March 25, 2025

Signs of Recovery, but Caution Still Reigns

Market Commentary

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It seems that not only BBCA's performance is improving, BBRI's performance also started to pick up in February 2025.

In February 2025, BBRI successfully booked a net profit of IDR 4.6 tn, up 42% yoy.

This figure serves as a positive signal that BBRI's growth engine is starting to rev up again.

For those still holding the stock, at least it's a bit of a relief, even though it may not fully cover losses yet, there's a breath of fresh air coming from the dividend payout.

This year’s total dividend amounts to IDR 343.4/share, of which IDR 135/share has already been distributed as an interim dividend, with the remaining IDR 208.4/share to follow soon.

Not only did profits increase. BBRI’s NIM also rose by about 30 bps to 7.0% in February 2025.

This increase was due to BBRI lowering interest on third-party funds and external funding to boost liquidity. However, we see this as a temporary effect.

One thing worth noting is that low-cost funds, or CASA, declined to 65% from the peak of 68% in 2024. This could drive up blended funding costs going forward.

So far this year, CASA has dropped 2.5%, while time deposits have increased 10% yoy through February. This means BBRI is starting to rely more on higher-cost funds.

Its LDR also continues to ease, now standing at 88.2% as of February. This shows that loan disbursement has been slowing since the second half of last year.

In fact, loan growth was only 5.2% YoY in February, still below management’s target of 7–8%.

One somewhat relieving point is that credit costs were successfully lowered to 3.3% in February, after spiking to 5.6% in January.

But if we total the first two months of 2025, credit costs are still high at 4.4%, far from management's target of around 3.0–3.2%.

So even though we’re seeing some improvement, BBRI still has to work extra hard to fix its asset quality.

We see that short-term challenges for BBRI are far from over. Liquidity remains tight, and loan growth hasn’t taken off due to lingering concerns about unresolved asset quality issues.

What makes it more difficult is that as of March 24, BBRI remains the top net foreign sell.

We’ll only turn more optimistic once liquidity starts to ease again and macroeconomic indicators show signs of recovery.

In essence, we still suggest waiting it out. Don’t rush to increase exposure to banking stocks before a truly strong catalyst emerges.

One potential game changer would be if the DHE program really takes off and succeeds. Yes, once again it all comes back to DHE, it’s practically become everyone’s mantra of hope these days.

But if you feel the stock is already too cheap and still want to enter the banking sector, we lean more towards recommending BBCA over BBRI.

As we know, BBRI is already part of Danantara, and unfortunately, we’re currently losing confidence in the direction of government policy. So rather than taking unnecessary risks, it’s better to stick with something more solid and defensive for now.

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March 25, 2025

March 24, 2025

March 24, 2025