BBCA IJ - MNC Sekuritas Equity Report 23 April 2021

PT Bank Central Asia Tbk (BBCA IJ)

Banking Sector

Right on Track!

1Q21 Performance: Relatively In-line with MNCS Target

•  BBCA posted IDR7.04tn of earnings in 1Q21 (+7.0% YoY); relatively in-line with MNCS/consensus est. reflecting 24%/23% of FY21E target. PPOP grew by 18.3% YoY since opex significantly declined 23.6% YoY driven by changes in accrual methods of staff bonuses.
•  NII stood at IDR14.13tn (+3.3% YoY), while non-interest income came in lower at IDR4.95tn (-14.5% YoY) as non-interest income in the 1Q20 was largely supported by one-off gain from mutual fund portfolio sale.
•  Loan declined -0.3% QoQ/-4.1% YoY due to slower business activities: Corporate loan (+0.9% YoY), Commercial & SME (-6.4% YoY), Consumer (-10.0% YoY). Deposit growth of +1.0% QoQ/+14.6% YoY, driven by strong CASA growth. CASA ratio inched up to 77.2% in 1Q21 (vs 76.6% in 4Q20), helped lower Cof ~30bps YoY.
•  LDR slipped from 77.6% in 1Q20 to 65.2% in 1Q21. Meanwhile, NIM stood at 5.3% (-80bps YoY) due to lower LDR and lower loan yield.
•  NPL-gross improved to 1.8% (vs 1.6% in 1Q20).
•  Total restructured loan (bank only) increased to IDR99.1tn in 1Q21F, primarily due to pandemic-related restructuring. Current restructured loan (include Covid-19) stood at IDR86.7tn (management expect ~35% will be back to normal in FY21E; 45%-60% of this current portfolio needs to go to 2nd term of restructuring e.g. tourism/hotel, construction, textile industry).
•  NPL coverage increased to 281% followed by additional provisions to anticipate additional NPL coming from restructured loan.

No Change in FY21E Company Targets

•  Management FY21E loan growth forecast at around 4%-6%; mainly supported by corporate segment (sectors: CPO, telco, pulp and paper).
•  NIM expected at 5.1%-5.4%.
•  CIR will be well managed at 39%-40% level.
•  Steady asset quality despite uptrend in NPLs. NPL target 2.4%-2.7%.
•  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. 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

BBCA will continue expanding their ecosystem and collaboration through partnership with fintech and e-commerce, increasing customer base online and launch digital super-apps in 2Q21E: focused on MSME segment & attracting millennials. As the economy is seeing a gradual recovery from the pandemic, BBCA will remain cautiously optimistic in tapping business opportunities across segments this year. 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 close to –1STD PBV (3-years average) at 4.15x 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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