The Truth About China/Africa Investment
7 November, 2017
As Xi Takes On the World, Where are the Bank Mergers to Do It?
7 November, 2017Euromoney, November 2017
It is loved by analysts and fund managers, with impeccable ratios and a market cap that sometimes trumps DBS as the largest in Asean, yet it is determinedly domestic and focused on its native Indonesia – meet Bank Central Asia.
There was a minor kerfuffle last February when DBS was briefly dethroned as southeast Asia’s largest bank by market capitalization. These things do not much matter of course, but still it was striking that the multinational Singaporean had been overtaken in value.
So who was this usurper? Fellow Singaporeans OCBC or UOB? Malaysia-based Asean specialists Maybank or CIMB? No, the answer was Indonesia’s Bank Central Asia (BCA).
Although the name is little known outside Indonesia, BCA has long been very popular with anyone who has invested in it. It is adored by the markets, where main competitor Mandiri trades at a price-to-book value of 1.9 and DBS 1.15; at BCA it is over four. The share price is up over 800% since February 2009. Yet it is still rated a buy by brokers from Nomura to DBS. Big names on the shareholder register include Vanguard, T Rowe Price, BlackRock, Fidelity and Aberdeen.
Why? Look at the numbers: 18.3% return on equity, 9.1% growth in assets and 11.9% in outstanding loans in the six months to June 2017, and a gross non-performing loan ratio of just 1.5%. For the full calendar year of 2016, it grew net income by 14.4%, while the rest of the five top banks in the country shrank by 1.9%, with scarcely one-third the industry level of bad loans. It is only the third-largest bank in Indonesia by assets, loans and deposits, but the largest private-sector bank and by far the one in the best condition.
Achieving growth in Indonesia is nothing special. Achieving it with such prudence is altogether rarer. So Euromoney went to the bank’s Menara BCA tower headquarters in Jakarta to find out how the best bank you have never heard of does it.
The key to understanding BCA is that it is a deliberate reduction of banking to the simple, the obvious and the practical, taking an approach that sounds rudimentary but is in fact remarkably rare in practice. That means: know your customer; stick to what you are good at; do not venture overseas; and remain exceptionally well-capitalized. “Knowing the customer, having almost a shoot-fish-in-a-barrel strategy, has served us very well,” says Eugene Galbraith, deputy president director.
Read the full article here: https://www.euromoney.com/article/b15j1f4z3yk324/bank-central-asia-the-best-bank-youve-probably-never-heard-of?copyrightInfo=true
