The Cleanup Quarter
The Q3 2019 post closed on an unresolved crisis: Corporate Non-SoE's gross NPL ratio had more than doubled in a single quarter, from 4.82% to 10.46%, exactly the default migration the prior quarter's Special Mention spike had warned about, while loan-loss coverage sank to a multi-year low of 160.0%. The audited full-year numbers show the crisis didn't compound through Q4 - but they also show it wasn't quietly resolved either. Corporate Non-SoE's NPL ratio eased back to 8.75% by December 31, still 326 basis points above Dec 2018's 5.49% but a genuine retreat from Q3's peak. Bank-only NPL (gross) fell from Sep's 2.94% to 2.62%, and the fully consolidated ratio (BRI, BRI Agro, BRI Syariah) eased from 3.07% to 2.80%. NPL coverage even ticked up, to 166.59% from Sep's 160.0% low.
Read at face value, that's a clean recovery story. It isn't one. The same filing that shows the ratios easing also shows gross loan write-offs jumping 38.9% YoY to Rp17.0 trillion for the full year (from Rp12.2 trillion in 2018) - a swing so large it means BRI wrote off more in the fourth quarter alone (roughly Rp8.4 trillion) than it had in the entire first nine months of the year (Rp8.6 trillion, per Q3's own disclosure). And the money recovered on those write-offs didn't keep pace: the full-year recovery rate fell to 41.6% (from 50.7% in 2018), even though the nine-month recovery rate reported in Q3 had actually been running ahead of target at 55.3%. Run the arithmetic on the fourth quarter in isolation and the recovery rate on Q4's own write-offs comes out to roughly 27% - about half of BRI's own 50% internal benchmark. A bank that had genuinely worked through its Corporate problem would show write-offs continuing at a steady, well-recovered pace. What this filing shows instead is a fourth-quarter surge sized almost exactly to erase the NPL spike, recovered at a rate well below what BRI itself considers healthy - the signature of a rushed cleanup, not a resolved credit event.
The Corporate segment's own loan book confirms the retreat came with a cost beyond the write-off math: Corporate loans (bank-only, excluding SoE) actually shrank 3.9% for the year, from Rp101.4 trillion to Rp97.4 trillion, while combined SoE-and-Corporate loans - which grew 8.4% YoY as recently as Q3's nine-month reading - ended the full year down 0.7%. Whatever growth that combined book had through September reversed entirely in the fourth quarter.
The Prescription
BRI's FY2019 filing still doesn't connect the two halves of this story in its own words: nowhere does the annual report state that the improvement in Corporate's NPL ratio was substantially a function of a fourth-quarter write-off surge rather than borrowers curing their loans or the bank collecting on bad debt. A reader relying on the headline ratios alone - NPL down, coverage up - would reasonably conclude the Corporate problem is behind BRI. The write-off and recovery-rate data in the same filing says otherwise. BRI should disclose, in the same section where it reports NPL-by-segment, how much of any quarter's improvement in a segment's NPL ratio came from write-offs versus genuine collection or upgrade - the current presentation lets the two look identical.
What BRI should stop doing: continuing to report loan-loss coverage and NPL-by-segment as if they're the whole picture on asset quality, when the write-off and recovery-rate schedule sitting a few pages later in the same filing tells a materially different story about how this year's numbers got better. Beyond the Usual below has to do the reconciliation work BRI's own materials don't.
Key Financial Metrics
FY2019 vs. FY2018 (P&L, consolidated, full year), and Dec 2019 vs. Dec 2018 / Sep 2019 (balance sheet, consolidated)
FX: 1 USD = Rp13,882.50, the exchange rate this filing itself discloses for December 31, 2019.
| Metric | FY2019 (IDR) | FY2019 (USD) | FY2018 (IDR) | YoY |
|---|---|---|---|---|
| Interest, Sharia and Premium Income, net ("Net Revenue" equivalent) | Rp82,718,033M | ~$5,958M | Rp78,611,494M | ✅ +5.22% |
| Other Operating Income | Rp28,439,130M | ~$2,049M | Rp23,425,430M | ✅ +21.40% |
| Total Other Operating Expenses | Rp44,965,625M | ~$3,239M | Rp41,990,284M | ⚠️ +7.09% |
| Operating Income | Rp44,431,933M | ~$3,201M | Rp41,725,877M | ✅ +6.49% |
| Net Income (attributable to owners) | Rp34,372,609M | ~$2,476M | Rp32,351,133M | ✅ +6.25% |
| Total Comprehensive Income (attributable to owners) | Rp39,403,628M | ~$2,838M | Rp28,910,721M | ✅ +36.29%¹ |
| EPS (basic, full year, attributable to owners) | Rp281.31 | ~$0.0203 | Rp264.66 | ✅ +6.29% |
¹ The bond-portfolio mark-to-market swing this series has tracked all year: a Rp3,696,914M gain (before tax) on available-for-sale securities and Government Recapitalization Bonds for the full year, against a Rp5,141,381M loss in 2018, as Indonesian bond yields kept easing through 2019.
| Balance sheet metric | Dec 2019 (IDR) | Dec 2019 (USD) | Dec 2018 (IDR) | YoY | Sep 2019 (IDR) | QoQ |
|---|---|---|---|---|---|---|
| Total Assets | Rp1,416,759B | ~$102,054M | Rp1,296,898B | ✅ +9.24% | Rp1,305,667B | ✅ +8.51% |
| Loans (gross, incl. sharia financing and finance lease) | Rp907,389B | ~$65,060M | Rp838,141B | ✅ +8.26% | Rp903,139B | ✅ +0.47% |
| Total Deposits From Customers | Rp996,378B | ~$71,772M | Rp923,310B | ✅ +7.91% | Rp959,238B | ✅ +3.87% |
| Total Liabilities | Rp1,183,156B | ~$85,226M | Rp1,090,664B | ⚠️ +8.48% | Rp1,106,127B | ⚠️ +6.97% |
| Total Equity (incl. non-controlling interest) | Rp208,784B | ~$15,039M | Rp185,275B | ✅ +12.69% | Rp199,540B | ✅ +4.63% |
| Total Cash and Cash Equivalents (per cash flow statement) | Rp236,906B | ~$17,065M | Rp215,757B | ✅ +9.80% | Rp176,296B | ✅ +34.38% |
The cash whipsaw this series has tracked since Q4 2018 swung hard again: after four alternating quarters of +54.3%, -7.66%, -22.77%, and Q3's modest +5.80% recovery, cash jumped 34.4% quarter-over-quarter to close the year - the largest single-quarter move in this series yet, in the same direction as the deposit growth and financing-activity inflows (proceeds from marketable securities issued nearly doubled YoY, to Rp12.1 trillion). Total assets and gross loans both grew for the full year, though loan growth essentially stalled in Q4 itself (+0.47% QoQ) even as deposits kept growing (+3.87% QoQ) - the mechanical reason loan-to-deposit ratio fell sharply this quarter.
Net income attributable to owners grew a steady 6.25% for the year, but the real story is how BRI's Corporate NPL ratio came down - through an aggressive, poorly-recovered Q4 write-off push, not through genuine credit repair. See The Cleanup Quarter above.
Key Operational Metrics
Bank-only, per BRI's own investor presentation and filed financial ratios, unless stated
- CASA»: 59.01% (Dec 2019) vs 61.84% (Dec 2018) and 59.49% (Sep 2019) - down on both counts, continuing the year's mild funding-mix drift toward more expensive deposits.
- Loan-to-deposit ratio (LDR)»: 88.64% (Dec 2019) vs 88.96% (Dec 2018) and 93.84% (Sep 2019) - a sharp sequential drop, mechanically explained by Q4's stalled loan growth against continued deposit growth (see above), landing back near management's 90%±2% target band after Q3 had pushed above it.
- Net Interest Margin (NIM)»: 6.98% (Dec 2019, filed ratio) vs 7.45% (Dec 2018) and 7.02% (Sep 2019) - essentially flat against Q3, but still the lowest full-year reading in this entire series and below management's own ±7.2% full-year target.
- ROA» (before tax): 3.50% (Dec 2019) vs 3.68% (Dec 2018) and 3.42% (Sep 2019, nine-month annualized) - down YoY, roughly flat against Q3.
- ROE» (Tier 1): 19.41% (Dec 2019) vs 20.49% (Dec 2018) and 19.16% (Sep 2019) - down YoY, up slightly from Q3.
- CAR» (Total, bank-only, filed ratio): 22.55% (Dec 2019) vs 21.21% (Dec 2018) and 21.62% (Sep 2019) - up on both counts, continuing the capital rebuild flagged since 9M 2018. Tier 1 CAR rose to 21.52% from 20.15% a year earlier.
- NPL ratio - gross (bank-only, filed ratio): 2.62% (Dec 2019) vs 2.16% (Dec 2018) and 2.94% (Sep 2019) ⚠️ - still above the year-ago reading, but a genuine retreat from Q3's spike (see above). Consolidated NPL ratio (BRI, BRI Agro and BRI Syariah): gross 2.80% (Dec 2019) vs 2.27% (Dec 2018) and 3.07% (Sep 2019); net 1.18% vs 1.04% and 1.28% (Sep 2019) - same pattern on the fully consolidated basis.
- NPL ratio - net (bank-only, filed ratio): 1.04% (Dec 2019) vs 0.92% (Dec 2018) and 1.13% (Sep 2019) ⚠️ - worse than year-end 2018, improved from Q3.
- NPL Coverage Ratio: 166.59% (FY2019) vs 200.61% (FY2018) and 160.0% (9M 2019) - up slightly from Q3's multi-year low, but still meaningfully behind Dec 2018's level. See Beyond the Usual.
- BOPO» (Opex/Opr. Income, bank-only): 70.10% (Dec 2019) vs 68.40% (Dec 2018) and 70.50% (Sep 2019) - worse YoY, essentially flat against Q3.
- Loan-mix NPL by category (bank-only): Micro 1.18%, Consumer 1.10%, Small Commercial 3.17%, Medium 5.38%, Corporate Non-SoE 8.75%, SoE 1.73% (Dec 2019) vs Micro 1.01%, Consumer 1.03%, Small Commercial 3.14%, Medium 6.80%, Corporate Non-SoE 5.49%, SoE 1.10% (Dec 2018). Every category worsened YoY except Small Commercial (flat) and Medium (improved) - Corporate remains the clear outlier even after its Q4 retreat from Sep's 10.46% high.
- Special Mention loans by category (bank-only): Micro 3.51%, Consumer 2.52%, Small Commercial 4.63%, Medium 2.97%, Corporate Non-SoE 5.82%, SoE 4.29% (Dec 2019) vs Micro 3.51%, Consumer 2.49%, Small Commercial 4.28%, Medium 2.87%, Corporate Non-SoE 7.73%, SoE 0.86% (Dec 2018). Corporate's Special Mention ratio rose from Sep's 4.43% to 5.82% even as its NPL ratio fell - a fresh version of the same migration pattern flagged at Q2 and Q3, worth watching again next year.
- Restructured loans: 6.0% of total loans (Dec 2019) vs 6.1% (Dec 2018) - essentially flat, with the absolute restructured book (bank-only, parent entity) growing 5.6% YoY to Rp51.9 trillion.
- Loans at Risk (LAR)»: not disclosed in this quarter's investor presentation or filed statements - a gap against Sep 2019's 10.36% reading.
- Dividend Payout Ratio: 50.00% (FY2019, as reported in BRI's own financial-ratio table) vs 45.00% (FY2018) - raised for the year BRI's asset quality was under the most pressure this series has recorded; see Beyond the Usual.
- Write-off recovery rate (bank-only): 41.6% of the full year's gross write-offs recovered (Rp7,065,981M recovered against Rp17,006,364M written off), down from 50.7% in 2018 - reversing Q3's improving nine-month trend of 55.3%. See above and Beyond the Usual.
Business Lines: Loan Growth and Credit Quality
Micro loans grew 12.2% YoY to Rp307.7 trillion, still the largest and fastest-growing book, with 10.6 million borrowers (+6.0% YoY). Micro's NPL rose slightly to 1.18% (from 1.01% a year ago) but remains by far the cleanest large book in the portfolio.
Small Commercial loans grew 8.6% YoY to Rp198.7 trillion with NPL essentially flat at 3.17% (vs 3.14% a year ago) - the only category besides Medium not to deteriorate YoY. Medium loans grew a reported 18.1% YoY to Rp21.5 trillion, continuing Q3's acceleration from earlier in the year, while its NPL kept improving to 5.38% (from 6.80% a year ago) - the one loan-mix category that both grew faster and got cleaner in 2019.
Consumer loans grew 7.4% YoY to Rp140.5 trillion, 72.1% of it salary-based lending, with NPL up to 1.10% from 1.03% a year ago - still comfortably the most stable large book, though the mild upward drift flagged at Q2 and Q3 has now held for a full year.
SoE and Corporate loans combined shrank 0.7% YoY to Rp191.1 trillion - a full reversal from Q3's 8.4% nine-month growth reading. Corporate loans alone (excluding SoE) fell 3.9% to Rp97.4 trillion, while SoE loans grew 3.1% to Rp93.8 trillion - the same divergence in credit quality flagged last quarter now shows up in loan growth too, with SoE expanding while Corporate contracts. Per BRI's own filed operating-segment footnote (which groups SoE and Corporate together under a single "Corporate" segment alongside Micro, Retail, Others and Subsidiaries), this combined segment's income before tax was Rp632,337 million for the full year - actually up 8.5% from FY2018's Rp582,826 million on this same segment definition, despite nine-month segment income having been reported at just Rp432,027 million (43.8% of FY2018's total) at Q3. That means the segment earned roughly Rp200 billion in the fourth quarter alone - a real but modest recovery, not a return to a normal quarterly run-rate, and one that arrived in the same quarter as the write-off surge described above.
Beyond the Usual
The Q4 Write-Off Surge That Made Corporate's NPL Retreat Possible
BRI's full-year gross write-offs jumped 38.9% YoY to Rp17.0 trillion (from Rp12.2 trillion in 2018) - and because nine-month write-offs stood at just Rp8.6 trillion, essentially all of that increase, and roughly half the full year's total write-off volume, happened in the fourth quarter alone. The money recovered on those write-offs didn't keep pace: the full-year recovery rate fell to 41.6% (from 50.7% in 2018), reversing the nine-month recovery rate's improving trend (55.3% at Q3, above BRI's own 50% internal target). Isolating the fourth quarter's own write-offs and recoveries implies a quarterly recovery rate of roughly 27% - about half BRI's stated benchmark. This is the mechanism behind Corporate Non-SoE's NPL ratio easing from Q3's 10.46% shock to 8.75%: a large, hastily-recovered write-off push, not a credit-quality repair. BRI's own materials don't draw this connection anywhere in the filing.
Loan-Loss Coverage Recovered Only Slightly From a Multi-Year Low
NPL coverage - provisioning held against non-performing loans - ticked up to 166.59% at FY2019 from Sep 2019's 160.0% low, but remains well below Dec 2018's 200.61% and every full-year reading in this series going back to 2016. Combined with the write-off finding above, this reads as a bank that absorbed this year's Corporate credit event mostly by writing bad loans off rather than by rebuilding the provisioning cushion against the loans still on its book - worth tracking again as 2020's quarters come in.
The Pension Contribution Anomaly From Q3 Isn't Repeated - or Explained - in the Annual Filing
Q3 2019's filing disclosed BRI's pension contribution rate jumping from 29.73% to 41.04% of employee pension-based salary effective April 1, 2019, with no explanation given. This annual filing's own employee-benefits footnote states BRI's contribution to its defined-benefit plan (Dana Pensiun BRI) is 26.65% of employee pension-based salary, unchanged since October 1, 2017 - the same steady-state rate the bank has disclosed in every filing before Q3's anomalous figure appeared. Neither number is reconciled against the other anywhere in this filing, and the annual report doesn't acknowledge Q3's jump occurred at all. Salaries and employee benefits expense grew a more modest 8.1% YoY for the full year (Rp24.2 trillion vs Rp22.4 trillion), decelerating from the 10.3% growth Q3 had reported for the nine months - consistent with whatever drove Q3's spike either reversing or being specific to that quarter's own actuarial reporting rather than a genuine, lasting increase in BRI's funding obligation.
Related-Party Lending Shifted Away From Pertamina, Toward PLN
BRI's related-party loan book (per the filing's transactions-with-related-parties footnote) totaled Rp102.7 trillion at Dec 2019, down 7.2% from Rp110.8 trillion at Dec 2018 and down slightly from Sep 2019's Rp105.3 trillion. The composition shifted meaningfully within that total: PLN (the state electricity utility) grew to Rp26.0 trillion (from Rp23.6 trillion), while Pertamina (the state oil and gas company) fell sharply to Rp7.8 trillion (from Rp11.6 trillion) and Perum BULOG (the state food-logistics agency) eased to Rp14.9 trillion (from Rp16.3 trillion). The overall related-party book shrinking while its largest state-owned exposure grows is a different shape of change than Sep 2019's snapshot showed on its own, though the underlying concentration in a handful of large SOE names is unchanged.
The Pending-Litigation Allowance Eased From Its Q3 Peak but Stayed Well Above Last Year
BRI's allowance for pending lawsuits (held in "Other Liabilities") stood at Rp1,520,854 million at Dec 2019 - down from Q3's Rp1,633,770 million but still up 43.4% from Dec 2018's Rp1,060,301 million. BRI's own disclosure again states management believes the allowance is adequate and no pending case is expected to have a material effect on the bank's financial position. The full-year increase is a small fraction of BRI's Rp208.8 trillion equity base, so this still reads as routine litigation-provision growth rather than a governance concern, but the pace of increase across the year is worth continuing to watch.
The Dividend Payout Ratio Rose to 50% in the Same Year Asset Quality Was Under the Most Pressure
BRI raised its FY2019 dividend payout ratio to 50%, up from 45% in FY2018 and continuing a steady climb from 30% in FY2015. That's a genuine capital-allocation choice, not an accident: a bank whose Corporate segment just went through the credit event described above, and whose loan-loss coverage still hasn't recovered to its FY2018 level, chose the same year to send a larger share of earnings out the door rather than retain more capital against the credit uncertainty its own numbers show. CAR remained comfortably above regulatory minimums either way (22.55% total), so this isn't a solvency concern - but it is a choice worth naming plainly rather than letting the headline payout-ratio increase pass as routine.
Target Valuation Range
P/E ~14.22x, P/B ~2.37x - BRI's multiple recovered alongside the share price this quarter, back toward where it sat before Q3's credit scare - a fair-value read rather than a clear buy or sell signal, since the write-off-driven nature of this quarter's asset-quality improvement (see above) means the Corporate question isn't genuinely closed yet.
BRI's share price closed at Rp3,999.93 on December 30, 2019 (the last trading day of the year) - up 6.8% from the Q3 2019 post's Rp3,745.39 close and up 20.2% YoY from Dec 2018's Rp3,327.22. Over the trailing two years the share price swung from a low near Rp2,582 (June 2018) to a high near Rp4,073 (July 2019) - a roughly 58% peak-to-trough range - before settling back into the high Rp3,900s to close 2019, a genuinely volatile two years for a stock whose underlying earnings grew steadily throughout.
Full-year EPS is Rp281.31 (basic, attributable to owners), giving a P/E» of ~14.22x against the Rp3,999.93 close.
| Market cap → book value | FY2019 |
|---|---|
| Share price (period-end) | Rp3,999.93 |
| Shares outstanding | ~122.19 billion (derived from this quarter's own EPS/net-income relationship) |
| Market capitalization | ~Rp488,751B |
| Total equity attributable to owners (book value) | Rp206,323B |
| P/B | ~2.37x |
| Peer-multiple sanity check | 9M 2019 | FY2019 | Change |
|---|---|---|---|
| P/E» | ~13.60x | ~14.22x (full-year) | ⚠️ up - the share price recovered faster than the now-genuine full-year EPS base grew |
| P/B» | ~2.32x | ~2.37x | ⚠️ up |
A same-period peer read is available: BBCA's FY2019 post reported a full-year NIM of 6.2% against BRI's 6.98%, ROE of 18.0% against BRI's 19.41% (Tier 1), and gross NPL of 1.3% against BRI's 2.62% (bank-only) - the same higher-margin/higher-return/higher-delinquency trade-off this series has tracked in every prior comparison. BCA's FY2019 P/E of ~28.8x against BRI's ~14.22x puts the gap at roughly 2.03x - wider than Q3 2019's ~1.97x gap, consistent with BCA's asset-quality wobble fully reversing by year-end while BRI's Corporate question, per Beyond the Usual above, remains only partly resolved.
A full DCF still isn't included here for the reason every prior post in this series has given, reinforced again by this year's own numbers: a loan-mix table whose worst category moved 564 basis points in one direction and then partially back in the other, achieved substantially through write-offs rather than collections, still 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 year.
PT Bank Rakyat Indonesia (Persero) Tbk's published consolidated financial statements as of December 31, 2019 and for the year then ended (audited, OJK transparency-format), together with its FY2019 investor presentation and annual report.