COMPANY UPDATE INDONESIA

October 29, 2010 Research Division

PT Bank Central Asia Tbk

Justified 5x PBV on Low Risk – High ROE
Rosy outlook on Indonesian economy provide the basis for optimism in banking
BUY business. However, this will go along with stiffer competition. BBCA with its robust
franchise in transactional banking and consequently unmatch low cost of fund is
Last Price (Rp) 6,950 well positioned to take full advantage of the economic growth.

Fair Value (Rp) 8,300 (+19.4%)

Net Profit Surged 20% yoy, PPOP Down 7% on Lower Margin and Higher Opex
Bank Central Asia delivered net profit for the nine month period in 2010 at Rp6.1
Stock Data trillion, a 20% yoy expansion and 4% growth on quarterly basis, accounting 70% of our
FY10F and 74% of consensus. PPOP melted down in a slight degree 7% to Rp7.6 trillion
Bloomberg BBCA.IJ
dragged by lower net interest income 14% yoy and higher opex 17% yoy. However, fee
Issued Shrs. (m) 24,655.0
based income increased 57% yoy due to gain on sales of marketable securities from only
Market Cap (Rp bn) 171,352.8
Rp22 billion in 9M09 to Rp1.7 trillion in 9M10. Down navigation on lending rate made
52 W High / Low Rp 7,100 / Rp 4,200
interest income sank 11% yoy to Rp14.8 trillion. NIM stepped down 90 bps to 5.5%.
Major Shareholders : Prudent provisioning policy remains intact, coverage up to 341%, nevertheless NPL stays
Farindo Investment 47,7% flat on quarterly basis at 0.8% and decrease by yearly basis from 1.3%.
Anthony Salim 1,8%
Public 50,5% Less Marketable Securities, More Loans
The loan portion rose from 55.1% in 9M09 to 66.2% in 9M10 vs marketable securities
from 20.8% to 11.0% in the same period. Loan swelled 23% yoy, 6% qoq to Rp138.9
Earnings Estimates trillion driven by sharp increase in consumer loan 35% yoy. Upon BI new regulation that
2010F 2011F required banks to announce their prime lending rates, BBCA will be most benefited
because of its low LDR at 52.6% and low cost of fund at 2.8%. Hence BBCA can exploit
Net Profit (Rp bn)
the momentum to boost its lending. In our opinion, display on prime lending rate will
AAA Estimate 8,703 9,785
have most effect on corporate and commercial loan which accounted for 37.4% and
Consensus 8,205 9,474
37.8% of the total, respectively. The impact will be minor to micro and small size
EPS (Rp)
borrowers, as they prefer faster loan approval and convenient payment points.
AAA EPS 357 402
Consensus EPS 334 384 Subdebt Not in a Hurry
CAR down by 50 bps to 15.8%. Management said that the comfortable level of CAR
ranges at 12% -15%. Hence, there is no urgency in our view for new capital infusion
unless loan growth in 2011 is over 25%. We estimate BBCA loan growth in 2011 is at 20%
vs 19% in 2010. However upon the subdebt issuance of US$200 million which is only half
is recognized as capital, CAR will up from 15.9% to 16.8% in 2011. A minor changes.

Valuation, Upgrade 12-Month TP to Rp8,300. BUY

We upgrade our TP from Rp7,100 to Rp8,300 on the basis of higher potential long term
growth from 10.3% to 11%. Our TP implies 5.1x PBV and 20.7x PE 2011 which is the
same level at current valuation. We believe that BBCA 5x PBV is justified by its superior
low NPL and relatively high ROE. Our 12-month TP offers 19.4% potential upside. BUY.

FINANCIAL SUMMARY
Rp bn 2008 2009 2010F 2011F 2012F
A. G. Pahlevi Operating Profit 9,409 10,777 11,707 13,398 15,815
agpahlevi@aaasecurities.com Net Profit 5,776 6,807 8,703 9,785 11,076
PT. Andalan Artha Advisindo Sekuritas EPS (Rp) 236.0 279.4 357.2 401.6 454.6
Equity Tower Building 22ND Floor Growth 28.7 17.9 27.8 12.4 13.2

Jl. Jend. Sudirman Kav. 52 – 53 P/E (x) 29.3 24.9 19.5 17.3 15.3

Jakarta 12190 P/BV (x) 7.3 6.1 5.0 4.3 3.6

Div. Yield (%) 1.7 1.6 2.0 2.3 2.6
Ph : +62 21 2991 6600
ROE (%) 26.4 26.6 28.3 26.6 25.7
Fax : +62 21 515 2644
Source: Company, AAA Securities

PT Andalan Artha Advisindo Sekuritas 1

COMPANY UPDATE INDONESIA
October 29, 2010 Research Division

9M10 Performance
(Rp bn) 3Q10 %QoQ %YoY 9M09 9M10 %YoY FY10F %YoY %AAA
Net Interest Income 3,618 25% 1% 10,967 9,476 -14% 10,854 -27% 87%
Fee Based Income 1,694 -22% 56% 3,558 5,599 57% 10,800 148% 52%
Other Operating Expense (2,273) -13% 12% (6,379) (7,443) 17% (9,946) 17% 75%
Pre-Provision Opr. Profit 3,039 24% 15% 8,146 7,632 -6% 11,707 9% 65%
(Impairment) Reversal (410) 1338% -25% (2,251) (135) -94% (233) -90% 58%
Other Income / (Expense) 121 -28% -44% 635 320 -50% 130 -70% 247%
Profit before tax 2,750 6% 19% 6,530 7,817 20% 11,604 30% 67%
Tax (622) 14% 20% (1,440) (1,708) 19% (2,901) 36% 59%
Net Profit 2,128 4% 19% 5,090 6,109 20% 8,703 28% 70%

Loan 138,869 6% 23% 112,720 138,869 23% 147,229 19% 94%

LLP (4,681) 32% 11% (4,203) (4,681) 11% (3,914) -9% 120%
Total Assets 310,196 4% 14% 271,626 310,196 14% 325,888 15% 95%
Customer Deposits 262,765 3% 12% 234,348 262,765 12% 282,610 15% 93%
Total Equity 32,431 7% 20% 27,048 32,431 20% 33,739 21% 96%

Yield on Assets 8.7% 10.2% 8.7% 9.3%

Cost of Fund 2.8% 3.6% 2.8% 3.4%
NIM 5.5% 6.4% 5.5% 6.1%
ROAE 32.3% 31.8% 32.3% 28.3%
Cost to Income 49.2% 41.5% 49.2% 45.9%
Total CAR 14.1% 16.3% 14.1% 16.0%
LDR 52.6% 47.8% 52.6% 52.1%
NPL 0.8% 1.3% 0.8% 0.7%
Coverage Ratio 341.2% 296.5% 341.2% 360.8%
Source : Company, AAA Research

Figure 1 : Loan Dominated by Corporate and Figure 2 : CASA Portion 75%

Commercial

160,000

Time Demand
140,000
Deposits, Deposits,
120,000 25% 23%

100,000

80,000

60,000

40,000

20,000

0
2Q 6
3Q 6
06

1Q 6
07

3Q 7
4Q 7
1Q 7
2Q 8
3Q 8
4Q 8
08

2Q 9
3Q 9
4Q 9
1Q 9
2Q 0
3Q 0
10
0
0

0
0
0
0
0
0

0
0
0
0
1
1

Savings
1Q

4Q

2Q

1Q

Accounts,
Corporate Commercial Consumer 52%

Source : Company Source : Company

PT Andalan Artha Advisindo Sekuritas 2

 COMPANY UPDATE INDONESIA
October 29, 2010 Research Division

Figure 3 : BBCA Strong Cheap Funding on ATMs Figure 4 : ROE in 3Q10, at 32.3%

CASA 35% 2,500

90% BBCA
30%
80% 2,000
25%
70% BBNI
1,500
60% 20%
BMRI
50% BDMN 15%
1,000
40% BBRI
10%
30%
500
20% 5%

10% 0% 0
0% ATM

2Q0 5
3Q0 5
4Q0 5
1Q0 5
2Q0 6
3Q0 6
4Q0 6
1Q0 6
2Q0 7
3Q0 7
4Q0 7
1Q0 7
2Q0 8
3Q0 8
4Q0 8
1Q0 8
2Q0 9
3Q0 9
4Q0 9
1Q0 9
2Q1 0
3Q1 0
10
1Q
0 2,000 4,000 6,000 8,000
ROE Net Profit (Rp bn - RHS)

Source : Company Source : Company

Figure 5 : Prudent Banking Practices, Coverage 341% Figure 6 : Earnings Assets Composition

2% 600%
Government
2% Others, 18% Bonds, 15%
500%
2%

1%
400%
1% SBI +
1% 300% Marketable
Securities,
1%
17%
200%
1%
0%
100%
0%

0% 0%
Loans, 50%
05

05

06

06

07

07

08

08

09

09

10

10
1Q

3Q

1Q

3Q

1Q

3Q

1Q

3Q

1Q

3Q

1Q

3Q

NPL Coverage (RHS)

Source : Company Source : Company

Valuation, Upgrade 12-Month TP to Rp8,300. BUY

We upgrade our TP from Rp7,100 to Rp8,300 on the basis of higher potential long term growth from 10.3% to 11%. Our TP
implies 5.1x PBV and 20.7x PE 2011 which is the same level at current valuation under which BBCAs traded at 5.0x PBV and
19.5x PE 2010. We believe BBCAs is worth at 5x PBV justified by superior low NPL and relatively high ROE. Our 12-month TP
offers 19.4% potential upside. BUY.

Risk Free Rate 8.9%

Assets Beta 0.88
Market Risk Premium 5.5%
Cost of Equity 13.7%
RR 61%
Sustainable ROE 25.3%
g 11%
Target PBV 5.1x
BVPS (FY11F) 1,630
Company Value Per Share (Rp) (round) 8,300

PT Andalan Artha Advisindo Sekuritas 3

 COMPANY UPDATE INDONESIA
October 29, 2010 Research Division

Figure 7 : Forward PE Band Figure 8 : Forward PBV Band

25.0 6.0

5.0 +2 Std. Dev 4.8x

20.0 +2 Std. Dev 19.7x

4.0
15.0 Average 14.4x Average 3.4x
3.0

10.0
-2 Std. Dev 9.1x 2.0 -2 Std. Dev 2.0x

5.0 1.0

0.0
0.0

M-06

M-07

M-08

M-09

M-10
J-06

S-06
J-07

S-07
J-08

S-08
J-09

S-09
J-10

S-10
J-06

J-06

J-07

J-07

J-08

J-08

J-09

J-09

J-10

J-10

Source : AAA Research Source : AAA Research

Risks to Our Call

Change in top management as they did well in building prudent management risk culture.
Increasing layoff and bankruptcy in mass industry which could decrease BBCA funding and fee based income.
Longer than expected low interest rate regime

PT Andalan Artha Advisindo Sekuritas 4

COMPANY UPDATE INDONESIA
October 29, 2010 Research Division

Balance Sheet
Year-end 31 Dec (Rp bn) 2007 2008 2009 2010F 2011F 2012F

Cash 7,676 10,799 8,865 7,407 10,077 7,383

Current Account with BI 20,872 9,669 11,511 20,798 23,722 26,638
Current Account with Other Banks 303 7,909 11,904 13,281 13,292 13,587
Placement at BI & Other Banks 6,391 4,936 5,259 8,023 8,768 9,674
Marketable Securities - net 45,848 50,045 69,563 72,798 77,911 81,941
Recap Government Bonds 46,778 39,811 42,495 44,785 44,897 45,554
Loan - gross 82,389 112,784 123,901 147,229 176,608 212,162
Allowance for Losses (1,686) (2,757) (4,306) (3,914) (4,710) (5,574)
Fixed Assets 2,265 2,645 2,971 3,412 3,759 4,249
Other Assets 7,169 9,730 10,228 12,069 14,242 16,805
Total Assets 218,005 245,570 282,392 325,888 368,566 412,420
Customer Deposits 189,172 209,529 245,140 282,610 319,165 356,108
Borrowing from Other Banks 2,065 4,048 2,489 2,563 2,640 2,719
Marketable Securities Issued 0 0 0 0 0 0
Subordinated Borrowings 0 0 0 0 0 0
Other Liabilities 6,326 8,713 6,907 6,976 7,046 7,116
Total Liabilities 197,563 222,291 254,536 292,149 328,851 365,943
Minority Interest 0 0 0 0 0 0
Shareholders' Equity 20,442 23,279 27,857 33,739 39,715 46,477
Total Liabilities & Equity 218,005 245,570 282,392 325,888 368,566 412,420
Source : Company, AAA Research

Income Statement
Year-end 31 Dec (Rp bn) 2007 2008 2009 2010F 2011F 2012F

Interest Income 16,327 19,301 22,931 26,154 31,372 37,164

Interest Expense (6,748) (6,945) (8,031) (8,998) (11,285) (13,138)
Net Interest Income 9,579 12,356 14,900 17,156 20,087 24,026
Fee Based Income 2,846 3,878 4,348 4,498 5,045 5,681
Other Operating Expense (5,884) (6,826) (8,471) (9,946) (11,734) (13,892)
Pre-Provision Opr. Profit 6,541 9,409 10,777 11,707 13,398 15,815
Provisions (210) (1,741) (2,258) (233) (495) (1,193)
Other Income / (Expense) 70 52 426 130 143 146
Profit before tax 6,402 7,720 8,945 11,604 13,046 14,768
Tax (1,912) (1,944) (2,138) (2,901) (3,262) (3,692)
Minority Interest 0 0 0 0 0 0
Net Profit 4,489 5,776 6,807 8,703 9,785 11,076
Source : Company, AAA Research

PT Andalan Artha Advisindo Sekuritas 5

COMPANY UPDATE INDONESIA
October 29, 2010 Research Division

Key Ratio
Year-end 31 Dec (Rp bn) 2007 2008 2009 2010F 2011F 2012F

Growth
Total Assets 23.3% 12.6% 15.0% 15.4% 13.1% 11.9%
Gross Loans 34.1% 36.9% 9.9% 18.8% 20.0% 20.1%
Customer Deposits 23.9% 10.8% 17.0% 15.3% 12.9% 11.6%
Net Interest Income 1.3% 29.0% 20.6% 15.1% 17.1% 19.6%
Pre-Provision Operating Profit -0.8% 43.8% 14.5% 8.6% 14.4% 18.0%
Net Income 5.8% 28.7% 17.9% 27.8% 12.4% 13.2%
Profitabilty
Earning Asset Yield 9.0% 9.1% 9.5% 9.3% 9.8% 10.3%
Cost of Fund 3.9% 3.4% 3.5% 3.4% 3.7% 3.9%
Net Interest Margin 6.5% 5.8% 6.2% 6.1% 6.2% 6.6%
ROAA 2.3% 2.5% 2.6% 2.9% 2.8% 2.8%
ROAE 23.3% 26.4% 26.6% 28.3% 26.6% 25.7%
CIR 47.4% 42.0% 44.0% 45.9% 46.7% 46.8%
Opr. Expense to Opr. Income 69.0% 67.0% 66.9% 68.8% 62.6% 64.6%
Capital
Tier-1 CAR 17.5% 15.6% 15.5% 15.9% 16.2% 16.4%
Tier-2 CAR 2.2% 1.3% 1.3% 1.3% 1.3% 1.3%
Total CAR 19.0% 16.1% 15.8% 16.0% 15.9% 15.7%
LDR 43.6% 53.8% 50.5% 52.1% 55.3% 59.6%
Assets Quality
NPL 0.8% 0.6% 0.7% 0.7% 0.8% 0.8%
Coverage Ratio 251.7% 408.5% 476.8% 360.8% 347.8% 329.6%
Source : Company, AAA Research

PT Andalan Artha Advisindo Sekuritas 6

COMPANY UPDATE INDONESIA
October 29, 2010 Research Division

PT Andalan Artha Advisindo Sekuritas

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Disclaimer : The information contained herein has been compiled from sources that we believe to be reliable.No warranty (express or implied) is made to
the accuracy or completeness of the information.All opinions and estimates included in this report constitute our judgement as of this date, without
regards to its fairness, and are subject to change without notice.This document has been prepared for general information only, without regards to the
specific objectives, financial situation and needs of any particular person who may receive it. No responsibility or liability whatsoever or howsoever arising
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