AAA Company Update_BBCA

Last Wednesday, BCA reported its full year 2009 performance by announced Rp. 6.8 trillion net profits on its P&L. This figure is inline with our and consensus estimate, although its net interest income slightly below our consensus. Thanks to BCA Finance, which has outstanding performance in FY09, so BCA total income was in line with our and consensus estimate. In addition, the bank also booked lower than expected NPLs by 0.7% which is increased its provision coverage to 480.2%. Their cost to income ratio is slightly increased to 43.6% because of new software and ATMs installment as well as branch expansion.

Retaining The Hidden Treasure
Last Wednesday, we were quite surprise that BCA has not started yet to write back their provision, as bank mandiri did. As of December 31st 2009 , The bank has Rp. 4.305 trillion outstanding provision on their book. As current bank’s NPLs ratio is as low as 0.7% and better economic environment ahead, as well as PSAK 50 & 55 implementation, the bank’s management expects minimum provision charge this year. If we assume the bank will have 1% NPLs ratio at the end of this year, with higher coverage ratio by 300%, BCA only has to book below Rp. 500 billion provision this year.

Consumer Loan will lead the growth in 2010
BCA management has already spoken to the media that they want to increase loan book by 15% in FY10, below Bank Indonesia guidance at 20%. The growth will mainly deliver by consumer segment, which has target growth by 22.2%, then followed by SME, commercial and the last corporate loan. They have indicated that their corporate loan will be softened this year since several of them are prefer to issue bonds rather than to take bank loan. To detain decelerating NIM, they have plan to increase their corporate bonds portfolio, which currently only account for 5% of their earning asset.

Downgrade to HOLD (TP-Rp. 5,900)
This year, BCA will be given two big presents, a lower provision charge as well as decreasing corporate tax rate to 20% this year. However, declining interest rate environment will squeeze BCA’s margin. In addition BCA expansion to motorcycle financing business as well as its network expansion this year, will subtract BCA’s bottom line. In overall, we still have positive view for this bank because of its deposit franchise and conservative management policy. But, recent share price rally has brought BCA shares to its new level high. So, we prefer to downgrade our recommendation to HOLD (TP-Rp. 5,900), then waiting for the 1Q10 performances which will be reported by late April 2010.