On Wednesday, JPMorgan adjusted its stance on Bank Rakyat Indonesia Persero Tbk PT (BBRI:IJ) (OTC: BKRKF), downgrading the stock from Overweight to Neutral. The new price target set by the firm is IDR5,500.00.
The decision for the downgrade was influenced by the stock reaching the firm's previous price target and the lack of immediate positive catalysts anticipated by the analysts.
They suggest investors should consider taking profits as the third-quarter results and briefing might present potential near-term challenges for the bank's stock.
The analysts at JPMorgan highlighted concerns regarding the bank's loan book, particularly the 2023 Kupedes portfolio, which is expected to maintain high slippages. Additionally, Bank Rakyat Indonesia is projecting gross credit costs of 300 basis points in 2024, which is slightly below JPMorgan's estimate of 350 basis points and the ~335 basis points observed in the first seven months of 2024.
The firm also noted the possibility of increased credit costs in 2025 if the bank decides to limit its provisions this year. Such a move could result in prolonged uncertainty around non-performing loans (NPLs) and potentially reverse some of the 35% gains the stock has made from its year-to-date low over the past three months.
In contrast to the more cautious view on Bank Rakyat Indonesia, JPMorgan expressed a preference for other Indonesian banks, naming BMRI and BCA as their top picks within the region. This suggests that while the broader Indonesian banking sector still holds appeal for the firm, Bank Rakyat Indonesia, in particular, is seen as having less upside potential in the near term.
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