Bank Rakyat Indonesia's NPLs feared to increase by 50bps

But NPL was still stable at 2.17% in April.

Based on recent results, Bank Rakyat Indonesia (BBRI) appears on track to meet analysts' FY17 targets. By Apr’17, it was able to maintain NIM at ~8% vs. 8.1% in 1Q17.

Here's more from Maybank Kim Eng:

But going forward, we think the tight liquidity which is reflected in its 94% LDR, is likely to force its CoF up. However, the downside risk to FY17F NIM will be managed by focusing expansion in the high-yield micro and consumer segments. Hence, we maintain our FY17 NIM forecast at 7.8% on the back of 14% YoY loan growth.

NPLs remained stable at 2.17% by Apr’17, supported by low delinquency in the high-yield segments. We expect BBRI to continue to clean up its small commercial and corporate book, which will cause NPLs to inch higher to 2.3% by YE17F.

The risk to our NPL forecast lies in OJK’s decision regarding the relaxation period for loan restructuring. If it is not extended beyond Aug’17, our worst-case scenario suggests that BBRI’s NPLs could go up by 50bps.

But as the banking industry’s loan growth has not fully recovered and NPLs are at the highest level since May 2010, we think OJK is more likely to push back the deadline.