BCA hiked IDR time deposit rate by 50-75bp to 6.25%

Third hike this year.

According to Maybank Kim Eng, for the third time this year Bank Central Asia (BCA), raised their IDR time deposit (TD) rate by 50-75bp to 6.25% effective from September. This made a total 300bp YTD hike, double the increase in BI rate that currently stood at 7.25%.

Here's more from Maybank:

BCA has passed on 100bp of these additional costs to its creditors, plus another 25-50bp for selective corporate and commercial accounts.

This might not stop here. Commercial lending, which covers 40% of total loan in 1H13, slowed down as a result of these interest rates increased. However, as there is no sign of weakness in the corporate and consumer segment, our YE13 loan expansion target of 20% YoY remains unchanged.

In fact, July’s 13% YTD loan growth is already ahead of our forecast, although BCA has stopped taking new creditors.

To prevent LDR from breaching its 75% internal limit, BCA might lift its TD rate further. There is a room for 75bp increase before it matches LPS’ deposit guarantee rate. The higher deposit cost does not necessarily mean lower NIM as it can translate into higher lending yield considering the 170bp differential to its closest peers.

EPS growth remains attractive. We roll forward our valuation to FY14 with TP at IDR12,300 (20.2x 2014F PER; 4.1x 2014F PBV). The lower multiples represent our -3% net profit adjustment to IDR15t due to higher CoF.

We are yet to incorporate further hike in lending rates, as management is unwilling to take any risk of NPL deterioration.

Nevertheless, based on our valuation BCA can still offer 12% EPS growth in 2014 on top of this year’s 14% increase. Note that by July, BCA has booked IDR7.5t net profit, inline with our 2013 forecast of IDR13.4t.

Should BCA go as aggressive as raising CASA interest rates to maintain LDR below 75%, we will become more cautious not limiting to the bank, but also on the sector as this would indicate how tight liquidity condition in the market can lead to lower loan growth.

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