BBCA IJ - MNC Sekuritas Equity Report 10 February 2021

PT Bank Central Asia Tbk (BBCA IJ)

Banking Sector

Handle with Care

FY20 Better-than-expected Result; Earnings slipped by only 5% YoY

• BBCA IJ reported above-expected FY20 results with net profit reaching IDR27.13 tn which only dropped by -5% YoY, beyond our estimate reflecting 106%/107% MNCS/cons (best performance among big banks). NIM stood at 5.7% (vs 6.2% in FY19).
•  Total asset still booked a double digit growth of 17% YoY to IDR1,075.57 tn in FY20, driven by  significant growth of secondary reserves and marketable securities (+100.1% YoY) while average loan slightly dropped by -2.5% YoY in FY20.
•  Loan still consist of corporate segment as the largest contributor which grew by 7.70% YoY while the other segments weakened. Meanwhile, Covid-19 restructured loans reaching IDR97.5 tn, equivalent to 15% of total loans while LAR with Covid-19 restructured loan reached 18.80% and gross NPL stood at 1.8% in FY20.
•  TPF surged by 19.30% YoY to IDR840.75 tn in FY20 with CASA at a higher level of 76.60% (vs 75.50% in FY19) backed by the decent growth on Current account (+23.70%) and Savings account (+19.60 YoY). Time deposit also grew by 14% YoY in FY20.
•  BBCA as the digital bank pioneer recorded an increase on internet and mobile banking transaction (+5.70%/+28.90% YoY) while branch banking and ATM transaction weakened.

FY21E Company Guidance: a clear Conservative Outlook

•  Management FY21E loan growth forecast at around 4%-6%; mainly supported by corporate segment (sectors: CPO, export-oriented and infrastructure).
•  NIM expected to drop by 30bps-60bps; as well as CoF lowered by 20-40bps assuming another 25bps BI7DRR cut.
•  CIR will be well managed at 40%-41% level.
•  Steady asset quality despite uptrend in NPLs. NPL is guided above 2% level largely due to management’s conservative stance.
•  Thus, under a conservative baseline scenario, we estimate loan demand to grow by 5% in FY21E, mostly inline with projected growth rate prior to the pandemic.
•  Although we are still conservative in our NII growth projection due to the uncertainty as well as the lingering impact of Covid-19, we expect BBCA’s NIM to grow by 5.4% YoY in FY21E (in-line with management target). Earnings could potentially recover by 21.37% in a best-case scenario with manageable NPL and provisions.

Digital banking initiatives gain traction

Management credits the significant increase in the digital banking transactions turn market disruptions into opportunities. BBCA will continue expanding their ecosystem and collaboration through a partnership with fintech and e-commerce, increasing customer base online and launch Bank Digital BCA (prev. Bank Royal)-neo bank in 2Q21E: focused on MSME segment & attracting millennials. Going forward, we believe that by growing CASA (~76% level) which entails lower CoF, BBCA might have greater quality assets.

Maintain BUY with an unchanged TP of IDR38,000

We continue to maintain our recommendation BUY for BBCAIJ with an unchanged target price of IDR38,000, which implied PBV FY21E/FY22F at 4.73x/4.39x. BBCA is currently traded at +1.5STD PBV (5-years average) at 4.7x level. Yet despite BBCA’s set a moderate loan growth, we remain hopeful that the bank can maintain decent bottom-line growth, supported by its efficient operations and lower CoC coupled with maintaining good assets quality. Speedy rollout of the vaccine in 2H21E would be a good momentum.

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