U.S. stocks edge higher; solid earnings season continues
On Wednesday, JPMorgan analysts downgraded shares of Bank Rakyat Indonesia Persero Tbk PT (BBRI:IJ) (OTC: BKRKF) from ’Overweight’ to ’Neutral’. Alongside the downgrade, the firm also reduced the price target to IDR4,200.00 from IDR4,600.00. The downgrade is based on a projection that the bank’s stock will trade within a certain range, influenced by factors such as ex-dividend dates and volatility related to liquidity and asset quality.
The analysts noted that while the dividend yield for the years 2025-26 looks attractive at 8.6-9.1%, it comes at the expense of book value growth. They forecast a 90% payout ratio from 2024 to 2027, which results in a modest compound annual growth rate (CAGR) of 3% for the bank’s book value per share (BVPS). Consequently, the majority of the returns for the stock are expected to come from yield rather than capital appreciation.
JPMorgan anticipates that tight system liquidity could lead to a reduction in net interest margin (NIM), predicting a NIM of 7.37% for 2025, down from 7.74% in 2024. The firm also expects that the reversal of modification loss-related net interest income (NII) for some large corporate borrowers will negatively impact reported NIM in the first half of 2025.
Credit risk in the Micro segment of the bank’s portfolio remains a concern, with gross provisions at the group level estimated to be 319 basis points in 2025 and 274 basis points in 2026. Although Bank Rakyat Indonesia has taken steps to clean up its book and is expected to continue doing so in the first half of 2025, JPMorgan suggests that increasing cash-flow stress could postpone a re-rating of the stock.
The analysts acknowledged that the stock has already seen a de-rating over the last 12 months, with a 27/33% decrease in forward price-to-earnings (PE) and price-to-book (PB) ratios, which they believe limits the potential for further sharp downside.
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