Solid Earnings yet Remain Cautious on Potential Headwinds
Solid Earnings in 2Q21, Thanks to Lower Interest Expense, Opex and Provision
• BBCA booked a net profit of IDR7.42tn in 2Q21 (+5.3% QoQ/+31%YoY). Strong YoY earnings growth was primarily driven by lower interest expense, lower opex and lower provision.
• Third party fund structure dominated by CASA (77.86% in June-21) and strong CASA growth (+21% YoY) have lowered CoF. This combined with limited decline in prime lending rate has favored NII growth. In 2Q21 BBCA posted NII of IDR14.15tn (+0.1% QoQ/+4.28% YoY).
• Non-Interest Income grew by 6.1% QoQ and increased by 15.95% YoY to IDR5.256tn on the back of solid mobile and internet banking transactions value and volume growth.
• Opex grew by 3.95% YoY, while on quarterly basis Opex declined by 3.3% QoQ to IDR6.99tn in 2Q21.
• Provision expense grew 1.2% QoQ but declined by 24.44% YoY and was attributable to high provision expense incurred during 2020 Covid-19 outbreak.
• Cumulatively BBCA recorded a net profit of IDR14.46tn in 1H21 marking a double digits growth of 18.1% YoY. BBCA’s 1H21 net profit achieved 44% of our full year estimate and 47% of the consensus forecast.
Remain Cautious on Higher NPLs
• Total Assets grew 15.8% YoY in June-21, driven by 43.5% YoY growth of secondary reserves and marketable securities.
• As of June-21 BBCA loan growth was contracted by 0.3% YoY but improved by 1.2% QoQ. The quarterly growth was attributable to higher consumer loan growth (+3.6% QoQ) thanks to mortgage & vehicle ownership loans disbursement growth of 4.7% and 2.2% QoQ respectively.
• Although recording a growth of 1.0% YoY in June-21, corporate loans disbursement which contribute 43.88% from total outstanding loans slipped by 0.8% QoQ on the back of higher loan repayment than disbursement.
• Total restructured loans were IDR97.7tn in 1H21. Total restructured loans grew by 41% YoY but relatively flat compared to Dec-2020.
• From the asset quality perspective, NPL (gross) grew 0.3% YoY to 2.4% in 1H21, still in line with management guidance of 2.4-27% by the end of this year. The bank’s exposure to manufacturing sectors particularly textile company loan portfolio has dragged up the NPL.
• Total LAR (incl. Covid-19) stood at 19.1% from the total loans after increasing 3.6% YoY and 0.2% YTD.
• Tighter social restriction measures on the onset of Covid-19 cases surge will be the downside risk that might deteriorate bank’s asset quality.
Maintain BUY with a lower TP of IDR36,000
We trim down our NIM to 5.2% (-20bps) in FY21E, in-line with management’s conservative guidance at 5.1%-5.3%. Hence, this figure translates to a 9% lower net profit from IDR32.92tn to IDR30.21tn. We remain cautious on potential headwinds from latest emergency restrictions which extend until Aug-2021 despite there are several adjustments related to community activities and mobility. Thus, we maintain our recommendation BUY for BBCA IJ with a lower target price of IDR36,000, which implied PBV FY21E/FY22F at 4.5x/4.2x. BBCA is currently traded close to –0.5STD PBV (5-years average) at 4.15x level. Yet despite BBCA’s set a moderate loan and NIM 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. Moreover, BCA will continue expanding their ecosystem and collaboration through partnership with fintech and e-commerce, increasing customer base online and launch Bank Digital BCA (blu-apps). With the launch of blu, BCA Digital offers an optimal and enjoyable banking experience with a fresher look for the younger generation.
