Indonesian bank with low cost deposits, high returns and growing market share
This leading private bank in Indonesia is conservatively 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.
The bank’s moat in transaction banking has created a large and growing pool of low cost deposits for the bank which is hard to replicate. It 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.
The bank was early to invest in digitisation in Indonesia. Technology and IT infrastructure are overseen by a member of the family that is the bank’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).
The bank 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 it should continue to benefit from a long growth runway.
Long term book value per share compounder
Funding cost advantage -> consistent and high profitability
Source: Company data, Bloomberg, FSSA Investment Managers, as at 31 December 2022.
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