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25 April 2022

BBCA IJ - MNC Sekuritas Equity Report April 25, 2022

Maintain Hold as it already Fairly Valued

1Q22 Performance Review : In Line with Our Expectation
• BBCA booked a net profit of IDR8.06tn in 1Q22 (-1.9% QoQ/+14.6% YoY), implying 22% run rate to our FY22F projection.
• On an annual basis, rising bottom line was driven by : 1) increasing non-II (+19.5% YoY) and 2) lower provisioning expense (-13.4% YoY).
• Non-II grew solidly thanks to fee income, bancassurance and investment revenue. Lower provisioning was driven by BBCA’s frontloading strategy.
• Albeit the continued decline in CoF, NIM stabilized at 4.9% in 1Q22 due to the downtrend in IEA yield.
• NPL slightly increased (+10 bps QoQ/+50 bps YoY) partly attributable to BBCA’s exposure to textile sector.

Expecting to Boost Loan Given its Ample Liquidity
• BBCA’s loan disbursement was flattish on a quarterly basis amid low loan demand during 1Q based on historical perspective.
• BBCA’s loan expanded +8.6% YoY in 1Q22 driven by corporate segment (+9.2% YoY); commercial and SME (+8.2% YoY); consumer (+7.6% YoY) and sharia financing (+16.1% YoY).
• In the consumer segment, mortgage loan rose 9.8% YoY in 1Q22 with the new booking of IDR7.2tn and run off IDR6.5tn.
• We think that lower interest rate, accommodative macroprudential policy and fiscal policy as well as the spillover impact of higher commodity price to boost domestic property demand.
• As CASA franchise recorded a solid growth, it finally hit another milestone of 80% to TPF. Given BBCA’s ample liquidity (LDR at 60.5% in 1Q22), thus we expect BBCA has room to boost loan disbursement to keep NIM at 5.0-5.2%.
• We project BBCA loan could grow by 10% YoY for FY22F, above management guidance at 8% YoY.

Maintain Prudent Risk Management Going Forward
• BBCA’s management expects LaR to continue to decline and stood at 13% by end of FY22F (vs current 13.8%). We think this is achievable given the trend of LaR has already been declining (-560 bps YoY in 1Q22).
• In addition, CoC is expected at 0.8-1.0% given its ample provisioning (NPL coverage at 244.8% and LaR coverage 44.7%).
• We think BBCA would still allocate its earning assets in high quality assets including placement with BI and other liquid securities including corporate bond to lower risk weighted asset in order to maintain its strong capital adequacy.

Key Catalysts and Risks
• BBCA’s recent share price rally was also driven by dividend payment to shareholders implying 56.8% DPR for FY21.
• Key catalyst include possible EPS growth (+14.1% YoY in our scenario for FY22F) due to potential non-II growth and frontloading provisioning strategy.
• As the largest market cap and weight on JCI & EIDO, BBCA could benefit from foreign inflows during heightened geopolitical tension between Russia and Ukraine that is likely to trigger geographical asset rebalancing from China & Russia moving to EM such as India & SEA.
• Risk to our call include unfavorable macro condition such as higher inflation and BI policy to increase RRR to 6.5% by end of FY22, that would sap out bank’s earning due to lower yield (note that BI remuneration offer 1.5% interest rate). However we expect this impact to be minimal to BBCA.

Maintain Hold Rating with TP at IDR 7,900/share
Currently BBCA share is traded at +1STD of 3-year forward P/B. Despite all the catalysts aforementioned, we think that BBCA share price has already fairly valued thus maintain a hold rating with TP at IDR 7,900/share implying 4.5x and 4.2x FY22F and FY23F P/B.

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