Why Analysts See 49% Upside in Indonesia's Bank Rakyat Despite Share Slump

JAKARTA, Investortrust.id — Shares of PT Bank Rakyat Indonesia Tbk (BBRI), Indonesia's largest microfinance lender and one of the country's biggest state-controlled banks, may have significantly more room to climb after this year's sharp selloff, according to KB Valbury Securities, which reiterated its Buy recommendation with a price target of Rp4,010 per share.

The target implies an upside of about 49.1% from Thursday's closing price of Rp2,690, reflecting analysts' confidence that the market has become overly pessimistic despite the bank's resilient operating performance.

BBRI is widely viewed as a bellwether for Indonesia's banking industry and domestic economy because of its dominant presence in micro, small, and medium-sized enterprise (MSME) lending. A recovery in its shares could signal improving investor confidence in Indonesian financial stocks after months of foreign selling pressure.

KB Valbury said BBRI currently trades at around 1.2 times projected 2026 price-to-book value, well below its historical valuation range and more than two standard deviations beneath its long-term average multiple of 1.5 times.

The brokerage believes the stock remains undervalued, estimating its downside fair value at around Rp2,670, slightly above this year's intraday low of Rp2,590, suggesting investors still have a meaningful margin of safety.

BBRI shares have declined 26.1% since the start of 2026 and remain nearly 35% below their peak this year. Analysts attribute most of the weakness to declining foreign investor confidence and broader domestic market sentiment rather than deterioration in the bank's fundamentals.

Operationally, BBRI continues to deliver steady growth.

The bank generated standalone net profit of Rp20.42 trillion ($1.28 billion) during the first five months of 2026, up 9.5% from a year earlier. The result represents 34.4% of KB Valbury's full-year earnings forecast and broadly matches market consensus expectations.

In May alone, net profit reached Rp4.52 trillion ($284 million), increasing 24.4% from the same month last year and 12.1% from April, indicating that earnings momentum remains intact.

The stronger performance was supported by a 6.6% increase in net interest income, while interest expenses fell 14.4% as the bank reduced reliance on higher-cost funding.

Non-interest income climbed 17.6%, driven by stronger fee-based revenue and higher dividends from subsidiaries. As a result, pre-provision operating profit rose 8% year over year to Rp44.59 trillion ($2.80 billion).

Loan growth also exceeded expectations.

Outstanding loans reached Rp1,417.19 trillion ($89.1 billion) through May, rising 12.2% from a year earlier and surpassing management's full-year growth target of 7% to 9%.

Customer deposits increased 8.6% to Rp1,546.44 trillion ($97.3 billion). Low-cost current and savings accounts (CASA) surged 18% to Rp1,092.27 trillion ($68.7 billion), while higher-cost time deposits declined 8.8%, strengthening the bank's funding mix and supporting profitability.

Asset quality also continued to improve.

BBRI's cost of credit fell to 3.3%, compared with 3.5% a year earlier, moving closer to management's long-term target range of 2.9% to 3.2%.

Standalone net interest margin remained resilient at 6.3%, slipping only 10 basis points from a year earlier.

According to KB Valbury, Indonesia's higher benchmark interest rates still provide room for BBRI to selectively reprice loans, helping preserve margins throughout 2026.

Based on current trends, the brokerage forecasts BBRI's net profit will reach Rp59.43 trillion ($3.74 billion) this year, representing annual growth of approximately 4.9%.

Earnings are expected to continue climbing to Rp63.43 trillion ($3.99 billion) in 2027 and Rp68.54 trillion ($4.31 billion) in 2028, while net interest income is projected to increase to Rp159.31 trillion ($10.02 billion) in 2026 from Rp150.50 trillion ($9.47 billion) last year.