Double digit profit, loan growth in the horizon for Indonesia’s BCA

Net profit will rise by 21% year-on-year.

Indonesia’s Bank Central Asia (BCA) is headed for double digit profit and loan growth in 2023.

The bank’s loans are estimated to grow by 11.4% for the full year of 2023, driven by its commercial and retail segments, according to a report by UOB Kay Hian. The bank will also report solid earnings for the year, with full-year net profit growth at 21% year-on-year.

“The solid net profit growth will come from a low teens loan growth, a 35 basis point (bp) NIM expansion, cost control, and a 15 bp decline in credit cost.” said Posmarito Pakpahan, analyst, UOB Kay Hian.

The bank’s solid account and savings account (CASA) franchise, as well as a stable benchmark rate, will also support a stable cost of fund (CoF) in the second half of 2023. The low CoF will support the bank’s double digit loan growth for 2023.

Bank Central Asia dominates Indonesia’s CASA market, with a 15% market share, UOB Kay Hian noted. This franchise also contributed 81% of the bank’s total deposits, with savings accounts accounting for 64% of its CASA as of June 2023.

ALSO READ: Indonesian banks must prioritize digitalisation, boost financial inclusion — experts

“Given its low CoF, BCA has plenty of flexibility to grow and manage assets,” Pakpahan said.

BCA’s loans are also headed for steady growth. Consumer loans rose 21% year-on-year in H1, thanks to mortgage and automotive loans. 

Competition is fierce in the corporate segment, UOB Kay Hian noted, but BCA’s low CoF gives it a competitive advantage against its peers. BCA also has ample liquidity with a loan-to-deposit (LDR) ratio at 68.7% in June 2023– one of the lowest in the industry, UOB Kay Hian said.