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On Monday, Goldman Sachs analysts downgraded shares of Bank Rakyat Indonesia Persero Tbk PT (BBRI:IJ) (OTC: BKRKF), moving the rating from Buy to Neutral and adjusting the price target to IDR3,730.00 from the previous IDR4,910.00. The downgrade reflects concerns over the bank’s asset quality, particularly within the micro segment, which is expected to impact the bank’s profitability for a longer period than initially anticipated.
Bank Rakyat Indonesia’s credit costs have seen a significant increase, as indicated by January 2025 bank-only data. The credit cost soared to 5.57%, a substantial rise from the January 24/2024 levels of 2.02% and 3.11%, and well above the guidance range of 3.0%-3.2%. This uptick is attributed to additional management overlay and year-over-year lower, yet still elevated, non-performing loan (NPL) formation.
The analysts also expressed concerns about macroeconomic uncertainties, particularly the risks to GDP growth stemming from government budget reallocation. These factors contribute to the projection that credit costs will remain high, sustaining at 3.36% in 2025, which is consistent with 2024 levels, and staying elevated at 3.01% and 2.95% in 2026 and 2027, respectively.
Furthermore, the asset quality issues are expected to constrain loan growth at Bank Rakyat Indonesia, with muted growth anticipated in the micro segment. The bank’s pivot towards corporate and consumer portfolios is likely to affect margins. Additionally, funding pressures are anticipated due to tight liquidity conditions, underscored by weak M2 growth and competition for liquidity with Bank Indonesia, as the SRBI outstanding now represents 10% of the system deposit.
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