Bank Central Asia: Comprehensive Deep Dive Analysis

Prepared by: PT Maybank Sekuritas Indonesia

Date: February 17, 2025

Overview of Bank Central Asia (BBCA)

Bank Central Asia (BBCA), a leading player in the Indonesian banking sector, has consistently delivered exceptional performance. With a focus on transactional banking, the institution leverages its extensive network and financial technology to drive growth. BBCA’s resilience and sound strategic decisions make it a standout performer in the banking landscape.

Investment Recommendation

The report maintains a “BUY” rating for BBCA, with a target price of IDR 11,675, reflecting potential upside of 25%. The robust fundamentals, low funding costs, and solid liquidity position support this recommendation. However, the report highlights potential risks, including loan quality deterioration and increased operational expenses.

Key Highlights and Financial Performance

1. Solid Earnings Despite Increased Provisions

BBCA’s 1M25 net profit grew by 5.8% year-on-year (YoY) to IDR 4.7 trillion, driven by a 12.4% YoY increase in pre-provision operating profit (PPOP). Despite a 204% YoY surge in provision expenses, the bank maintained strong operational profitability. The net interest margin (NIM) improved by 25 basis points YoY to 6.0%, supported by higher non-interest income (+14.5% YoY) and reduced operating expenses (-1.3% YoY).

2. Robust Loan Growth

Loan growth reached an impressive 15.1% YoY for 1M25, outpacing industry trends. This growth was driven by corporate, commercial, and consumer loans, with a focus on higher-yielding assets. The loan-to-deposit ratio (LDR) of 79.7% provides the bank with room to expand lending without aggressively competing for deposits, further enhancing NIM.

3. Selective Deposit Growth

Deposits grew modestly by 3.9% YoY, driven by current accounts (+8.0% YoY) and savings accounts (+4.8% YoY), while time deposits contracted (-5.1% YoY). The bank’s LDR remains ample, ensuring low funding costs and elevated margins.

4. Elevated Net Interest Margins

BBCA’s NIM stood at 6.0% in January 2025, an improvement from 5.7% in January 2024. This was achieved through stable, low-cost funding and higher-yielding assets. The report anticipates NIM to sustain these elevated levels, even amid tight liquidity and macroeconomic volatility.

5. Pre-Provision Operating Profit (PPOP) Growth

PPOP increased by 12.4% YoY, attributed to higher net interest income (+6.7% YoY) and non-interest income (+14.5% YoY). Operating expenses contracted slightly, leading to a cost-to-income ratio (CIR) of 27%, which is expected to stabilize at 30%.

6. Provision Costs and Loan Quality

Provision expenses surged to IDR 568 billion (+204% YoY) in January 2025. However, the report expects these costs to moderate, supported by strong non-performing loan (NPL) coverage of 209% and a low NPL ratio of 1.8%. Loans at risk (LAR) stood at 5.3%, with a healthy LAR coverage of 79%.

7. Sustained High ROE

BBCA maintained a robust return on equity (ROE) above 20% throughout FY24, with an average of 21% projected for FY25-26E. This stability is driven by strong asset quality and low funding costs, ensuring consistent profitability.

Environmental, Social, and Governance (ESG) Initiatives

1. Environmental Efforts

BBCA demonstrated its commitment to sustainability by financing environmentally friendly projects, including energy conservation and organic agriculture. Sustainable financing accounted for 25.4% of its total loan portfolio in FY22. The bank also implemented measures to reduce carbon emissions, achieving a total carbon savings potential of 1,995 tCO2eq in FY22.

2. Social Contributions

BBCA employed 14,767 female staff, representing 62% of its workforce. It also collaborated with organizations like UNICEF and WWF to support education, healthcare, and environmental initiatives. The community empowerment program realized a budget of IDR 143.1 billion in FY22, equivalent to 0.3% of its consolidated profit before tax (PBT).

3. Governance Standards

BBCA’s board of commissioners (BOC) and board of directors (BOD) maintain a strong governance framework. As of FY22, the BOC comprised five members (all male), including three independent commissioners. The BOD included 12 members, with two female directors. The bank’s audit processes are handled by PricewaterhouseCoopers, ensuring transparency and accountability.

Financial Metrics and Projections

Key financial metrics indicate robust performance, with core net profit projected to grow at a compound annual growth rate (CAGR) of 8.4% from FY25E to FY27E. The gross NPL ratio is expected to improve to 1.4% by FY27E, while the loan loss coverage ratio remains strong at 201.0%.

Conclusion

Bank Central Asia continues to showcase resilience and strong financial performance, supported by robust fundamentals, selective growth strategies, and a commitment to ESG principles. The “BUY” recommendation with a target price of IDR 11,675 reinforces confidence in the bank’s potential for sustainable growth, making it an attractive opportunity for investors.