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On Thursday, HSBC analyst Weldon Sng upgraded Bank Rakyat Indonesia Persero Tbk PT (BBRI:IJ) (OTC:BKRKF) stock from Hold to Buy, adjusting the price target to IDR4,550.00, up from IDR4,200.00. The upgrade reflects a positive outlook on the bank’s prospects in light of recent market developments and internal changes within the company.
Sng cited lower rate expectations as a key factor for the upgrade. Since the US "liberation day" in April, there has been anticipation of further Federal Reserve rate cuts. This environment is expected to provide Bank Indonesia with the flexibility to reduce policy rates. Bank Rakyat Indonesia, with its low CASA ratio and a loan portfolio dominated by micro loans, stands to benefit significantly from the lower rates.
The analyst also highlighted the impact of new management and their transformation plans. With nine out of thirteen management positions, including the CEO, recently filled by new appointees, the first quarter of 2025 briefing revealed strategies to enhance the bank’s funding franchise. These strategies include improving productivity, transaction banking capabilities, and cross-selling.
Furthermore, the bank’s transformation initiative aims to overhaul the core micro asset quality, payroll, and bullion services. Notably, Pegadaian, a part of the bank, has just received a gold license, which is expected to contribute positively to the bank’s operations. The management’s plans also include strengthening risk management practices and building a robust infrastructure for risk and operations.
Sng expressed confidence in the new management team’s ability to execute these plans, emphasizing their extensive industry experience. This sentiment is reflected in the revised Buy rating and increased price target for Bank Rakyat Indonesia’s stock.
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