Bank Central Asia's non-performing loans could peak above 1%

It includes its IDR509b loan to Trikomsel.

According to Maybank Kim Eng, BBCA posted a strong IDR18t (+9.3% YoY) net profit in 2015, in line with estimates. "We believe that despite management’s cautious guidance for 2016F, BBCA can still outperform peers due to its excellent risk management and competitive lending rates."

Here's more from Maybank Kim Eng:

On the back of strong 12% YoY loan growth and rising CASA portion, NIM ticked up further to 6.7% by YE15. Despite the low NPL of 0.7%, management set aside another IDR2.3t of provisioning in 4Q15, which brought the bank’s total NPL coverage back up to 322%.

The conservative approach was taken in anticipation of higher NPL in the near future. The bank has also done a more aggressive restructuring in 4Q15, mostly in its Current (cat 1) loans. The amount, however, is small compared to peers.

Cautious outlook for 2016
Management indicated that NPL could peak above 1%, which includes its IDR509b loan to Trikomsel (TRIO IJ) that has been downgraded from Special Mention (cat 2) in 1Q16. Based on our estimate, this means an additional 0.1% to total NPL.

BBCA also targets 9.7% corporate lending rates in its 2016F business plan to support its 12-14% YoY total loan growth. However, the bank mentioned that in the worst case scenario where OJK requests single digit rates to be applied to all sectors, NIM might fall by roughly 50-60bps this year.