Indonesian bank with low cost deposits, high returns and growing market share
A leading private bank in Indonesia, Bank Central Asia (BCA) is a conservatively run bank with long-term minded owners and management. The seasoned and professional management team have a good track record of maintaining profitability and lending prudently in good and bad times.
BCA’s moat in transaction banking has created a large and growing pool of low cost deposits for the bank which is hard to replicate. BCA then lends sensibly to good borrowers (“doesn’t have to take undue risks”) and earns healthy return on equity. It has the lowest credit loss ratio and lowest leverage amongst Indonesian banks.
BCA was early to invest in digitisation in Indonesia. Technology and IT infrastructure are overseen by Armand Hartono (the Hartono family are BCA’s largest shareholders) and the bank is seen as the partner of choice for many new economy companies. Digital banking has accelerated pace of customer acquisition (100% increase in number of customers in 5 years).
BCA has been gaining market share over the years. As credit penetration in Indonesia is still low (less than 45% credit to Gross Domestic Product), we believe BCA should continue to benefit from a long growth runway.
Source: Company data, Bloomberg, FSSA Investment Managers, as at 31 December 2022.
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