BNPP Bank Central Asia (BBCA IJ) - a good bank at a price (TP IDR5,650; HOLD)

We raise our TP for BCA to IDR5,650 equivalent to 3.4x P/BV 2011E, based on 1 STD above the average valuation since 2003. Given its stable operation, conservative management and high ROE of 25%, the stock remain a core holding for investors. However, we do not suggest to chase them at the current level but at around IDR5,000 it provides good entry level.

Loan growth is expected at 20-21% in 2010-2012 with particular exposure into the consumer lending, especially mortgage and car loans. While it is safe, this has also affect the bank's NIM given the low spread for the mortgage, which account for 49% of consumer loans (24% of total loans). Low NIM in 2010 is also due to the accounting change, which now recognises income from SBI booked under the trading account as trading income, part of non-interest income.

BCA's low LDR of 52% is likely to get impacted by the upcoming Bank Indonesia's ruling which will likely penalise banks with LDR of <78%. We however, believe that the impact will not be significant as the bank will need to set aside higher reserve requirement in the form of government paper, which still earn interest.

The bank has outperformed the market by 1% YTD and remains as a core holding. Maintain HOLD.