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27 July 2018

Bank Central Asia (BBCA IJ)


Results Note
HOLD (Unchanged)

Stock Data Steady albeit moderating growth


Target price (Rp) Rp20,500
Net profit grew 8.6% in 1H18 in line with its modest asset growth.
Prior TP (Rp) Rp22,000
Share price (Rp) Rp23,325 NIM pressure easing as loans well outpaced deposit growth.
Upside/downside (%) (12.1) Stable asset quality despite uptrend in consumer NPLs.
Shares outstanding (m) 24,655 Reiterate Hold albeit with a lower TP of Rp20,500.
Market cap. (US$ m) 39,762
Equity | Indonesia | Banks

Free float (%) 50.9 Modest result. BBCA reported profit of Rp11.4tn in 1H18 (+8.6% yoy), with its
Avg. 6m daily T/O (US$ m) 25.2 2Q/1Q profits forming 23.2%/21.6% of our FY18F forecast of Rp25.4tn (in-line)
vs. consensus estimate of Rp25.9tn (still within expectations). We view this as
Price Performance
modest results, with steady, albeit moderating, profit growth reflecting the bank’s
3M 6M 12M strong asset quality. Net interest income grew 7% in 1H on the back of modest
Absolute (%) 8.5 2.3 23.2 asset growth (+7.3%) and stable NIMs of 6.6%, while operating cost growth was
Vs. JCI (%) 8.0 13.3 21.2 under control (+8.3%) and provisions were lower (-12%). ROAA was sustained
high at 2.98% while ROAE moderated to 16.9% in 1H18 (1H17: 17.9%).
52w high/low (Rp) 23,325 - 18,575

135 Stable NIMs. BBCA’s loan portfolio grew 14.2% in 1H, well outpacing its deposit
130
125 growth (+7.5%), driven by strong growth of its corporate and commercial/SME
120 loans at 19% and 15%, respectively. Meanwhile, consumer loan growth slowed to
115
110 6%, due to slower growth across all products (mortgage: 4%; vehicle: 8%; credit
105 cards: 11% yoy) in recent quarters. However, the bank’s NIM of 6.58% in 1H (our
100
95 calculation) was only marginally lower vs. last year (-4bps) as NIM pressure from
90 falling asset yields is mitigated by stronger growth of loans vs. deposits. Given the
Oct-17

Mar-18
Jul-17

Jan-18
Jan-18

May-18
Jun-18
Jun-18
Jul-18
Aug-17
Sep-17
Sep-17

Nov-17
Nov-17
Dec-17

Apr-18
Apr-18
Feb-18

100bps rate rises so far this year, we believe BBCA should be able to maintain its
BBCA-Rebase JCI Index-Rebase NIMs relatively stable in coming years as the bank usually benefits from rising
rates on the back of its strong CASA ratio of 78%.
Major Shareholders
Asset quality. BBCA’s NPL ratio was stable at 1.4%, with high provision/NPL
PT Dwimuria Investama 54.9%
coverage of 186%, as a decline in corporate NPL ratio to 1.0% in 2Q (1Q: 1.4%)
has offset the uptrend in consumer NPL ratio to 1.4% in 2Q (1Q: 1.2%; FY17:
1.0%). Meanwhile, credit cost of 33bps in 1H was significantly improved vs. 43bps
Estimate Change; Vs. Consensus in 1H17 despite higher provisioning in 2Q vs. 1Q (51bps vs. 16bps). This was in
2018F 2019F line with our credit cost assumptions of 54bps for FY18F (FY19F: 42bps).
Latest EPS (Rp) 1,032 1,146
Valuation. We maintain our earnings forecasts unchanged but lower our TP to
Vs. Prior EPS (%) 0.0 0.0
Rp20,500 (from Rp22,000) due to our 50bps higher cost of capital assumption of
Vs. Consensus (%) -1.7 -3.0 12.5% (from 12.0%) in line with rising 10-yr yields during the second quarter.
Source: Bloomberg Our GGM-derived TP assumes LT ROAE of 22% (from 21.1%), LT growth of 8.5%,
cost of equity of 12.5%. We estimate BBCA’s LT ROAE based on DuPont analysis,
assuming LT ROAA of 2.74% and asset/equity leverage of 8x. Despite BBCA’s
steady growth and its high earnings quality and visibility, we reiterate our HOLD
rating due to the stock’s premium valuation over peer major banks in Indonesia.

Year To 31 Dec 2016A 2017A 2018F 2019F 2020F


Operating income (RpBn) 53,643 56,950 62,154 67,553 75,406
PPOP (RpBn) 30,264 31,760 34,749 37,800 43,104
Net profit (RpBn) 20,470 23,278 25,455 28,247 32,222
Net profit growth (%) 13.7 13.7 9.4 11.0 14.1
FD EPS (Rp) 830 944 1,032 1,146 1,307
P/E (x) 28.1 24.7 22.6 20.4 17.8
P/B (x) 5.1 4.4 3.8 3.3 2.9
Stephan Hasjim Dividend yield (%) 0.7 1.1 1.1 1.2 1.4
PT Indo Premier Sekuritas ROAA (%) 3.2 3.2 3.2 3.1 3.2
stephan.hasjim@ipc.co.id ROAE (%) 19.8 19.1 18.1 17.5 17.4
+62 21 5793 1168 Source: BBCA, IndoPremier Share Price Closing as of : 26-July-2018

Refer to Important disclosures in the last page of this report


BBCA IJ Results Note

Fig. 1: Net Interest Income (Rp bn) and NIMs (%) Fig. 2: Non-Interest Income (Rp bn; % of Gross Income)

Net Interest Income Net Interest Margin Other Income Other Income % of Total
12,000 Rp bn 8% 5,000 Rp bn 35%

10,000 7% 30%
4,000
25%
8,000 6%
3,000 20%
6,000 5%
2,000 15%
4,000 4%
10%
2,000 3% 1,000
5%
0 2% 0 0%
2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18
Source: Company, IndoPremier Source: Company, IndoPremier

Fig. 3: Operating Expense (Rp bn) and Cost/Income Ratio (%) Fig. 4: Pre-Provision Profit (Rp bn; % of Average Assets)

Operating Expenses Cost-Income Ratio Pre-Provision Profit Pre-Provision Profit ROAA


8,000 60%
Rp bn 10,000 6%
Rp bn
50%
6,000 8,000 5%
40% 4%
6,000
4,000 30% 3%
4,000
20% 2%
2,000
10% 2,000 1%

0 0% 0 0%
2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18
Source: Company, IndoPremier Source: Company, IndoPremier

Fig. 5: Net Loan Provisioning (Rp bn; bps of Average Loans) Fig. 6: Net Profit (Rp bn) and ROAA (%)

Net Provisions bps of Loans Net Profit Net Profit ROAA


2,400 Rp bn bps 600 7,000 Rp bn 4.0%

2,000 500 6,000 3.5%

5,000 3.0%
1,600 400
2.5%
1,200 300 4,000
2.0%
800 200 3,000
1.5%
400 100 2,000 1.0%
0 0 1,000 0.5%

-400 -100 0 0.0%


2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

Source: Company, IndoPremier Source: Company, IndoPremier

Refer to Important disclosures in the last page of this report 2


BBCA IJ Results Note

1H 2018 Results

Results (Rp Bn) 1H18 1H17 % Y-Y 2Q18 1Q18 % Q-Q


Net Interest Income 21,762 20,357 6.9 10,990 10,772 2.0
Fees & Commissions 5,516 4,934 11.8 2,847 2,669 6.7
Insurance & Other Incomes 1,396 1,224 14.1 747 649 15.2
Trading Income 807 890 -9.3 229 578 -60.4
Operating Income 29,481 27,405 7.6 14,813 14,668 1.0
Operating Expenses -14,347 -13,246 8.3 -6,750 -7,597 -11.2
Pre-Provision Profit 15,134 14,158 6.9 8,063 7,070 14.0
Provision for Impairment -826 -936 -11.7 -638 -188 238.9
Operating Profit 14,316 13,222 8.3 7,425 6,891 7.8
Other Non Operating Items 21 0 0.0 21 0 n.m
Pre-Tax Profit 14,328 13,222 8.4 7,437 6,891 7.9
Tax -2,906 -2,700 7.6 -1,524 -1,382 10.3
Net Profit 11,421 10,519 8.6 5,913 5,508 7.4

Gross Loans 508,822 445,553 14.2 508,822 484,260 5.1


Customer Deposits 615,551 572,622 7.5 615,551 583,519 5.5
Non-Performing Loans (NPL) 7,124 6,373 11.8 7,124 7,223 -1.4
Special Mention Loans 10,805 10,805 0.0 10,805 8,787 23.0
Loan Loss Reserves (LLR) 13,261 12,512 6.0 13,261 13,261 0.0
Total Assets 791,730 738,199 7.3 791,730 759,851 4.2
Risk-Weighted Assets 601,841 551,639 9.1 601,841 579,577 3.8
Shareholders’ Funds 136,747 120,610 13.4 136,747 136,355 0.3
BV Per Share 5,546 4,892 13.4 5,546 5,530 0.3
Source: Company, IndoPremier

Key Ratios (%) 1H18 1H17 % Y-Y 2Q18 1Q18 % Q-Q


ROAA (annualized) 2.98 3.01 -0.9 3.05 2.92 4.5
ROAE (annualized) 16.9 17.9 -5.7 17.3 16.5 5.2
Net Interest Margin (bps) 658 662 -0.6 670 646 3.7
Credit Cost (bps) 33 43 -22.9 51 16 229.3
Fee Inc/Operating Income 18.7 18.0 3.9 19.2 18.2 5.6
Non Int Inc/Operating Income 26.2 25.7 1.8 25.8 26.6 -2.8
Op. Cost/ Operating Income 48.7 48.3 0.7 45.6 51.8 -12.0
Loan-to-Deposit Ratio (LDR) 82.7 77.8 6.2 82.7 83.0 -0.4
NPL/Loan Ratio 1.4 1.4 -2.1 1.4 1.5 -6.1
LLR/NPL Ratio 186.2 196.3 -5.2 186.2 183.6 1.4
Tier-1 Capital Ratio 22.4 21.6 4.1 22.4 23.3 -3.6
Total Capital Ratio 23.4 22.5 4.1 23.4 24.2 -3.4
Source: Company, IndoPremier

Refer to Important disclosures in the last page of this report 3


BBCA IJ Results Note

Year To 31 Dec (RpBn) 2016A 2017A 2018F 2019F 2020F

Income Statement

Interest income 50,426 53,768 57,630 64,403 72,944


Interest expense (10,347) (11,941) (11,763) (15,319) (17,876)
Net interest income 40,079 41,826 45,867 49,084 55,068
Fees and commissions 9,401 10,386 11,424 12,567 13,824
Trading income 2,210 1,772 1,600 2,150 2,200
Other operating income 1,954 2,966 3,262 3,752 4,315
Total operating income 53,643 56,950 62,154 67,553 75,406
Personnel expenses (10,630) (11,335) (12,242) (13,344) (14,545)
G&A expenses (11,229) (12,306) (13,536) (14,619) (15,789)
Other operating expenses (1,520) (1,550) (1,627) (1,790) (1,969)
Pre-provision operating profit 30,264 31,760 34,749 37,800 43,104
Provisions (4,561) (2,633) (2,770) (2,479) (2,814)
Loan recovery income 0 0 0 0 0
Operating profit 25,703 29,127 31,979 35,321 40,289
Non-operating profit 0 0 0 0 0
Exceptional items 0 0 0 0 0
Pre-tax profit 25,703 29,127 31,979 35,321 40,289
Income tax (5,207) (5,838) (6,524) (7,064) (8,058)
Minority interests (27) (11) 0 (10) (10)
Reported net profit 20,470 23,278 25,455 28,247 32,222

Balance Sheet

Cash 15,944 16,754 25,093 28,203 31,744


Current account with BI 40,597 43,473 44,083 49,369 55,380
Placements at BI & other banks 47,830 28,063 29,466 30,940 32,487
Short-term investments 44,365 76,977 85,987 96,161 107,667
Government bonds 72,019 69,388 75,278 78,700 82,293
Gross loans 427,866 480,584 551,287 632,457 725,650
Loan provisions (12,849) (13,686) (14,564) (15,893) (17,557)
Other assets 40,968 48,766 51,204 53,764 56,453
Total Assets 676,739 750,320 847,834 953,701 1,074,117
Customer deposits 530,134 581,115 651,749 731,950 823,177
Deposits from other banks 4,901 5,758 6,768 7,966 9,387
Securities and borrowings 5,121 3,651 4,016 4,418 4,860
Other liabilities 23,504 27,914 34,711 36,871 39,008
Total Liabilities 563,659 618,439 697,245 781,205 876,432
Share capital 7,105 7,090 7,090 7,090 7,090
Reserves and others 6,824 8,215 8,215 8,215 8,215
Retained earnings 98,503 115,998 135,167 157,050 182,210
Shareholders' equity 112,433 131,304 150,472 172,355 197,515
Minority interest 282 98 118 141 170
Total Liabilities & Equity 676,374 749,841 847,834 953,701 1,074,117
Source: BBCA, IndoPremier

Refer to Important disclosures in the last page of this report 4


BBCA IJ Results Note

Year To 31 Dec 2016A 2017A 2018F 2019F 2020F


Growth Ratios (% yoy)
Gross loans 7.4 12.3 14.7 14.7 14.7

Total assets 13.9 10.9 13.0 12.5 12.6

Customer deposits 11.9 9.6 12.2 12.3 12.5

Net interest income 11.7 4.4 9.7 7.0 12.2

Non-interest income 13.2 11.5 7.7 13.4 10.1

Total operating income 13.6 13.3 9.8 10.5 14.1

Operating expense 7.7 7.7 8.8 8.6 8.6

PPOP 15.8 4.9 9.4 8.8 14.0

Net profit 13.7 13.7 9.4 11.0 14.1

Profitability Ratios
ROAA (%) 3.24 3.23 3.19 3.14 3.18
ROAE (%) 19.8 19.1 18.1 17.5 17.4
NIM (%) 7.17 6.59 6.55 6.25 6.24
Credit cost (bps) 114.7 59.4 53.7 41.9 41.4
Cost/income (%) 43.6 44.2 44.1 44.0 42.8
LDR (%) 80.7 82.7 84.6 86.4 88.2
CAR (%) 22.2 20.4 20.4 20.4 20.4
NPL ratio (%) 1.3 1.4 1.5 1.4 1.4
Provisions/NPL (%) 235.7 197.1 181.8 175.0 167.9
Source: BBCA, IndoPremier

Refer to Important disclosures in the last page of this report 5


Head Office
PT INDO PREMIER SEKURITAS
Wisma GKBI 7/F Suite 718
Jl. Jend. Sudirman No.28
Jakarta 10210 - Indonesia
p +62.21.5793.1168
f +62.21.5793.1167

INVESTMENT RATINGS
BUY : Expected total return of 10% or more within a 12-month period
HOLD : Expected total return between -10% and 10% within a 12-month period
SELL : Expected total return of -10% or worse within a 12-month period

ANALYSTS CERTIFICATION.
The views expressed in this research report accurately reflect the analyst;s personal views about any and all of the subject securities or issuers; and no part of the
research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

DISCLAIMERS
This reserch is based on information obtained from sources believed to be reliable, but we do not make any representation or warraty nor accept any
responsibility or liability as to its accruracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for
general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, finacial situation and the
particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or
sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this
report.