BBCA has released its bank-only Aug-24 results. Monthly earnings of IDR4.6tn (-6% m-m / +22% y-y) brought YTD Aug-24 headline profit to IDR36.0tr (+14% y-y), on track to exceed our FY24F projections (particularly when we consider the consolidated numbers). In our opinion, the bank has continued to demonstrate its status as the top transactional bank (particularly non-government/non-SOE related). BBCA in Aug-24 recorded the lowest funding cost of 1.07% among its major peers which stood at >2.5%, a slight uptick from Jul-24 as the bank raised its time deposit (TD) rates by 50bp m-m in Jul-24. Despite the slight increase in funding cost, the bank continued to report improvement in NIM to 6.0% (bringing YTD Aug-24 NIM to 5.7%/+10bp y-y). Given BBCA’s generally stable funding cost, we think its peers could also witness the same Aug-24 performance. In our view, the stable funding cost in recent months may indicate stability in the system liquidity. And considering BI’s reduction in SRBI issuances, which should see liquidity injection in 4Q24F-2Q25F, this could further improve system liquidity, and in turn reduce the funding cost pressure across banks. Ultimately, these would improve banks’ near-term earnings (all else remaining unchanged). *Admittedly, monthly results can be volatile; and thus, in this report, from time to time, we look at the bank’s 12-month moving average (12MMA), which gives us a better understanding of the bank’s latest trends in several areas.* Further details on the results are shown in the following tables/charts inside this report.  

Another key area that we closely observe relates to the bank’s provisioning policies. We think BBCA management has continued to show a prudent stance. Comparing the bank’s monthly credit costs (CoC) with monthly write-off, BBCA has maintained a prudent approach given its elevated CoC. This has resulted in a stable Loan-Loss-Reserve (LLR) of 4.0%, well above the bank’s pre-pandemic level of 2.5%. With signs of easing write-off rates, we think the bank's CoC could remain at the current levels. Combined with the bank’s sustained low funding costs, BBCA’s 12MMA ROAEs or ROAAs (for a given loan growth) have improved. Indeed, as of Aug-24, only BBCA reported a hefty annualized ROAA of 4.0% and ROAE of 23.1%, easily well above its major peers.

On balance sheet, BBCA recorded loan and deposit growth of +16% y-y (+7% YTD) and +4% y-y (+2% YTD), respectively. This brought LDR to 76% (+700bps y-y). Loan-to-current account savings account (CASA) (an indicator of how much loans are funded by cheap funding – reflecting future earnings stability) remains at a healthy level of 93%, the only bank in Indonesia to register a ratio of below 100%.

Post the Aug-24 results, we reiterate BBCA as one of our top picks in the Indonesia banking sector.

Valuation and risks

We derive our TP of IDR13,200 using DuPont analysis with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 0.8x and a CAR-adjusted ROAE of 24.5%. Our TP implies 5.4x FY25F P/B (vs current price valuation of 4.2x) and 26.9x FY25F P/E (vs current price valuation of 21.0x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

Fig. 3: BBCA improving risk-adj NIM trend

Fig. 4: BBCA – 12MMA loan vs NII growth %

Fig. 5: BBCA - CoC vs Est WO %

Fig. 6: BBCA - CoC trend (%)

Fig. 7: BBCA – LLR

Fig. 8: BBCA - ROAA trend (%)

Fig. 9: BBCA - Asset to equity x

Fig. 10: BBCA - ROAE trend (%)

INVESTMENT RATINGS

A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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ANALYST CERTIFICATION
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Nicholas Santoso (nicholas.santoso@verdhana.id) 

Erwin Wijaya (erwin.wijaya@verdhana.id)