In today’s briefing:
- Aozora Bank (8304 JP) – Two Bets Too Far
- Bank Rakyat Indonesia (BBRI IJ) – Pushing the Margins of Profitability
Aozora Bank (8304 JP) – Two Bets Too Far
- 3QFY23 results reveal losses related to Aozora’s US CRE exposure and securities portfolio; management forecasts a FY23 loss and a 50% cut in the previously forecast FY2023 dividend
- US CRE exposure is 6.6% of total loans and Aozora’s US CRE deterioration propelled the NPL ratio to 2.87% up 162bps QoQ, the worst NPL ratio of the peer group
- The securities portfolio hits are in US MBS and US bond ETFs; SMFG and Mizuho have large relative FX bond exposures, but they have less duration risk
Bank Rakyat Indonesia (BBRI IJ) – Pushing the Margins of Profitability
- Bank Rakyat Indonesia’s results reflected its ability to offset a tighter liquidity environment with a higher margin loan mix as it continues to shift to commercial Kupedes microloans.
- The bank has also seen the benefit of increasing digitalisation benefitting costs with more BRILink agents and users of mobile banking through BRIMO, which has also helped to grow CASA.
- Guidance for 2024 remains positive on loan growth, NIMs, increasing leverage, and rising loan yields, with stable credit quality. Valuations look attractive relative to a forecast ROE of above 20%.
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