As the private sector is more vulnerable to the economic slowdown, credit growth of Bank Central Asia (BCA) is estimated at 8-9 percent (y/y) in 2016, whereas the state-controlled banks are estimated to see loan growth in the range of 13-15 percent (y/y). Enhanced government budget spending is expected to boost credit growth in 2016 and the government will encourage state-controlled banks to finance part of the various government-led infrastructure projects.

However, BCA has other strengths that support its performance. These are (1) the company's low cost of funds (which is the interest rate paid for the funds that BCA deploys in its business. The cost of funds is a key input costs for a financial institution as lower costs will generate better returns when the funds are deployed in the form of short-term and long-term loans to borrowers) and (2) its relatively high non-interest income (such as deposit and transaction fees, insufficient funds fees, annual fees, monthly account service charges, and inactivity fees). Last year, BCA's non-interest income was the highest among Indonesian banks except for Bank Mandiri. Relatively high non-interest income is important as less vulnerable to the central bank's interest rate policy.

Future Projection of Bank Central Asia's Financial Highlights:

      2013     2014    2015F    2016F    2017F
Net Interest Income   25,009   30,611   35,293   39,464   44,187
PPOP   19,094   22,744   24,796   26,871   29,592
Net Profit   14,254   16,486   18,062   19,792   22,201
P/E Ratio (x)     23.1     19.8     18.3     16.7     14.9
P/BV (x)      5.2      4.2      3.7      3.1      2.6

in billion IDR rupiah, except otherwise indicated
¹ in IDR rupiah
Source: Danareksa Sekuritas