PT Bank Central Asia Tbk (BBCA)
Banking Sector
Decent Performance yet High Valuation
Slightly Burdened Bottom Line
BBCA managed to book its net profit at IDR12.86 trillion or grew by 12.62% YoY, which represents 44%/45% of our estimate/consensus. We see that the results is still in-line, given its realization in 1H18 at 44% of net profit in FY18. Net interest income was able to reach 13.07% YoY growth to IDR24.63 trillion because of higher NIM at 6.24% in 1H19 (vs. 6.05% in 1H18), which is a contrarian to NIM pressure condition in banking system. Non-interest income helped BBCA to maintain its performance with 24.51% growth to IDR9.61 trillion with fees and commissions uptrend growth indicates high traffic of digital transaction. Other than that, bottom line was burdened by higher provision expense up to IDR2.45 trillion in order to push up its coverage.
Ample Liquidity as Key for Its Performance
Overall, loan disbursement grew by 11.50% YoY to IDR565.23 trillion in 1H19, which was driven by corporate loan with 14.58% YoY growth. Electricity and financial sector was the main reason of its loan growth. The liqudity was still ample due to high CASA and low LDR, although time deposit growth reached out 18.11% YoY. Meanwhile, third party fund grew by 8.61% YoY to IDR673.87 trillion. We see that BBCA could maintain its cost of fund throughout the year (~1.90% at FY19E) because of high liquidity, as it is superior than its peers whose have limited room to lower its cost of fund due to tighter liquidity although there is cut rate in 7DRRR.
Sufficient Coverage for Asset Quality
We see that BBCA’s asset quality will be stable at 1.41% in FY19E, although special mention was higher at 1.80% in 2Q19 (vs 0.70% in 2Q18). Hence, provision expense was upgraded by IDR1.47 trillion in 2Q19 in order to anticipate PSAK 71 implementation, which coverage ratio was at 183.70% in 2Q19 and we see it will be maintain at ~180% in FY19E.
Recommendation: HOLD at Target Price Rp30,600
We recommend HOLD with slightly lower TP: IDR30,600 (from IDR31,000) because we cut earnings FY19E by -1.56% due to a little bit heavier provision. We downgrade it from BUY because the market price is already fair to the valuation itself which is traded in STD+2, and it implies PBV at 4.44x in FY19E.
