January 30, 2025

Heavy Foreign Outflows

Market Commentary

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BBCA has been the talk of the market after plunging nearly 5% in the past week, despite just releasing its latest financial report.

Adding to the pressure, the stock has also been among the top net sell by foreign investors.

So, what’s causing this decline?

BBCA’s 4Q24 financial results revealed slowing earnings growth.

The bank posted a net profit of IDR 13.8 tn, down 3% qoq, primarily due to a sharp increase in operating expenses, which jumped 15% qoq.

Meanwhile, NII only grew by 1%, indicating that revenue growth is becoming more constrained.

These factors made BBCA’s bottom-line performance look underwhelming, despite some positive aspects being overlooked.

One bright spot was the lower credit cost, which should have been a positive catalyst.

However, with rising operational costs and limited interest income growth, this advantage was not enough to offset the pressure on earnings. As a result, PPOP declined by 8% yoy to IDR 17.2 tn.

Looking at the bigger picture, BBCA actually delivered a solid performance throughout 2024.

The bank recorded a full year net profit of IDR 54.8 tn, up 13% yoy, outpacing the industry average.

This strong result was driven by robust loan growth of 14% yoy and a 10% increase in NoII.

However, as BBCA heads into 2025, management is taking a more cautious stance. The competition for funding is getting tougher, while consumer purchasing power is starting to weaken.

As a result, loan growth is expected to slow to 6-8%, significantly lower than the impressive 14% growth in 2024.

Despite this, credit quality remains strong. BBCA expects credit cost to stay low and stable at 30 bps, thanks to healthier borrower conditions.

Additionally, LAR ratio improved to 5.3%, signaling better credit risk management, while the LAR coverage ratio remains solid at 76.9%, one of the highest in the industry.

To navigate these challenges, BBCA has laid out strategic measures to protect its profitability.

The bank plans to increase lending rates, particularly for KPR and auto loans, to counter rising funding costs while maintaining credit quality.

With this strategy, NIM is expected to remain stable at 5.7-5.8% in 2025, not far from the 5.8% achieved in 2024.

However, with slower loan growth, BBCA’s net profit for 2025 is projected to grow at a more moderate pace of 6.3% yoy, reaching IDR 58.3 tn.

This projection already factors in a loan growth slowdown to 8% at the upper end of guidance, alongside continued operational efficiency.

Given these dynamics, the target price for BBCA has been revised down to IDR 11,500, though the BUY recommendation remains intact.

Fundamentally, BBCA remains a strong bank, but the market needs to adjust expectations for a less aggressive growth outlook compared to last year.

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