BFIN The Cost of Credit Tripled, and the Explanation Still Leaves a Gap

The Cost of Credit Tripled, and the Explanation Still Leaves a Gap

Every quarter in this backlog has had one clean headline number and one open disclosure question sitting next to it. Q1 2023 is the first time the headline number is itself the uncomfortable one. Cost of Credit tripled year-over-year, from 1.1% to 3.0%, and the company said why without being asked: "some deterioration in collectability (capacity adjustment due to new methodology and strong bookings growth) and loss on repossessed assets." That's a real, named cause - not silence - and it's worth taking at face value as far as it goes. What it doesn't explain is whether the book that's actually restructuring is getting healthier or just getting smaller. The cure rate and second-restructuring share stay undisclosed for a fourth consecutive filing - the first three misses (H1 2022, 9M 2022, and FY2022) could each be read as a formatting choice for interim filings, or as one annual report needing more time. A fourth straight absence, in the same quarter the company is volunteering a genuinely new credit-quality data point, makes that reading harder to sustain - BFI clearly discloses uncomfortable numbers when it chooses to; this one it still hasn't chosen to bring back.

The other continuity thread resolves the same way it has every quarter since June 2022: the 927,732,000-share treasury disposal mandate remains at exactly zero shares moved, roughly nine months after the EGMS approved it specifically to remove the pricing friction that killed Q1 2022's narrower attempt. And new bookings actually fell quarter-over-quarter for the first time in this series - Rp6,317 billion, down 0.6% from Q4 2022's Rp6,354 billion, ending a run of four consecutive record quarters even as the year-over-year comparison (against a like-for-like Rp4,103 billion base - see Key Operational Metrics below) still shows a robust 53.9% gain. None of this is a crisis quarter. It's a quarter where the operating numbers are still strong on every conventional measure, the company disclosed its own asset-quality wobble candidly, and the one number that would let a reader judge whether that wobble is contained is the same one that's now been missing longer than it was ever present in this backlog.

The Prescription

A credit-cost spike a company explains candidly is a very different signal from one it stays silent about - which is exactly why the silence on the cure rate reads worse this quarter, not better. BFI should publish the cure rate and second-restructuring share alongside the Cost of Credit explanation it just gave, in the same investor materials, in the same breath. The two disclosures answer the same underlying question - is the shrinking restructured pool (now roughly 1.0% of managed receivables, a sixth straight quarterly contraction) actually curing, or is it aging into write-offs and repossessions that show up elsewhere as the Cost of Credit jump this quarter shows? Publishing both together would let a reader connect them instead of guessing.

What the company should stop doing: treating a stalled mandate as equivalent to an active one. Nothing in this quarter's filing distinguishes the 927,732,000-share sale mandate from a live, in-progress plan - it's disclosed with the same flat, present-tense language used for a facility that's actually drawing down. Nine months of an unconstrained, board-approved mandate producing zero share movement is no longer a rounding error in a multi-year disposal timeline; if BFI or Trinugraha Capital no longer intend to execute it, the market is owed that statement directly, the same conclusion FY2022's post reached at the six-month mark.

Key Financial Metrics

Three months ended 31 March 2023 vs. three months ended 31 March 2022

FX: Rp15,020 = USD 1 (30 March 2023 month-end rate, the closest trading day to period-end). Both periods below are converted at this same rate for comparability, following the convention used throughout this backlog - it is not a historical rate for the 2022 column.

Metric	Q1 2023 (IDR)	Q1 2023 (USD)	Q1 2022 (IDR)	YoY
Total Income ("Net Revenue" equivalent)	Rp1,643,739M	~$109.4M	Rp1,182,602M	✅ +39.0%
Profit Before Tax ("Operating Income" equivalent)	Rp627,701M	~$41.8M	Rp490,267M	✅ +28.0%
Net Income	Rp508,822M	~$33.9M	Rp395,982M	✅ +28.5%
Total Cash and Cash Equivalents	Rp1,286,859M	~$85.7M	Rp627,355M	✅ +105.1%

Profit before tax remains the closest operating-income equivalent for this lender, as established throughout this backlog. Operating cash flow used Rp1,439,847M this quarter, with investing activities using a further Rp61,926M - the same mechanics flagged at FY2022: new financing disbursements are still outrunning collections as record bookings get funded largely in cash, with the gap covered by net financing inflows (Rp1,715,377M this quarter, mostly new bank borrowings and Rp1,100,000M of new securities issued). This is the ordinary mechanics of a growing lending book, not a credit-quality signal on its own - see the Cost of Credit discussion above and Beyond the Usual below for the actual asset-quality read this quarter.

Basic earnings per share reached Rp34 for Q1 2023, up from Rp26 a year earlier (+30.8%), on an unchanged weighted-average share count of 15,039,383,620 - unchanged because no further treasury shares moved this quarter (see Beyond the Usual). No new dividend was declared during the quarter; the note repeats December 2022's Rp28/share interim distribution as the most recent action.

Balance sheet metric	31 Mar 2023 (IDR)	31 Mar 2023 (USD)	31 Dec 2022 (IDR)	QoQ
Total Assets	Rp23,959,955M	~$1,595.2M	Rp21,929,634M	✅ +9.3%
Financing Receivables (gross)	Rp28,603,484M	~$1,904.4M	Rp25,942,774M	✅ +10.3%
Total Liabilities	Rp14,689,188M	~$978.0M	Rp13,173,725M	⚠️ +11.5%
Fund Borrowings (net)	Rp10,789,012M	~$718.3M	Rp10,246,908M	⚠️ +5.3%
Securities Issued (bonds, net)	Rp2,678,354M	~$178.3M	Rp1,581,490M	⚠️ +69.4%
Total Equity	Rp9,270,767M	~$617.2M	Rp8,755,909M	✅ +5.9%

Debt-to-equity^» rose to 1.5x from FY2022's 1.4x, per the financial statements' own capital-structure disclosure - still well inside the regulatory ceiling of 10x, and the company's own language still calls it "healthy." That figure is not repeated anywhere in this quarter's investor presentation: FY2022's deck brought it back after two quarters' absence, relocated to a Comparison to Industry slide; that slide doesn't exist in this quarter's deck at all. See Beyond the Usual below. The related-party PT United Tractors Tbk facility - flagged since Q1 2020 - continued drawing, with its balance rising to Rp433,564M from Rp407,100M at year-end against an unchanged Rp1,250,000M limit.

Key Operational Metrics

• New financing originations: Rp6,317 billion for Q1 2023, up 53.9% YoY from a like-for-like Q1 2022 base of Rp4,103 billion, but down 0.6% QoQ from Q4 2022's Rp6,354 billion - the first sequential decline after four consecutive record quarters tracked through this backlog. This quarter's presentation defines "New Bookings" as excluding Pinjam Modal channeling volume, a narrower basis than Q1 2022's original post used (Rp4,752 billion, on an all-in basis) - see Beyond the Usual below for the definitional change itself.
• Managed receivables (including off-balance-sheet joint financing, per the deck): Rp22,526 billion, up 9.9% QoQ from Q4 2022's Rp20,498 billion and up 44.4% YoY.
• Non-Performing Financing (NPF) (company's own disclosed figure^», gross basis): 1.06% at Q1 2023, up 6bps QoQ from Q4 2022's 1.00% - the first quarterly uptick after five straight improvements, though essentially flat YoY (1bp below Q1 2022's 1.06%). NPF coverage eased to 3.8x, down from Q4's 4.1x - a third consecutive quarterly decline in coverage.
• Cost of Credit (CoC): 3.0% for Q1 2023, up from 1.1% a year earlier and up from FY2022's full-year 0.8% - the company attributes the jump to "capacity adjustment due to new methodology and strong bookings growth" and loss on repossessed assets, equivalent to roughly Rp163 billion of the increase per the deck's own framing. This is the sharpest single-quarter deterioration in this metric anywhere in this backlog.
• Net Interest Spread: 13.6% for Q1 2023, up from 13.2% a year earlier, on improvement in both yield and cost of funds.
• Cost to Income: 42.1% for Q1 2023, an improvement from 45.4% a year earlier and from Q4's 47.9%.
• Return on average assets (before tax): 10.8% for Q1 2023, down from 12.4% a year earlier.
• Return on average equity (after tax): 22.4% for Q1 2023, up from 20.8% a year earlier, flat versus Q4 2022's annualized 22.4%.
• Earnings per share: Rp34 basic for Q1 2023, up from Rp26 a year earlier (see Key Financial Metrics above).

The seasonal pattern this backlog has tracked cuts the other way this quarter: Q1 is typically BFI's weakest booking quarter relative to the prior Q4 (year-end vehicle-purchasing and dealer activity concentrates in Q4), so this quarter's small QoQ dip is partly structural rather than purely a demand signal - though the magnitude (essentially flat, not a sharp seasonal drop) is itself notable given how far Q4 2022 had run up.

Update on Loan Restructuring

• Restructured balance: Rp217,838M as of 31 March 2023, roughly 1.0% of total managed receivables - down again from FY2022's 1.6%, the sixth consecutive quarterly contraction in the pool.
• Absolute size: down 35.4% in three months, from Rp336,971M at 31 December 2022 to Rp217,838M at 31 March 2023.
• Cure rate and second-restructuring share: still not disclosed, for a fourth consecutive filing. The last disclosed cure rate remains Q1 2022's 80.7%; the last disclosed second-restructuring share remains Q1 2022's 18.0%. See The Prescription above and Beyond the Usual below for why this quarter's Cost of Credit jump makes the gap harder to read past.
• Rescheduling program remains closed since August 2020 - every account still in restructuring is working through relief already granted in 2020, not new Covid-19 volume, per the same disclosure that has held throughout this backlog.

Three Segments, and Others Extends Its Run as the Structural Fastest-Grower

The company reports Cars, Motorcycles, and Others on the same quarterly basis as every prior quarter in this backlog.

Cars - still the largest segment: Rp1,055,918M of income (64.2% of total, down from 68.3% a year earlier), with profit before tax up 15.7% YoY to Rp402,212M from Rp347,759M - margin (PBT/income) held roughly flat at 38.1% from 43.0%, and net profit up 16.1% to Rp326,038M from Rp280,880M.

Motorcycles - Rp377,242M of income (23.0% of total, up from 19.9%), with profit before tax up 15.8% YoY to Rp117,648M from Rp101,590M, margin easing to 31.2% from 43.2%, and net profit up 16.2% to Rp95,367M from Rp82,053M.

Others (heavy equipment/machinery, property, and sharia financing) - Rp210,579M of income (12.8% of total, up slightly from 11.8%), with profit before tax up 163.5% YoY to Rp107,841M from Rp40,918M - again the fastest-growing segment, and its fifth straight quarter of triple-digit YoY profit growth - and net profit up 164.5% to Rp87,417M from Rp33,049M. Margin more than doubled to 51.2% from 29.4%, the widest margin of any segment for the first time in this backlog.

FY2022's post called Others' pattern - out-growing both larger segments on every profit measure for six straight quarters - a structural feature rather than a low-base rebound. A fifth straight triple-digit quarter, and the first time its margin actually overtakes both Cars' and Motorcycles', extends that read further: this is no longer just the fastest grower off a small base, it's now also the most profitable segment on a per-Rupiah-of-income basis. Cars' and Motorcycles' margins, by contrast, both compressed meaningfully this quarter (Cars from 43.0% to 38.1%, Motorcycles from 43.2% to 31.2%) - consistent with where this quarter's Cost of Credit deterioration is landing, since Cars and Motorcycles carry the bulk of the vehicle-financing book most exposed to repossession losses.

Beyond the Usual

Cost of Credit tripled year-over-year, and the company named the cause without waiting to be asked

Cost of Credit rose to 3.0% for Q1 2023 from 1.1% a year earlier and from FY2022's full-year 0.8% - the sharpest single-quarter move in this metric anywhere in this backlog. The company's own investor presentation attributes it to "some deterioration in collectability (capacity adjustment due to new methodology and strong bookings growth) and loss on repossessed assets," quantifying roughly Rp163 billion of the increase. That's a materially more candid disclosure than the silence this backlog has flagged around the cure rate for three straight quarters - but a genuine methodology change and a genuine collectability deterioration read very differently to an investor, and the presentation doesn't cleanly separate how much of the jump is each. NPF coverage easing to 3.8x from 4.1x in the same quarter is at least directionally consistent with real asset-quality softening, not purely an accounting reclassification.

The cure rate has now gone missing longer than it was ever disclosed at all

BFI disclosed a restructuring cure rate and second-restructuring share every quarter from the pandemic's start through Q1 2022, then dropped both starting with the H1 2022 filings. This is the fourth consecutive filing - two interim quarters, one annual report, and now this quarter - without either figure or any stated reason for the omission. The restructured pool has kept shrinking every quarter since (10.2% of receivables at FY2021, then 6.9%, 4.5%, 2.9%, 1.6%, and now roughly 1.0%), and this is the same quarter the company volunteered a new, uncomfortable credit-quality number (see above) - showing BFI will disclose bad news candidly when it chooses to. The cure rate's continued absence looks less like an oversight with each additional filing.

Nine months after approval, the entire 927,732,000-share treasury mandate is still at zero

The 29 June 2022 EGMS authorized disposing of BFI's entire 1,002,732,000-share treasury stock: 75,000,000 shares for the MESOP^» program, and 927,732,000 shares for sale on or off the exchange to Trinugraha Capital or any other party. The MESOP tranche executed on 11 October 2022, as already reported. The remaining 927,732,000 shares show an unchanged treasury balance across three straight quarter-end filings now - 30 September 2022, 31 December 2022, and 31 March 2023 all show the identical 927,732,000-share balance. Neither this quarter's financial statements nor the presentation frames the broader mandate as behind schedule or reconsidered; it simply isn't mentioned as incomplete anywhere outside its own share-count disclosure.

Debt-to-equity vanished from the investor presentation again, one quarter after it came back

FY2022's deck restored a "Gearing Ratio" figure (1.4x) for the first time since Q1 2022, on a Comparison to Industry slide. This quarter's presentation has no such slide, no industry-comparison page, and no gearing or debt-to-equity figure anywhere in its 15 pages - a single-quarter reappearance rather than the metric's return becoming a fixture. The number itself is still disclosed in the audited financial statements' own capital-structure note (1.5x, up from 1.4x) - it was never hidden from the filed statements, only from the more widely read investor-facing deck, for a second time in three quarters.

The "New Bookings" figure the company now headlines excludes Pinjam Modal channeling volume - a narrower basis than what Q1 2022's original post reported for that same quarter (Rp4,752 billion, all-in, versus this quarter's restated Rp4,103 billion comparative). The narrower basis has been used consistently since at least FY2022's post (whose Rp20,081 billion full-year figure and Rp6,354 billion Q4 figure both already exclude Pinjam Modal), so this isn't a change happening mid-quarter - it's a footnote worth surfacing because a reader comparing this quarter's YoY growth rate against the original Q1 2022 post's own headline number would get a different, incorrect answer than the company's own restated series shows.

A new USD lender, PT Bank CTBC Indonesia, drew down USD 18,000,000 (Rp263,585M) under a facility signed 20 February 2023 - the first time this bank appears in BFI's borrowing base in this backlog, bringing the USD side of the balance sheet to three distinct counterparties (the Standard Chartered-agented syndicated loan, responsAbility SICAV, and now CTBC). The PT Bank Jago Tbk bilateral facility - fully drawn as of FY2022 after a slow start - was partially repaid this quarter, its balance easing to Rp277,329M from Rp300,000M, ordinary amortization rather than anything flagged as unusual. Subsequent to quarter-end, BFI was in the process of issuing a Rp1.6 trillion Shelf Registration Bond (Phase IV of its fifth shelf program) across three series (370 days, 2 years, 3 years), scheduled to list 17 April 2023 - consistent with the securities-issued balance already jumping 69.4% this quarter (see Key Financial Metrics above) ahead of the listing.

Target Valuation Range

Market cap ~Rp19,776,790M (~$1,316.7M) at ~10.30x TTM P/E and ~2.13x P/B - BFI is more expensive on both a trailing-earnings and book-value basis than it was three months ago - the first quarter in over a year where the stock's move outran its earnings growth rather than lagging it.

Using 15,039,383,620 shares outstanding net of treasury (unchanged from Q4 2022, since no further treasury shares moved this quarter - see Beyond the Usual above) and the Rp1,315 closing price:

Market cap buildup	Q1 2023
Share price (period-end)	Rp1,315
Shares outstanding	15,039,383,620
Market capitalization	Rp19,776,790M (~$1,316.7M)
Book value (total equity)	Rp9,270,767M

Peer-multiple sanity check	FY2022	Q1 2023	Change
P/E (TTM)	~8.78x	~10.30x	up - the stock rose 24.7% while TTM earnings grew just 6.2%
P/B	~1.81x	~2.13x	up

Market cap is up 24.7% from Q4 2022's ~Rp15,866,550M. TTM P/E uses TTM net income of Rp1,919,519M (FY2022's Rp1,806,679M plus Q1 2023's Rp508,822M, less Q1 2022's Rp395,982M). This is the reverse of the pattern this backlog flagged in Q1, Q2, Q3, and FY2022 of 2022, where the price consistently lagged or fell against growing earnings. Stock price is like mood: it can change anytime, and what matters is how the business actually performs - and this quarter's actual performance is mixed enough (record bookings broken, Cost of Credit tripled, cure rate still missing) that a stock re-rating upward on the same quarter isn't obviously supported by the operating numbers alone.

Stock Price: A Sharp Rebound Inside the Same Two-Year Swing

BFI Finance shares closed at Rp1,315 on 31 March 2023, up 24.6% from Q4 2022's Rp1,055 - the sharpest single-quarter gain in this backlog since the post-pandemic recovery, reversing two consecutive quarterly declines. Over the trailing two-year window (April 2021 through March 2023), the stock ranged from Rp675 (April 2021) to Rp1,365 (February 2023, an intra-window high the stock nearly matched again at quarter-end), a 102.2% peak-to-trough swing - well past the >30-40% threshold applied throughout this backlog. Unlike the past several quarters, where the underlying price move mostly predated the quarter being covered, this rebound happened largely within Q1 2023 itself - the stock gained ground steadily from January's Rp1,155 through February's Rp1,365 peak before settling at Rp1,315 at quarter-end.

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