Bank Rakyat Indonesia's profits up 14% to IDR21.4t in 2013

Thanks to these 3 growth drivers.

According to Maybank Kim Eng, Bank Rakyat Indonesia's profit grew 14% YoY to IDR21.4t in 2013, exceeding its forecast by 3% and consensus by 5.5%.

Here's more:

The key drivers for such strong profit were: 1) the NIM rebounding to 8.6% along with 23% YoY growth in high-yield micro lending and 16% YoY growth in saving deposits; 2) fee income growing 21% QoQ to IDR4.9t by YE13 on the stronger e- banking franchise; and 3) NPLs declining in all business lines.

The overall rate was down to 1.6% in 2013 vs 1.8% in 2012. What’s Our View Margin sustainable above 8%. The NIM is at its highest in the past two years.

We see limited downside from this level, with a more significant contribution from BRI’s continuous expansion in the micro segment to start kicking-in this year. The bank’s focus on raising cheap funding will also help to prevent CoF from spiking.

Fee income to grow with stronger e-banking franchise. Strong growth in BRI fee income is expected to continue in 2014. It is now accounting for 12% of total income.

The bank plans to buy satellite as part of its IT investment in order to bring its service to a higher level and support fee income growth. BUY, TP IDR10,000. We maintain BUY for BRI with TP unchanged at IDR10,000 (10.2x 2014F PER; 2.5x 2014F P/BV).

The current valuation is still attractive, below its 2.4x average P/BV. We believe the bank will continue to offer the strongest ROE among peers at 27% in 2014.