BBRI

Fed Fund Rate: Psychology effect of tapering Tantrum

The fed in several times announced that they had a plan to raise their fund rate as US economic growth had started to recover in 2015. This acts triggered the investor to make decision in responding the announcement, global investor in emerging country tends to remove their fund from the country to another country which they assumed having lower risk. According to domestic newspaper in the early of July 2015, china had loss fund more than 35,000 trillion rupiah from its capital market. They might remove their money because the fed announced its plan to increase the fed fund rate in 2015.  

The Fed apparently did that action to search the respond from global investor, they may analyze where the money was removed by global investor after the fed made announcement about the fed fund rate.

Government should anticipate the raise of fed rate which may be lifted in September of 2015. They should not only increase its interest rate to maintain capital outflow but they should also do more than that, they have to establish better logistic distribution to decrease cost. Capital outflow which will be removed from capital market should be projected before September. The rapid increase of the fed rate will possibly be a deadly trigger for currency rate if the fed does that monetary policy. Despite central bank has hundred billions of foreign deposit, the worst scenario should be prepared. Our big domestic investors have changed in to global investor and they could act as global player. They will bring their money to lower risk country to save their asset. 80 % of economic growth has been driven by 20 % of the business people who own share in big company at Indonesia. These people have big portion of investment in capital market.  

We remember that the chaos in 1998 was triggered by high inflation rate which rupiah was sharply falling. In 1998 the richest people of Indonesia brought their asset to Singapore.

Slowdown in credit growth: from 20 dropped in to 10

The slowdown of credit growth in among of banks is caused by the shrink of commodity price which decreased export. In 2013 the credit growth was more than 20, 17 % which was higher than credit growth in 2014 which was at 11,6 %. In May of 2015 the credit growth was only less than 10 %.

There are many companies in commodity sector have postponed their business expansion and delayed to purchase good.

On other hand the non performing loan ratio of banking sector increased in 2015 due to slowdown of economy. The decline of demand for goods and services make the manufacture industry decreased their production and as the result of that several companies may have liquidity problem in pay their short term liabilities.

Company Analysis: Kupedes is the famous brand for customer

Government of Indonesia owns more than 56.75 % of total share. BRI is one of the best bank in Indonesia with good performance. The company seems focus in retail banking and micro banking. According to annual report of 2014, the biggest contribution of interest income was from loan for micro segment, it was more than 44 % of total interest income. In spite of that the biggest loan portion is loan for retail segment which was more than 50 % of total loan in 2014.  The interest rate of micro credit may need to be considered in order to increase loan for micro segment.

The famous brand is kupedes which was 36 % of total loan by its type. The company seems focus in developing its micro and retail segment by establishment of Teras BRI and Mobile Teras BRI. Based on annual report in 2014 there are 245 new mobile teras unit and 145 new Teras BRI unit.

The company seems plan to capture more in micro segment as the interest rate margin is promising. In 2014 net loan growth is more than 13.9 % higher than loan in 2013. The biggest contribution was credit in trading, hotel and restaurant segment by its economic sector.

Capital expenditure: rp 831 billion for satellite and rp 1,032 trillion for computer and machinery

In spite of economic slowdown in 2014, the company was still confident to expand its business by developing its technology. They purchased satellite for development and they have spent more than Rp1.03 trillion for computer and machinery. They increased its ATM from 18,292 units in to 20,792 units and they added EDC machine from 85,936s unit in to 131,204 units. They want to be the biggest national

payment bank in Indonesia. 

As the result of that they were able to increase its fee base income in 2014 compared to 2013. Although there are many achievement at domestic the company liquidated its subsidiary in hongkong. BRI was shutting down BRI finance ltd in Hongkong.

Opinion

I think BRI should use more part of his loan portfolio for youth entrepreneur because this is the biggest part of population. This could reduce unemployment in Indonesia and finally it could contribute economic growth for Indonesia. Mandiri is better in building this segment by creating entrepreneur program.

Back to back loan could be an option for this segment, the company could use csr program for giving back to back loan for business leader. Then leader will manage this loan for distributing for beginner entrepreneur.

The back to back loan is using revolving basis which let the debtor only pay the interest only during one period of facility. The purpose of the loan is financing working capital. If the business is failed the asset should be liquidated.

 

BBRI

Economic condition of 2014

Indonesia seems stable in its economic growth in 2014, according to the expert it will be at range of 5.8- 6.2. It is slower than economic growth in 2013 which was forecasted at 5.7 % up. Indonesia has good competitive advantage in its economic, this is stable and this is supported by more than 50 % domestic consumption.

As long as people have strong ability in buying goods and the inflation rate is better, the condition will be better. BI rate is at 7.5 %, it is predicted that it will be higher at 2014. The deficit of current account which is contributed by oil and gas sector as main contributor make the central bank keep BI rate at the point.

The current account deficit will be still high in 2014. The lack of government policy in oil and gas sector increases its business risk and the similar problem is also occurred in biodiesel conversion policy in a mixture of diesel. It is difficult to reduce trade deficit in diesel imports. The crisis at Ukraine will trigger higher oil price and finally will increase inflation rate. Higher its rate will force central bank keep Bi rate still high.

76 % of imports are raw material items which means our consumption is not matching with domestic raw material either its number or availability.

I think if industry produce goods which are supported with more local raw material the trade deficit will be able to be reduced.

Central Bank has changed its required reserve from 5 % in to 8 %. With higher reserve, the banks are expected safer. Based on data 2013 credit growth is at 22.2 % yoy in October 2013, this is slower than its growth with 23.1 % on September 2013. This regulation increases its barrier to entry for new comers who have to have more capital to establish Bank.

Bank Rakyat Indonesia

The company still concerns in its core business, the credit retail segment. The micro segment is at 30.7 % of total loan although this is smaller than the retail banking. Since they have launched TerasBRI, its network and product development has been better. TerasBRI as the part of its micro strategic has increased both micro Loan and micro deposit significantly in 2012. Micro segment is designed for personal customer with competitive product such as Kredit Usaha Rakyat and Kupedes as the lending product and simpedes as funding product.

The company expanded its micro infrastructure with 5000 BRI units, 1,778 TerasBRI and 350 mobile TerasBRI.

In 2012 the loan of the company is at IDR 362 trillion. It increases 22.9 % higher than loan in 2011.  Based its loan composition in 2012, the biggest loan of its loan is retail segment with 42 % of total loan. I took rediction the loan will increase 19 % higher with increase of interest income at 20 % in 2014.

In 2008-2012 The company have good loan to deposit ratio, good capital adequacy ratio and low Non performing loan. The asset has average growth at 22.5 % in 2008-2012. The other good news is its average growth of fund from third party in 2008-2012 is at 27.45 %.

As the economic growth in 2014 is predicted in lower rate because of the election schedule in the year, I forecast the placement with bank Indonesia will be higher than 2013 at 20 % increase.

I took prediction that EPS will increase to 1.026, 1,357, 1,543 with consecutive growth 2014-2016 at 20%,25 %, 20%. In 2015 the loan assessment will at 25 % as the optimistic condition of new government.

As long as government could decrease deficit  in current account  inflation rate and Bi rate will be stable.      

If you are interested to my forecasting of BBRI you could send sms 081217596612.