Sunday, April 3, 2011

Bank Central Asia (BBCA)

by Samuel Securities

Not Surprising

 BBCA result for FY10 meets with market and our expectation. On 4Q10, net interest income and net income were booked at Rp3.4 tr (-4% QoQ) and Rp2.4 tr (+11% QoQ). Meanwhile, on full year basis net interest income and net income were booked at Rp12.9 tr (-13.2% YoY) and Rp8.5 tr (+25%), respectively.

 On full year basis, Net interest income (NII) declined as the impact of PSAK 50-55 implementation (income from SBI is now reclassified as non interest income) and on QoQ basis NII declined as low lending rate in 4Q10 compared to 3Q10.
 NIM declined by 110 bps because yield asset declined higher than the declining cost of fund (164 bps vs 60 bps) and the additional reserve requirement (RR) to 8%. This year, NIM decline because BBCA will be charged by additional RR as BBCA cannot fulfill the minimum LDR of 78%.
 Income from floating government bond will shrink because benchmark price will be changed to SPN (Surat Perbendaharaan Negara) from SBI (rate will decline by 1.3%). However, interest rate of saving will decline 25 bps effective on April 2011. Therefore, the decline on income from floating government bond can be compensated.
 The increase on bottom line was also supported by the declining provision as much as 84% to Rp324 bn and reversal on allowances is Rp475 bn (vs previously Rp6 Bn).

Action and recommendation:
 BBCA’s current price has reflected our price target of Rp7,000, implying 4.5x PBV'11. We view that it is difficult for BBCA to improve when compared to BBRI (with relatively similar ROE) which is trading at 3.2x PBV’11. We maintain our target price and downgrade recommendation from BUY to HOLD. Downgrade to Hold

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