Bank Central Asia profitability, asset quality to be stable in 2025: analyst

Capitalization and liquidity may decline, however.

Bank Central Asia’s asset quality and profitability are expected to remain stable in 2025.

“The bank's profitability will remain higher than that of the industry because of robust asset quality and leading transaction banking franchise, which leads to a competitive advantage in funding cost,” said Moody’s Ratings in a report on February 2025.

The Indonesian bank’s loan loss coverage is expected to remain robust during the year, it added.

BCA’s loans-at-risk ratio of 5.3% as of end-2024 is amongst the lowest compared to domestic peers rated by Moody’s. Its Stage 3 loans ratio of 1.8% is also amongst the lowest in Indonesia.

“We expect that net credit costs will remain modest in 2025, and that the bank will maintain its high stock of credit reserves that currently cover around 200% of stage 3 loans,” Moody’s Ratings said.

Profitability, measured by net income as a percentage of tangible assets, is expected to be largely stable at around 3.8%, driven by a stable net interest margin (NIM) and credit costs.

Interest rate cuts in Indonesia will lead to “very modest” net interest margin (NIM) compression, however.

“This is because the bank's liabilities are dominated by low-cost deposits, while fixed-rate assets are significant,” Moody;s said.

However, capitalization may decline mildly, although remain at “a still very strong level,” on the back of higher dividends payout and loan growth.

Liquidity will decline at the bank, but at a still solid level, Moody’s said.  

“Bank Central Asia's funding will remain solid, underpinned by leading transaction banking franchise. As of year-end 2024, the bank's current and savings account ratio was 82%, the highest amongst rated Indonesian banks,” it said.