its NPL ratio surged, the migration described above. Medium's Special Mention also eased (6.51%→5.22%) even as its NPL kept improving - a cleaner, less ambiguous quarter for that category than any since Q1 2019.
- Restructured loans: 6.0% of total loans (Sep 2019) vs 6.4% (Sep 2018) - improved YoY. Loans at Risk (LAR)»: 10.36% (Sep 2019) vs 10.44% (Jun 2019) and 10.09% (Sep 2018) - essentially flat sequentially, still modestly above the year-ago reading.
- Write-off recovery rate (bank-only): 55.3% of the nine-month period's own gross write-offs recovered (Rp4,813,619M recovered against Rp8,601,315M written off), vs 52.8% a year ago - improved YoY, above BRI's own 50% internal target, even as gross write-offs themselves fell 29.7% YoY (Rp12,243,478M a year ago) - see above for why that matters this quarter.
- Geographic segment data: disclosed this quarter for the first time in any of BRI's 2019 interim filings, ending the gap flagged at Q1 and Q2 2019 - see Beyond the Usual.
- Segment income (Micro/Retail/Corporate/Others/Subsidiaries): also disclosed this quarter for the first time since Q1 2019 - see Beyond the Usual and Business Lines below.
Business Lines: Loan Growth and Credit Quality
Micro loans grew 13.2% YoY to Rp301.9 trillion, still the largest and fastest-growing book, with 10.5 million borrowers (+6.2% YoY). Micro's NPL ticked up slightly to 1.30% (from 1.25% a year ago) but remains by far the cleanest large book in the portfolio - the segment BRI's corporate plan is explicitly betting on continues to combine size, growth, and asset quality better than anything else on the balance sheet.
Small Commercial loans grew 12.8% YoY to Rp177.6 trillion with NPL essentially flat at 3.71% (vs 3.84% a year ago). Medium loans grew 7.2% YoY to Rp21.1 trillion - a genuine acceleration from H1 2019's 2.5% YoY growth - while its NPL kept improving to 5.26% (from 6.96% a year ago). For the first time in this series, Medium is growing at a normal pace and improving in credit quality at the same time, rather than combining stagnant growth with high delinquency.
Consumer loans grew 7.8% YoY to Rp137.3 trillion, 72.5% of it salary-based lending, with NPL up to 1.40% from 1.25% a year ago - still comfortably the most stable large book, but the upward drift (also flagged last quarter) has now continued for two straight quarters.
SoE and Corporate loans combined grew 8.4% YoY to Rp202.8 trillion. This is the segment carrying this quarter's real story (see above): Corporate's own officially-reported segment income before tax collapsed to just Rp432,027 million for the full nine months - only 43.8% of all of FY2018's full-year total (Rp987,486 million), despite three quarters having already elapsed. Every other reporting segment is tracking closer to a normal share of last year's full-year figure over the same nine months (Micro at 77.4%, Retail at 75.2%, Others at 79.1%), which makes Corporate's collapse look specific to this segment's own credit costs rather than a broad-based slowdown. SoE's own NPL, by contrast, stayed low and roughly flat at 1.04% (from 1.10% a year ago) - the two halves of this combined loan category are moving in opposite directions.
Beyond the Usual
Loan-Loss Coverage Fell to a Multi-Year Low in the Same Quarter NPL Spiked
BRI's NPL coverage ratio - provisioning held against non-performing loans - fell to 160.0% at 9M 2019, down from 181.9% a year earlier and 200.61% at FY2018, a decline that was already underway before this quarter's Corporate NPL spike widened the gap further. A bank facing a genuine, isolated credit event in one segment would ideally be building coverage into it, not drawing it down; instead, BRI's provisioning cushion relative to its bad-loan stock has been shrinking for several consecutive comparable periods even as the stock of non-performing loans just jumped by more than half a percentage point in a single quarter. Coverage remains well above 100% of NPL, so BRI isn't under-provisioned against its current book in an absolute sense - but the direction, combined with this quarter's NPL move, is worth watching closely next quarter rather than assuming it stabilizes on its own.
BRI's Own Pension Contribution Rate Jumped by a Third, With No Explanation Given
BRI's contribution rate to its own pension fund (Dana Pensiun BRI, which manages the bank's defined-benefit plan) rose from 29.73% to 41.04% of employee pension-based salary, effective April 1, 2019, per this filing's employee-benefits footnote - a jump of more than 11 percentage points in the bank's own required funding rate. Neither this filing nor BRI's investor presentation explains what actuarial assumption change or funding-shortfall finding drove an increase of this size. Salaries and employee benefits expense grew 10.28% YoY this period (Rp18,301,889M vs Rp16,595,853M), meaningfully faster than the 6.30% growth in total other operating expenses overall - consistent with, though not fully explained by, a materially higher pension contribution obligation kicking in mid-year.
BRI Closed Its Acquisition of a Seventh Consolidated Subsidiary This Quarter
BRI completed its purchase of a 90% stake in PT Asuransi Bringin Sejahtera Artamakmur (BRINS), a general insurance company, on September 26, 2019, for a purchase price of Rp1,040,000 million, per the transaction agreement signed with BRI's own pension fund in June 2019 and approved by OJK that September. BRINS becomes BRI's newest consolidated subsidiary, with total assets of Rp2,602,651 million (0.20% of consolidated total assets) at quarter-end - a modest addition in scale, similar in size to the Danareksa Sekuritas and BRI Ventura additions flagged at FY2018 and Q2 2019, continuing BRI's pattern of bolting smaller financial-services businesses onto its core banking franchise one insurance/securities/venture-capital acquisition at a time.
Segment Income and the Timor Leste Data Both Reappeared After a Three-Quarter Gap
This is the first of BRI's 2019 interim filings to carry both a segment-income breakdown (Micro/Retail/Corporate/Others/Subsidiaries) and geographic-segment data - neither had appeared in any interim quarter this year, only in the FY2018 annual filing. The geographic data resolves the long-running Timor Leste puzzle this series has tracked since 9M 2018: Timor Leste's total assets stand at Rp998,001 million at Sep 2019, up from Rp798,272 million at Dec 2018, a normal-looking 25% growth trajectory with none of the unexplained swings this series flagged through 2017-2018. Timor Leste also posted income before tax of Rp42,899 million for the nine months, more than four times the Rp9,268 million reported for the same period in 2018.
Related-Party Lending Is Concentrated in a Handful of Large State-Owned Borrowers
BRI's related-party loan book (per the filing's transactions-with-related-parties footnote) totaled Rp105,295,378 million at Sep 2019 - about 11.7% of BRI's Rp903,139,003 million in total gross loans. The largest individual exposures are all state-owned enterprises: PT Perusahaan Listrik Negara (PLN, the state electricity utility) at Rp25,321,298 million, Perum BULOG (the state food-logistics agency) at Rp16,143,323 million, and PT Pertamina (the state oil and gas company) at Rp4,848,566 million. This concentration is a structural feature of a majority state-owned bank lending to fellow SOEs, not a governance concern on its own - but given this quarter's Corporate segment NPL surge (see above), it's worth a reader knowing how much of BRI's largest-borrower exposure runs through a small number of state-linked names rather than a diversified corporate book.
The Pending-Litigation Allowance Grew 54% Year-to-Date
BRI's allowance for pending lawsuits (held in "Other Liabilities") grew to Rp1,633,770 million at Sep 2019, up from Rp1,060,301 million at Dec 2018 - a 54.1% increase. BRI's own disclosure states management believes the allowance is adequate and that no pending case is expected to have a material effect on the bank's financial position; the increase itself is a small fraction of BRI's Rp199.5 trillion equity base, so this reads as routine litigation-provision growth rather than a governance concern, but the pace of increase is worth noting given how flat this line held through most of 2018.
Target Valuation Range
P/E ~13.60x, P/B ~2.32x - both of BRI's multiples compressed this quarter as the price pulled back and earnings kept growing - not a re-rating downward on business fundamentals yet, but a market beginning to price in the open credit-quality question flagged above, which makes this a fair-value read rather than a buying signal until next quarter clarifies whether Corporate's NPL spike is transient or sustained.
BRI's share price closed at Rp3,745.39 on September 30, 2019 - down 5.5% from the Q2 2019 post's Rp3,963.57 close, its first sequential decline after four straight quarters of gains, though still up modestly from the Rp3,736 close two quarters earlier.
Trailing-twelve-month EPS is approximately Rp275.37 (FY2018's Rp264.66 basic EPS, minus 9M 2018's Rp191.98, plus this quarter's Rp202.69), giving a P/E» of ~13.60x against the Rp3,745.39 close.
| Market cap → book value | 9M 2019 |
|---|---|
| Share price (period-end) | Rp3,745.39 |
| Shares outstanding | ~122,258,000,000 (derived from this quarter's own EPS/net-income relationship) |
| Market capitalization | ~Rp457,904B |
| Total equity attributable to owners (book value) | Rp197,107B |
| P/B | ~2.32x |
| Peer-multiple sanity check | H1 2019 | 9M 2019 | Change |
|---|---|---|---|
| P/E» | ~14.41x | ~13.60x | ✅ down - driven by the lower price, TTM EPS itself kept growing |
| P/B» | ~2.57x | ~2.32x | ✅ down |
A same-period peer read is available: BBCA's Q3 2019 post reported bank-only NIM of 6.23% against BRI's 7.02%, ROE of 18.03% against BRI's 19.16% (Tier 1), and gross NPL of 1.62% against BRI's 2.94% (bank-only) - the same higher-margin/higher-return/higher-delinquency trade-off this series has tracked in every prior comparison, though the delinquency side of that trade-off widened further this quarter as both banks' NPL ratios moved, BRI's far more sharply. BCA's 9M 2019 P/E of ~26.8x (annualized nine-month basis) against BRI's ~13.60x (genuine TTM basis) puts the gap at roughly 1.97x - essentially unchanged from Q2 2019's ~1.99x gap, meaning both banks' multiples compressed together this quarter rather than one re-rating relative to the other.
A full DCF still isn't included here for the reason every prior post in this series has given, now reinforced by this quarter's own numbers: a loan-mix table that just moved by 564 basis points in a single category in a single quarter 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 September 30, 2019 and for the nine-month period then ended (unaudited, OJK transparency-format), together with its 9M 2019 investor presentation.