Indonesian bank with a favourable backdrop for continued growth
Bank Central Asia (BCA) is a leading private bank in Indonesia. It has the lowest-cost deposit franchise in the country, with a conservative culture and management who is committed to growing earnings sustainably and predictably.
BCA’s moat in transaction banking has created a large pool of low-cost deposits for the bank which is hard to replicate. BCA then lends sensibly to good borrowers and earns a healthy return on equity, averaging around 20% over the past 10 years. It has the lowest credit loss ratio and lowest leverage amongst Indonesian banks. In addition, BCA was early to invest in digitisation in Indonesia, which has since accelerated its customer acquisition.
Despite a relatively weak macro environment and disruptions like Covid, the bank has gained market share and doubled the number of customers over the past five years. BCA remains very profitable, and we believe it can compound book value at high rates without taking on too much risk. Low credit penetration and household debt in Indonesia should provide a favourable backdrop for continued growth.
Long term book value per share compounder
Funding cost advantage - consistent and high profitability
Source: Company data, Bloomberg, FSSA Investment Managers, as at 30 April 2025.
* Book Value Per Share (BVPS): A measure of a company's assets, allocated to each outstanding share of common stock.
** https://www.investopedia.com/terms/t/taper-tantrum.asp
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