On Friday, JPMorgan (NYSE:JPM) adjusted its price target on shares of Bank Rakyat Indonesia Persero Tbk PT (BBRI:IJ) (OTC: BKRKF), reducing it from IDR5,800.00 to IDR5,500.00. Despite the price target cut, the firm maintained its Overweight rating on the stock.
The revised price target comes amid expectations of continued volatility for the bank in the short term, with a forecast for a stronger performance in the longer term. JPMorgan anticipates that the bank will experience fluctuations over the next three to six months but will establish a foundation for notable outperformance in the subsequent 12 to 18 months.
JPMorgan's report delved into several factors affecting the bank's outlook, including the drivers of system liquidity and net interest margin (NIM) risk, asset quality (AQ) risks and their resolution, particularly concerning microfinance, and the factors influencing stock multiples.
The Balance of Payments (BoP) has been identified as a key factor in shifts in excess system liquidity as domestic liquidity tightens, which could result in elevated costs of funds, a slowdown in credit growth, a shift towards lower-yield loans, and pressure on NIM.
The bank's asset quality was another point of focus. JPMorgan's in-depth discussions with Bank Rakyat Indonesia ensured that incremental asset quality issues were manageable. However, the disbursements in 2023 are expected to lead to high credit costs, which JPMorgan revised upward to 350 basis points for 2024 and 260 basis points for 2025.
Despite these concerns, JPMorgan remains positive on the stock, citing attractive valuation metrics. The bank's 2025 estimated price-to-earnings (P/E) ratio stands at 10.2 times, with a price-to-book (P/B) ratio of 2.01 times for the same year.
Additionally, dividend yields are projected at 6.4% for 2024 and 7.9% for 2025. These figures are set against an expected return on equity (RoE) of 17% for 2024 and 20% for 2025, with a return on assets (RoA) of 2.6% for 2024 and 3.0% for 2025, which the firm finds compelling despite the identified risks.
InvestingPro Insights
As investors weigh JPMorgan's revised price target on Bank Rakyat Indonesia (BBRI), it's worth considering some additional metrics and insights from InvestingPro. With a market capitalization of $40.44 billion USD and a P/E ratio of 10.85, BBRI's valuation remains attractive in the banking industry. Moreover, the company's commitment to shareholder returns is evident with a noteworthy dividend yield of 7.09%, especially significant as BBRI has raised its dividend for 3 consecutive years and maintained payments for 21 years.
InvestingPro Tips highlight that BBRI is a prominent player in the Banks industry and has been profitable over the last twelve months. Despite weak gross profit margins, analysts predict the company will be profitable this year, which aligns with JPMorgan's positive long-term outlook. Additionally, the stock is trading near its 52-week low, which could present a buying opportunity for investors considering the bank's history of consistent dividend payments and the prospect of profitability.
With these InvestingPro insights, those interested in a deeper analysis can find additional InvestingPro Tips for BBRI at Investing.com. There are currently 9 tips available, which can be accessed with an additional 10% off a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24.
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