Company Update: BBCA

HIGH LIQUIDITY, EASY TO UTILIZE ANY MOMENTUM

BUY BBCA FY17 net profit grew by + 13.1% YoY to Rp 23.31tr (vs FY16: 14.4% Target Price : Rp 25,000 YoY), in line with FY17 PANS target (99.8%) and consensus target (101.1%). Current Price : Rp 23.300 Improving FY17 net profit was contributed by lower provision growth of - Upside/Downside : 7.29% 42.3% YoY (FY17: Rp 2.6 tr vs FY16: Rp4.6 tr). Loan grew by 12.4% YoY while deposits grew by 9.6% YoY lead to higher LFR (FY17: 78.2% vs FY16: COMPANY PROFILE: 77.1%). NPL increased to 1.5% in FY17 (vs FY16: 1.3%). NIM squeezed by 60bps YoY to 6.2 % in FY17 due to lower loan yield (FY17: 6.19% vs FY16: PT Bank Central Asia Tbk is an Indonesia-based company primarily engaged in banking sector. It operates 6.81%) as a consequences of price wars from both banking sector and its bank under the name Bank BCA or BCA. Besides capital market. We like BBCA due to manageable asset quality and high conventional banking, it also offers Shariah-compliant liquidity, thus we recommend the coverage on BBCA with HOLD banking services through its subsidiary, PT Bank BCA recommendation at a price of Rp25.000/share. Syariah. Its other subsidiaries include PT BCA Finance, which is engaged in financing business; PT BCA Sekuritas, which provides securities underwriting and BBCA reported in-line net profit of Rp23.31 tr (FY17: +13.1% YoY vs FY16: brokering services; PT Asuransi Umum BCA, which 14.4% YoY), supported by lower provision in FY17 (Rp2.6 tr;-42.3%YoY). provides general insurance, and BCA Finance Ltd, which Loan grew to Rp 467.5 tr (+12.4% YoY), dominated by corporate segment is engaged in money lending business. The company was founded on August 10, 1955 and is headquartered in (FY17:14.5% YoY vs FY16:9.6% YoY) and commercial & SME (FY17:10.3% YoY Jakarta, Indonesia. vs FY16: 3.8% YoY). In other side, deposits grew by 9.6%, dominated by low cost

of fund (CASA) by 76% in proportion, while in value dominated by high cost fund

(time deposits). Thus, increasing growth of high cost fund (FY17: 12.75% YoY vs KEY STATISTICS: FY16: 7.52%) leads to increasing cost of fund (FY17: 2.02 % YoY vs FY16:

Market cap (Rp bn) : 518,372 1.97%) Outstanding share (bn) : 24.655 Highest price (52 wk) : Rp 21,625 NPL slightly increased to 1.5% in FY17 (vs FY16: 1.3%). Increasing NPL is Lowest price (52 wk) : Rp 13,950 contributed by oil and gas contractor, which leads increasing NPL in corporate Performance (YTD) : 35.81% segments (FY17: 1.4% vs FY16: 0.8%). However, with high loan loss provision of Rp13.2 tr (5.9% YoY) which lead to NPL coverage of 190.7% in FY17, the

SHAREHOLDER PROFILE: increasing NPL is manageable.

PT Dwimuria Investama Andalan : 54.9% NIM is squeezed by 60bps YoY to 6.2% in FY17 due to lower loan yield Public : 43.3% (FY17:10.19% vs FY16: 9.38%) and higher cost of fund (FY17: 2.02% vs Anthoni Salim : 1.8% FY16:1.97%). Intensified competition from capital market and other big banks make BBCA adjusted the yield, which still lead the margin into manageable level.

Outlook FY18: High Liquidity, Easy to Utilize any Momentum. On loan, we expect BBCA will record a conservative loan growth if there is no significant recovery in Indonesia economy. However, with high liquidity, BBCA can easily step into any profitable sector, including subsidized and guaranteed infrastructure FRIDA NABABAN projects. On margin, we see BBCA will be facing some pressures on cost of fund

if they failed to reduce the high cost of fund in the funding portfolio, assuming the [email protected] +6221 5153055 economic growth will trend flat in FY18. Moreover, BBCA has been bring down the loan yield to face intensified competition from other big banks and capital markets. On asset quality, we believe BBCA will be able to keep the NPL in check due to anticipative move in approving the loans.

We re-initiate our coverage on BBCA with HOLD recommendation at a price of Rp 25.000 /share. The share is currently trading at 3.8x forward P/BV, while our implied P/BV multiple of 4.2x implying ~7.3% potential.

BBCA: HIGH LIQUIDITY, EASY TO UTILIZE ANY MOMENTUM

BBCA : Performance Summary

Source: Company, PANS

Dominated by corporate loans, BBCA has recorded +12.3% YoY in total loan, higher than other banks under our coverage. In FY17, only the commercial & SME disbursed with higher growth as the retails sectors still need a sustainable financing to expand and grow, although in a lower growth. Based on the asset quality, corporate loan started to post a higher NPL as there is one oil and gas contractor downgraded to NPL. However, the non-performing loan has been backed by 100% provision. With higher NPL coverage of 190.7%, the slight increase in NPL is manageable.

Corporate & Consumer loan drive the total loan (% YoY) A slight increase in corporate segment’s NPL (%)

22% 2.5

17% 2.0

12% 1.5

7% 1.0

2% 0.5 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 -3% Corporate Commercial & SME Corporate Commercial & SME Consumer Total Loan Consumer NPL

Source: PANS. Company Source: PANS. Company

BBCA: HIGH LIQUIDITY, EASY TO UTILIZE ANY MOMENTUM

Sharia & Other

Some pressures on margin. We see some pressures on margin still come from the loan yield due to intensified competition with other big banks and capital markets amidst decent loan growth. In funding side, there is potential pressures from anticipated BI rate’s hike as another effort to normalize constant depreciation and capital outflow.

Lower NIM due to lower loan yield Positive relation between time deposit’s growth & CoF 11 2.1 45.00% 2.10%

30.00% 2.05%

9 1.8 15.00% 2.00%

0.00% 1.95% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 6 1.5 -15.00% 1.90% 1Q16 2Q16 3Q16 4Q16 1Q17 3Q17 4Q17 Current Account (LHS) Time Deposits (LHS) COF (RHS) Loan Yield (LHS) NIM (LHS) Cost of Fund (RHS)

Source: PANS. Company Source: PANS. Company

High liquidity, easy to utilize momentum. BBCA has a lower LDR than BBNI as the bank with high disbursement of loan to the economy. With high liquidity and high asset quality, BBCA can easily utilize the any momentum or any prospective sector in FY18.

Compared to BBNI, BBCA has higher liquidity BBCA recorder highest asset quality under our coverage

95 3

85 2

75 1

Jul-16 Jul-17

Jan-17

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Oct-16 Oct-17

Apr-16 Apr-17

Sep-16 Feb-17 Sep-17

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Aug-16 Aug-17

Nov-16 Nov-17

Mar-16 Mar-17 May-17 May-16 0 BBCA BBRI BBNI BBTN BDMN BCA BBNI Source: PANS. Company Source: PANS. Company

BBCA: HIGH LIQUIDITY, EASY TO UTILIZE ANY MOMENTUM

DISCLAIMER

The information contained in this report has been taken from sources which we deem reliable. However. none of PT Panin Sekuritas Tbk and/or its affiliated companies and/or their respective employees and/or agents makes any representation or warranty (express or implied) or accepts any responsibility or liability as to. or in relation to. the accuracy or completeness of the information and opinions contained in this report or as to any information contained in this report or any other such information or opinions remaining unchanged after the issue thereof. We expressly disclaim any responsibility or liability (express or implied) of PT Panin Sekuritas Tbk. its affiliated companies and their respective employees and agents whatsoever and howsoever arising (including. without limitation for any claims. proceedings. action . suits. losses. expenses. damages or costs) which may be brought against or suffered by any person as a results of acting in reliance upon the whole or any part of the contents of this report and neither PT Panin Sekuritas Tbk. its affiliated companies or their respective employees or agents accepts liability for any errors. omissions or mis-statements. negligent or otherwise. in the report and any liability in respect of the report or any inaccuracy therein or omission there from which might otherwise arise is hereby expresses disclaimed. The information contained in this report is not be taken as any recommendation made by PT Panin Sekuritas Tbk or any other person to enter into any agreement with regard to any investment mentioned in this document. This report is prepared for general circulation. It does not have regards to the specific person who may receive this report. In considering any investments you should make your own independent assessment and seek your own professional financial and legal advice

BBCA: HIGH LIQUIDITY, EASY TO UTILIZE ANY MOMENTUM

HEAD OFFICE Indonesia Stock Exchange Tower II, Suite 1705 • Jl. Jendral Sudirman Kav. 52-53, Jakarta Selatan 12190 Tel: +62 21 515 3055 Website: www.pans.co.id E-mail: [email protected] Fax: +62 21 515 3061 Online Trading: www.post.co.id

BRANCH OFFICES KelapaGading Menara Satu, Sentra Kelapa Pluit Village PluitSakti PuriNiaga Gading Pluit Village, Ruko No. 66 Jl. Pluit Sakti Raya No. 28 Puri Niaga 1 Blok K7 /3U Lt 5 Unit 0505, Jl. Raya Boulevard Jl. Pluit Permai Raya Blok A2 Ruko Sentra Bisnis Puri Kencana, Kembangan Kelapa Gading LA3 no 1 Jakarta Utara 14450 Jakarta Utara 14450 Jakarta Barat 11610 Jakarta Utara 14240 Tel: +62 21 6667 0268 Tel: +62 21 6660 0302 / 6660 5635 Tel: +62 21 582 3868 Tel : +62 21 293 85767 Fax: +62 21 668 3585 Fax: +62 21 6660 5618 Fax: +62 21 582 3867 Fax: +62 21 293 85768 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] E-mail: [email protected]

Pondok Indah GadingSerpong Tanah Abang Jl. Margaguna Blok B-9, Jl. Sutera Utama, Ruko ASTC Pusat Grosir Tanah Abang Plaza Pondok Indah 5, Blok 10B no 30, Alam Sutra Blok A Lt. 3 Los. A No. 1 Gandaria Utara - Jakarta Selatan Tangerang Jakarta Pusat 10210 Tel: +62 21 722 4420 Tel: +62 292 11518 Tel: +62 21 2357 1177 Fax: +62 21 722 4421 Fax: +62 292 11519 Fax: +62 21 2357 0404 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected]

Bandung Bandung, Dago Bandung - Batununggal Batam Gedung BPR Citradana Rahayu Jl. Diponegoro no 2 Jl. Batununggal Indah IV no 37A Komplek Lumbung Rejeki Lt. 3 Bandung – Jawa Barat, 40115 Komp. Batununggal Indah Bandung Blok H no 13 Jl. Sunda No. 2A Tel: +62 22 426 8127 / 426 8129 Jawa Barat - 40266 Nagoya, Batam Bandung 40262 Fax: +62 22 426 8128 Tel / Fax: +62 22 8730 1954 Tel: +62 778 459 222 Tel: +62 22 732 1434 E-mail: [email protected] Fax: +62 22 8730 1640 Fax: +62 778 459 220 Fax: +62 22 732 1435 E-mail:[email protected] E-mail: [email protected] E-mail: [email protected] Denpasar Medan - Timor Medan – Iskandar Muda Medan - Pemuda Gedung Panin Bank , Lantai 3 Jl. Timor No. 203 Jl. Iskandar Muda no 99 Gedung Panin Bank Lt. 5 Jl. Patih Jelantik , komplek Medan 20231 Medan 20112 Jl. Pemuda No. 16-22 pertokoan Kuta Galeria Blok 1 Tel: +62 61 457 6577 / 453 2912 Tel: +62 61 453 0123 Medan 20151 valet 7 Fax: +62 61 453 2875 Fax: +62 61 452 3934 Tel: +62 61 457 6996 Tel: +62 361 7152 999 E-mail: [email protected] E-mail: [email protected] Fax: +62 61 453 1097 Fax: +62 E-mail: [email protected] E-mail: [email protected] Padang Palembang Surabaya Pontianak Jl Thamrin No. 43 Gedung Panin Bank Lt. 3 Gedung Panin Bank Lt. 5 Jl. Budi Karya Padang 25122 Jl. KolonelAtmo No. 863 Jl. Mayjend Sungkono No. 100 Komp. Villa Gamma Blok D Tel: +62 751 811 322 Palembang 30125 Surabaya 60256 No. 26 Fax: +62 751 811 332 Tel: +62 711 370 235 Tel: +62 31 561 3388 Pontianak 78121 Email: [email protected] Fax: +62 711 370 271 Fax: +62 31 561 3585 Tel: +62 561 748 888 E-mail: [email protected] E-mail: [email protected] Fax: +62 561 767 300 E-mail: [email protected] Semarang Solo Jl. S. Parman No. 41 Gd. Graha Prioritas lt 3 Semarang 50231 Jl. Slamet Riyadi No. 302 Tel: +62 24 850 2300 Kel. Sriwe dari, Kec. Laweyan Fax: +62 24 850 4971 Surakarta - 57141 E-mail: [email protected] Tel: +62 271 727888 Fax: +62 271 726 868 E-mail: [email protected]