Company Update / Bank / IJ / Click here for full PDF version
Author(s): Jovent Muliadi ; Shierly Elizabeth
- We recently met with BRI's risk director to discuss its overall asset quality. Vintage and net downgrade for Kupedes has improved.
- It expects overall FY26F CoC to be at lower end of guidance (<3%) vs. 3.1% in 1H26. It also expects FY27 CoC to be 15-25bp lower than FY26.
- Given the positive trend on asset quality, we expect Kupedes to start growing again next year. BRI is our top pick.
Change in Kupedes's business process has started to bear fruits
Our biggesst question was whether the improvement in Kupedes due to better business process or improving economic condition. The answer was the former as since 2023 there were multiple changes/improvement that have been implemented: 1) previously micro risk was under micro director not risk director; this has been changed in 2024. 2) Deterioration in asset quality was easily masked by paying-off existing loan, then the same customer can apply for new loan again; this has been changed which now only allow one loan account/customer. 3) Change in KPI for micro loan officer; before 2024, the bonus is contingent to volume target, now the main determinant for bonus was 6 months on book loan quality (with >1% SML threshold) and 4) lastly, the addition of field collection officer of 4,400 people (16% addition from 26-27k mantri) which specifically handles collection - this is important, as before the collection was handled by mantri/micro loan officer.
Both vintage to SML and net micro downgrade to NPL have improved
The changes in business process has resulted in both better vintage (downgrade to SML) and net micro downgrade. 6MoB vintage analysis downgrade to SML for 2025 Kupedes disbursement has fallen to average of 3.4% vs. 5% for 2024 disbursement and 6.3% for 2023 disbursement. Whereas net micro downgrade to NPL has fallen to Rp1.7tr/month in 2Q26 vs. Rp1.9tr in 1Q26 and peak of Rp3.5tr in 1Q25. It expects downgrade to fall to Rp1.5tr in 3Q. At the same time, PNM CoC has fallen to 3.6% in 1H26 from 6-7% in FY24-25. In sum, it expects FY26F CoC to be at the lower end of guidance (<3%) vs. 3.1% in 1H26. For FY27F, assuming there is no further deterioration in macro, overall CoC is expected to improve by 15-25bp.
Stabilizing asset quality will allow Kupedes to start growing again next year; BRI is our top pick
After posting 3 years of negative growth (FY23-1H26 Kupedes CAGR of -12%), we expect Kupedes to grow again next year at mid-single digit. This shall also alleviate the concern on NIM/ROE compression from expansion in corporate (corporate FY23-1H26 CAGR of +34%) - note that most of its expansion in corporate loan is short-term in nature. Valuation also remains attractive at 1.5x P/B and 8.4x P/E vs. its 10Y average of 2.3x and 14.1x. Whereas foreign fund ownership has fallen to 13% in Aug26 from 18-19% in FY21-23 (fig. 10).
Sumber : IPS