DBS Bank Central Asia: Hold; Rp5,750; TP Rp5,100; BBCA IJ

Expects 35% growth in sharia unit

Bank Central Asia launched sharia unit on Monday, targeting 35% growth a year in assets, financing, and third-party funds. BCA will use its nationwide network to support transactions for its sharia unit so that consumers can access BCA syariah services in BCA branches. BCA syariah currently has 11 branches, nine are in Jakarta and two are in Surabaya . So far, the bank has Rp776bn in total assets and Rp296bn in working capital. It also has another Rp230bn in additional financing and Rp420bn in consumers’ fund. We see this as neutral to BBCA. BBCA's growth will be focused on cumsumer and SME segments. Corporate loans growth, if at all, would be slower although it could move towards some Tier-2 corporates in addtion to top tier corporates without compromising asset quality.

Maintain Hold, with TP unchanged at Rp5,100 based on the Gordon Growth Model with implied 4.0x FY10 P/BV. Trading at 4.5x FY10 BV makes BBCA the most expensive bank in our regional bank universe. We believe BBCA’s premium valuation has priced in its solid transactional banking franchise.