Accelerated Loan Growth Drove Earnings, yet In-line with Our Estimate
2Q22 performance was in-line with our expectation
BBCA booked a net profit of IDR9.99tn in 2Q22 (+23.8% QoQ/+34.6% YoY) in 2Q22. The jump in bank’s bottom line was driven by improving net interest income (+5.6% QoQ) and significantly lower provisioning expense (-67.7% QoQ). Net interest income growth was driven by loan growth (+6.0% QoQ/+13.8% YoY), whereas risk adjusted NIM rose by +140 QoQ bps on the back of CoC decline (-130 bps QoQ). Lower non-interest income (-12.1% QoQ) was largely driven by the decline in trading and other income (-48.0% QoQ). However fee and commissions still manage a +5.4% QoQ growth along with the increase in loan and transaction value amidst the implementation of BI-Fast. On the other hand, provisioning expense drop along with better asset quality as NPL becoming more normalized while LaR continued to show a downtrend. Cumulatively, BBCA booked a net profit of IDR18.05tn, in-line with our & consensus estimate implying 50.3%/49.9% run rate of FY22E bottom line.
Loan growth outpaced TPF increase
BBCA managed to record a double digit loan growth on an yearly basis (+13.8% YoY), outpacing TPF growth of (+12.9% YoY) as of Jun-22. Loan grew across the board, particularly in corporate segments (+8.1% QoQ/+19.1% YoY), along with improving economic activities. Furthermore, commercial & SME loan also increased by +4.6% QoQ/+10.9% YoY, whereas consumers loan booking +3.7% QoQ/+7.6% YoY largely driven by its mortgage business that grew +3.5% QoQ/+8.5% YoY.
In spite of TPF growth was outpaced by loan growth, CASA grew by +17.3% YoY and bringing CASA ratio to hit 80.9% as of Jun-22. Over a decade, BBCA successfully to record a CASA growth of 12% CAGR. However, despite the increasing CASA ratio, CoF has reached the bottom in our view, worth noting that BI decided to adjust monetary policy through raising banking reserves requirement to 9% by Sep-22. In our calculation, this should absorb banking liquidity by IDR234- 315tn. In addition we also foreseeing that domestic CB to raise interest rate soon following the increase in inflation and lower interest rate differential to FFR that depreciate IDR.
BBCA’s LDR improved and stood at 66.8% in Jun-22 (vs 63.9% in Mar-22 and 66.3% in Jun-21). Such figure reflecting that BBCA’s liquidity remain to support >10% loan growth FY22E, in our view.
Asset quality continued to improve
A more normalized NPL at 2.2% as of Jun-22 coupled with lowering SML at 2.0% in Jun-22 (vs 2.8% in Jun-21) was a sign of improvement in bank’s asset quality. Furthermore, LaR, which we see as the more conservative view on banking loan quality also improved significantly. Note that last Jun- 21, BBCA’s LaR stood at 19.1% and have reached the peak (vs 12.3% in Jun-22). Despite improving asset quality, BBCA maintain ample coverage which we see as a prudent risk management strategy. Under this circumstance, we believe BBCA could achieve 0.8-1.0% CoC, that would support its bottom line performance for FY22E.
HOLD with TP at IDR7,900/share
We maintain our HOLD call for BBCA with TP at IDR7,900/share (+7,5% potential upside) and implying 4.5/4.2x FY22E/FY23E P/B. Key upsides include : 1) ample liquidity to support loan growth and 2) low cost funding strategy. Key downsides : 1) outflows from heavy weight stock on JCI during Fed’s tightening cycle; 2) deteriorating asset quality.
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