Bank Central Asia: Results in line; more attractive shareholder return ahead
- 3Q25 earnings at IDR14.4tn (-3.3% q/q, 1.3% y/y) in line; our 2025F NPAT was trimmed by 3% on the back of slower-than-expected loan growth
- Loan growth remains conservative at 7.6% y/y and 2.4% YTD; expect more robust growth in 4Q25
- The bank conducted IDR5tn of buyback with maximum price per share at IDR9,200; plans to disburse more dividend payout
- Maintain BUY with a TP of IDR12,000
Results in line; more attractive shareholder returns
What’s new?
BCCA reported a 3Q25 NPAT of IDR14.4tn, bringing 9M25 NPAT to IDR43.4tn (+5.7% y/y), broadly in line with both our and consensus estimates. The 9M25 NPAT of IDR43.4tn (+5.7% y/y) represents 75%/72% of our/consensus FY25F forecasts. The bank recorded loan growth of 7.6% y/y, with total outstanding loans reaching IDR944tn as of September 2025. Notably, the average loan balance rose by 10.4% YTD and 12.2% y/y to IDR940tn for 9M25, indicating that while loan growth tends to moderate toward quarter-end due to repayments, the daily average loan balance remains elevated throughout the period. On the margin front, BBCA maintained a stable NIM of 5.7% in 3Q25, with YTD margin also steady at 5.8%.
The bank’s cost of credit remains elevated, but broadly in line with its guidance of 30-50bps, primarily to maintain adequate coverage for both NPL and LAR despite a declining ECL, which stood at 3.4% in 3Q25 (-10bps q/q, -60bps y/y). We view this as a continued prudent approach to preserving sufficient reserves. Additionally, BBCA announced a new buyback programme, to be executed over the next three months, with a maximum allocation of IDR5tn, subject to market conditions. The buyback price is capped at IDR9,200/share (implying 3.6x 2026F P/BV). The programme may be terminated earlier should the share price exceed management’s targeted valuation.
The bank is also considering a potential dividend increase, supported by its ample capital position, although this remains subject to internal assessment. We raise our dividend payout ratio forecast for BBCA to 75% over the next three years (previously 70%), as management has hinted at a potential increase in payout (2024 NPAT: 67.4%).
Our view
We remain bullish on BBCA and continue to view it as a high-quality core holding in the sector. The bank’s consistent ability to deliver solid earnings growth – underpinned by resilient margins and disciplined risk management – reinforces our positive outlook. Despite elevated provisions, BBCA’s conservative stance reflects prudent balance sheet management, particularly as ECL trends continue to improve.
Robust loan growth on an average basis and the bank’s strategic approach to sustaining NIM underscores its operational strength amid a shifting rate environment. Furthermore, the announced buyback and potential for higher dividends demonstrate confidence in its capital strength and commitment to shareholder returns.
Management guidance
Management maintained its guidance for the remainder of the year. Loan growth guidance remains at 6-8%, despite a moderated YTD expansion of 2.4% as of 9M25, while the y/y growth of 7.6% remains intact. The cost of credit guidance is unchanged at 30-50bps for FY25F, with BBCA currently at the higher end of this range – 50bps annualised as of 9M25, and 60bps in 3Q25. We expect the bank to meet its CoC target, as loan growth typically picks up with seasonally lower provisioning in 4Q relative to 2Q and 3Q.
Management also reiterated its NIM guidance of 5.7–5.8% for FY25F, consistent with 9M25 (5.8%) and 3Q25 (5.7%) levels. We believe the bank can sustain its NIM following the recent rate cuts.
Looking ahead to 2026, while official guidance has not yet been released, BCA expects NIM to decline by 20-30bps from this year due to lower asset yields on both loans and marketable securities. The bank anticipates three rate cuts in 2026, bringing Indonesia’s policy rate to 3.75% by year-end. Nonetheless, earnings growth will be supported by portfolio expansion, with loan growth guidance of 8-10% in 2026F – slightly more aggressive than 2025’s 6-8%. Based on BBCA’s assessment, this remains a conservative forecast, and we see upside risk to this guidance.
Valuation and forecast changes
We revise our earnings estimates, cutting FY25F and FY26F by 3% and 1%, respectively. The FY25F revision reflects slower-than-expected loan growth – revised to 8.5% (10% previously). The FY26F cut of 1% is due to a lower projected loan balance and reduced asset yields amid rate cuts. However, we expect a slight improvement in funding costs in FY26F, resulting in only minor changes to NII.
We also raised our dividend payout ratio assumption to 75% over the next three years (previously 70%) to reflect a stronger capital return commitment. Following the buyback announcement on 20 October, we believe BBCA’s share price should rerate, supported by management’s indication of a potentially higher payout ratio.
We value the bank using a Gordon Growth Model (GGM) with the following assumptions: k = 12.3%, g = 10%, and ROE = 21.0%, reflecting solid NII growth and pristine asset quality. Our TP implies a 4.7x 2026F P/BV. With fundamentals remaining intact – particularly in NII, a key driver of valuation (you can read further here) – we believe BCA’s valuation should improve as concerns around the bank and Indonesia’s macro environment have started to ease.
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