BBCA - Robust results momentum to sustain

BBCA posted another solid result with 1H23 earnings came in above ours and street expectation at 54%/51%. Key metrics remain robust with NIM and CoC arrives above 2023 guidance and thus made management rising the target. Ours and consensus' FY23F estimates now looks conservative given stronger 2H performance trend (5yr hist. accounted closed to 55%). We revisit our model and made some adjustment following better than expected 1H23 results and taking into account BBCA’s new guidance. Our new ‘23F/’24F earnings are 140bps and 200bps higher, mainly on lesser credit cost. Upgrade to BUY, TP IDR10,150 (5.1x/4.6x ‘23F/’24F P/B), while currently trading at 4.7x ‘23F P/B, at its +2SD 5-yr hist 1H23 earnings beating KBV’s and street estimates In all, 1H23 earnings arrived above ours and consensus expectation at 54%/51%. From top to bottom, the bank reported solid 1H23 results, whereas net interest income noted 24.6% yoy higher helped by strong interest income growth by 26.7%. PPOP came in at IDR31,670bn or grew by 22.6% yoy on the backed of manageable opex and bringing CIR improves by 1.4% yoy. A sharp drop in provisions (- 49.5% yoy) has strongly underpinned BBCA’s 1H23 earnings which grew 34.0% yoy. On the quarterly basis, 2Q23 standalone PATMI was 9.8% qoq higher, mainly driven by -8.8% drop in opex and provision expenses which tanked 71.1% qoq. Solid loan growth with steady strong CASA Loans grew by 9.0% yoy to IDR735,93bn, arrives within management guidance range of 9%-12% (KBVS: 10.3% yoy), supported by robust consumer loan growth which grew by 13.9% yoy (surpassing our ‘23F for BBCA consumer segment loan growth at 10% yoy), as both mortgage and vehicles loan continue to remain recorded solid demand. Corporate segment remains taking the largest chunked of the loan portfolio, despite noted lower and offset by consumer loan portion of around 25% from 23.9% in 1H22. On the liabilities side, TPF grew by 6.0% yoy to IDR1,071.2bn and gradually improving vs previous quarters. CASA continue as BBCA’s funding backbone and we believe will remain stays at around or above that level (KBVS ‘23F: 82% vs FY22: 81.2%). Continuing solid key metrics BBCA recorded another solid key performance metrics across the board. NIM expanded by 60bps to 5.6% arrives above original BBCA’s guidance at 5.3%-5.4%. LAR consistently improving with stronger coverages, while NPL saw another solid figure at 1.9% or 30 bps better yoy and flattish qoq. Last but not least, CoC came in as low as 50bps from 120bps in 1H22 and even lower on quarterly basis to 0.1% in 2Q23 (-70bps) from 0.8% in 1Q23. LAR consistent improvement LAR continue to improves (360bps) to 8.7% from 12.3% in 1H22 and 80bps qoq better from 9.5% in 1Q23 as reopening economy has triggered continuing recovery momentum which led to stronger repayment. Restru loans on Coll.1 even record a stronger amount from 8.1% to 4.1% of total loans in Jun23, thanks to current restructured loans which improves by -45.5%yoy, -36.6%ytd and -27.4%qoq Earnings upgrades BBCA increasing its NIM guidance to 5.5%-5.6% from 5.3%-5.4% previously and CoC lowered by 20bps from 70bps-80bps to 50bps-60bps. We revisit our model and made some adjustment following better than expectation 1H23 results and taking into account BBCA’s revised up guidance. Having said that, our new ‘23F’23F earnings are 140bps and 200bps higher, mainly on lesser credit cost. We also raised retention ratio assumption to 88% from 85% of DPO previously, as we believe BBCA’s stable payout ratio likely to remains. Using GGM model, BBCA’s new TP pegged at 5.1x/4.6x of ‘23F/’24F P/B. Upgrade BUY, with target price of IDR10,150 In all, BBCA deserved to trade at premium and its solid result signaling the ability to remain resilient in this cautiously optimistic year. Risks to our call are: a) slower-than-expected loan growth, b) lowerthan-expected NIM and loan yield, c) higher than expected cost of funds and cost of credit, d) higher inflation, slowing economic activity, worsening uncertainty and e) deteriorating asset quality.