BBCA The Bad-Loan Bucket Stopped Growing - and the Multiples Finally Noticed

The Migration Q1 Flagged Just Stopped

The Q1 2018 post closed on a specific worry: Substandard loans had collapsed 65% quarter-over-quarter not because they'd healed, but because they'd migrated straight into the Loss bucket, which jumped 32% in the same three months. Total NPL hit a fresh nominal high of Rp7,223 billion and coverage fell to a new multi-year low of 183.6%. One quarter later, that migration has essentially stopped: bank-only Substandard loans sit at Rp686 billion (Jun 2018) versus Rp695 billion at Mar 2018 - flat - and the Loss bucket actually fell slightly, from Rp5,637 billion to Rp5,594 billion. Total NPL declined to Rp7,075 billion, down 2.0% quarter-over-quarter - the first sequential decline this series has recorded since it began tracking BCA's asset quality - and coverage recovered to 187.8%, up from Mar 2018's low.

That's a genuine improvement, not just a rounding change: the gross NPL ratio actually moved this time, down to 1.4% (bank-only) from five straight quarters parked at a rounded 1.5%. But it came alongside a new wobble elsewhere. The Special Mention bucket - the early-warning tier just below any NPL classification - jumped 30.4% quarter-over-quarter to Rp11,458 billion, and BCA's own investor materials attribute part of that increase to "customer late payment during Ramadhan holiday." A seasonal, explained bump in the earliest-warning bucket is a different kind of concern than the collectability migration Q1 flagged - worth watching, not alarming on its own - but it's the same underlying pattern this series keeps finding: whichever asset-quality metric looked calm last quarter is usually the one that moves next.

Net profit grew a healthy 8.4% year-over-year to Rp11,421 billion for the half, continuing the double-digit-to-high-single-digit growth this series has tracked every period. But operating cash flow told a very different story - see Key Financial Metrics below.

The Prescription

BCA should keep doing exactly what stabilized the collectability picture this quarter - the corporate write-offs and active portfolio monitoring its own materials cite as the driver behind the gross NPL ratio's drop to 1.4% - rather than treating Q1's migration scare as resolved and easing off. The Special Mention jump this quarter, even with a seasonal explanation attached, is the leading indicator this series flagged as far back as H1 2017: a bucket that grows before the NPL ratio does is worth reserving against before it becomes confirmed non-performing, not after.

What it should stop doing: continuing to raise the cash dividend payout ratio in the same year operating cash flow swung this hard. BCA paid Rp4,314,626 million in dividends this half - a payout ratio against FY2017 earnings of roughly 18.5%, up from 15.6% a year earlier and 14.4% the year before that (see Beyond the Usual) - a three-year climb, not a one-off. That's a defensible capital-allocation choice on its own at a bank this well-capitalized, but doing it in the same half operating cash flow fell 70.8% is exactly the kind of pairing the H1 2017 post already named once: capital moving toward shareholders in the same period the balance sheet's cash-generation capacity moved the other way.

Key Financial Metrics

H1 2018 vs. H1 2017 (P&L, cash flow, consolidated unaudited figures, six months cumulative) and 30 Jun 2018 vs. 31 Dec 2017 (balance sheet, consolidated)

FX: IDR 14,330.0 = USD 1 (June 30, 2018, per BCA's own filed financial statements' exchange-rate disclosure).

Like every semi-annual filing in this series, BCA's interim statements report year-to-date cumulative figures rather than a discrete quarter. The table below uses the filed H1 2018 cumulative consolidated statement directly against H1 2017 cumulative, the same basis the filing itself reports on. This quarter's filing includes the fuller consolidated statement (balance sheet, income statement, cash flow statement, commitments/contingencies, asset-quality, and capital-adequacy schedules) but, like every interim publication in this series except FY2017's annual filing, no notes to the financial statements.

Metric	H1 2018 (IDR)	H1 2018 (USD)	H1 2017 (IDR)	YoY
Net Interest Income	Rp21,782,672M	~$1,520.1M	Rp20,372,225M	✅ +6.9%
Non-interest operating income (gross)	Rp11,416,077M	~$796.7M	Rp9,307,623M	✅ +22.7%
Pre-tax income	Rp14,327,767M	~$999.8M	Rp13,238,300M	✅ +8.2%
Net Income (attributable to owners)	Rp11,420,955M	~$796.9M	Rp10,534,738M	✅ +8.4%
EPS (year-to-date)	Rp463	~$0.032	Rp427	✅ +8.4%

Balance sheet metric	Jun 2018 (IDR)	Jun 2018 (USD)	Dec 2017 (IDR)	YTD
Total Assets	Rp791,729,673M	~$55.25B	Rp750,319,671M	✅ +5.5%
Loans	Rp494,603,390M	~$34.52B	Rp467,508,825M	✅ +5.8%
Total Deposits (Third Party Funds)	Rp615,551,242M	~$42.96B	Rp581,115,442M	✅ +5.9%
Total Liabilities	Rp654,884,667M	~$45.70B	Rp618,917,977M	✅ +5.9%
Total Equity (attributable to owners)	Rp136,747,366M	~$9.54B	Rp131,303,555M	✅ +4.1%

Loans grew 14.2% YoY (Rp494,603,390M vs. Rp433,257,702M at Jun-17), the fastest YoY loan growth this series has recorded outside Q1 2018's 15.0% reading. Total deposits grew 7.6% YoY (Rp615,551,242M vs. Rp572,247,005M).

Operating cash flow was positive Rp10,294,901M this half, but down sharply - 70.8% - from Rp35,304,255M in H1 2017 (the comparative figure as restated in this filing), as a Rp28,084,852M net increase in loans disbursed outpaced a Rp34,435,800M deposit inflow that itself grew more slowly than a year earlier (fixed-asset purchases were Rp697,969M this half). ⚠️ Cash and cash equivalents still grew to Rp104,757,727M (~$7.31B) at period-end, up 25.6% from Rp83,377,439M at Dec 2017 but down 8.1% YoY from Rp114,040,239M at Jun 2017. Unlike Q1 2018's negative operating cash flow reading, this half stayed cash-flow positive overall - Q1's negative quarter was more than offset by a stronger Q2 - but the year-over-year comparison shows real deceleration in cash generation even as every P&L line above kept growing.

Net profit grew 8.4% and the bad-loan migration Q1 flagged actually reversed course - but operating cash flow fell 70.8% year-over-year as loan growth ran well ahead of deposit inflows, and the dividend payout ratio kept climbing regardless.

Key Operational Metrics

All ratios below are bank-only (individual), matching the basis used in every prior post in this series, from BCA's own filed financial-ratio disclosure:

• CASA ratio^»: 78.18% (Jun 2018) vs. 76.35% (Dec 2017) vs. 74.60% (Jun 2017) ✅ - the reversal Q1 2018 flagged held for a second straight quarter and widened further, now the best CASA reading this series has recorded.
• Loan to Funding Ratio^» (LFR): 77.02% (Jun 2018) vs. 78.2% (Dec 2017) vs. 74.49% (Jun 2017) ⚠️ - down QoQ but still up 253bp YoY, loan growth (14.2%) continuing to outpace deposit growth (7.6%).
• NIM^»: 6.05% (Jun 2018) vs. 6.2% (Dec 2017) vs. 6.26% (Jun 2017) ⚠️ - compression continues, now the sixth straight quarter this series has recorded a YoY NIM decline.
• ROA^»: 3.59% (Jun 2018) vs. 3.9% (Dec 2017) vs. 3.67% (Jun 2017) ⚠️ - down both QoQ and YoY.
• ROE^»: 17.26% (Jun 2018) vs. 19.2% (Dec 2017) vs. 18.30% (Jun 2017) ⚠️ - continues the multi-year decline this series has tracked since 2011.
• CAR^» (credit, market and operational risk): 22.81% (Jun 2018) vs. 23.1% (Dec 2017) vs. 22.10% (Jun 2017) ✅ - capital keeps building regardless of the operating trends above.
• NPL ratio - gross: 1.43% (Jun 2018) vs. 1.5% (Dec 2017) vs. 1.47% (Jun 2017) ✅ - the first genuine improvement (not just a flat rounded reading) this series has recorded, on a nominal NPL stock (Rp7,075bn bank-only) that fell 2.0% QoQ for the first time in this series' data. NPL ratio - net: 0.43% (Jun 2018) vs. 0.4% (Dec 2017) vs. 0.40% (Jun 2017).
• Provision/NPL coverage: 187.8% (Jun 2018) vs. 190.7% (Dec 2017) vs. 196.3% (Jun 2017) ⚠️ - recovered from Mar 2018's multi-year-low 183.6%, but still below both the Dec 2017 and Jun 2017 readings, and well below the multi-year decline's Dec 2015 starting point of 322.2%.
• Cost Efficiency Ratio (bank-only opex over interest-plus-fee income, cumulative YTD): 48.3% (Jun 2018) vs. 44.4% (Dec 2017) vs. 48.6% (Jun 2017) ✅ - essentially flat YoY and well below Q1 2018's seasonally-elevated 53.2%, consistent with the seasonal pattern Q1 2018 already explained: Q1's elevated personnel-cost reading eases once the second quarter's costs blend in.
• BOPO^» (cost-to-income, the regulator's broader definition including provisioning): 62.12% (Jun 2018) vs. 58.6% (Dec 2017) vs. 61.83% (Jun 2017) ⚠️ - up slightly YoY.
• Special Mention loans (bank-only): Rp11,458 billion (Jun 2018), up 30.4% quarter-over-quarter from Rp8,787 billion at Mar 2018 and up 6.0% year-over-year from Rp10,805 billion (Jun 2017) - BCA's own materials attribute part of the increase to Ramadhan-related late payments (see above).
• Indonesia's national banking-sector NPL ratio rose to 2.8% in May 2018 from 2.6% at Dec 2017, per Bank Indonesia/OJK data cited in BCA's own investor presentation, while sector loan growth ran 10.3% YoY against BCA's 14.2% - BCA continues growing faster than the system while its own NPL ratio improved this quarter, unlike the sector's.

Segment Performance

BCA reports three lending segments (bank-only): Corporate, Commercial & SME, and Consumer.

Corporate

Corporate loans reached Rp191,433 billion (Jun 2018), up 19.1% YoY and 8.0% YTD - the fastest-growing segment for a third straight period, extending the lead this series has tracked since FY2017. Both the YoY and YTD growth rates accelerated from Q1 2018's 17.6% YoY reading.

Commercial & SME

Commercial & SME loans reached Rp174,829 billion (Jun 2018), up 15.1% YoY and 4.4% YTD - a recovery from Q1's slight QoQ pullback, and now growing faster than Consumer for a second straight quarter.

Consumer

Consumer loans reached Rp128,158 billion (Jun 2018), up just 6.0% YoY and 4.3% YTD - clearly the slowest-growing of the three segments, continuing the deceleration Q1 2018 flagged and now falling further behind the other two. Mortgages grew to Rp74,556 billion (+4.0% YTD, +4.0% YoY-equivalent pace), the promotional "Fix and Cap" product Q1 2018 mentioned having moved from launch into the balance by quarter-end. Vehicle loans (bank-only plus subsidiary bookings) reached Rp41,270 billion (+7.7% YTD), the strongest sub-book within Consumer, while credit cards grew to Rp12,332 billion (+7.0% YTD).

Segment Comparison

Segment	Jun 2018 (Rp bn)	Dec 2017 (Rp bn)	Jun 2017 (Rp bn)	YoY	Share (Jun 2018)
Corporate	191,433	177,277	160,744	✅ +19.1%	38.7%
Commercial & SME	174,829	167,487	151,906	✅ +15.1%	35.4%
Consumer	128,158	122,856	120,956	⚠️ +6.0%	25.9%
Total	494,420	467,620	433,606	✅ +14.0%	100%

The gap this series has tracked between Corporate and Consumer growth - first appearing in FY2017, then widening through Q1 2018 - kept widening again this quarter: Corporate's 19.1% YoY growth is now more than three times Consumer's 6.0%, the widest split this series has recorded between the two segments.

Beyond the Usual

This quarter's filing is a fuller consolidated OJK-format publication (balance sheet, P&L, cash flow statement, commitments/contingencies, and asset-quality/capital-adequacy schedules) but, like every interim filing in this series besides the annual report, carries no notes to the financial statements. The findings below come from the collectability, cash-flow, and dividend-history detail those schedules still disclose.

Total NPL Fell Quarter-Over-Quarter for the First Time This Series Has Recorded

Bank-only nominal NPL fell from Rp7,223 billion (Mar 2018) to Rp7,075 billion (Jun 2018), down 2.0% quarter-over-quarter - the first sequential decline in the nominal NPL series this series has tracked (Jun-16: Rp5,241bn → Sep-16: Rp5,622bn → Dec-16: Rp5,452bn → Mar-17: Rp6,025bn → Jun-17: Rp6,373bn → Sep-17: Rp6,729bn → Dec-17: Rp6,945bn → Mar-18: Rp7,223bn → Jun-18: Rp7,075bn). The bucket-level detail Q1 2018 flagged as a migration - Substandard collapsing into Loss rather than resolving - also stopped moving: Substandard sits at Rp686 billion (vs. Rp695 billion at Mar 2018) and Loss actually fell to Rp5,594 billion (vs. Rp5,637 billion at Mar 2018). Coverage recovered to 187.8% from Mar 2018's multi-year-low 183.6%. Read against the prior two quarters, this looks like the migration completing itself and then genuinely stabilizing, rather than continuing to worsen - though one quarter of improvement, after several quarters of deterioration, isn't yet a new trend on its own.

The Early-Warning Bucket Jumped 30% in the Same Quarter NPL Improved

Special Mention loans - the tier one notch below any NPL classification - grew 30.4% quarter-over-quarter to Rp11,458 billion, reversing this series' Q1 2018 reading of a Q4-pullback-then-resumed-growth pattern with an outright acceleration. BCA's own investor materials attribute part of the increase to "customer late payment during Ramadhan holiday" - a seasonal, company-disclosed explanation, not an unexplained deterioration. Still, this is the same bucket the H1 2017 post flagged as the leading indicator that grew faster than the NPL ratio itself for three straight quarters that year, and it's worth tracking whether this quarter's jump proves as seasonal as management's explanation suggests or continues into Q3.

Operating Cash Flow Fell 71% While the Dividend Payout Ratio Kept Climbing

BCA paid Rp4,314,626 million in cash dividends during H1 2018, up 34.6% from Rp3,205,152 million in H1 2017 - a payout ratio against FY2017 net income (Rp23,309,994 million) of roughly 18.5%, up from 15.6% a year earlier (against FY2016 earnings, as the H1 2017 post noted) and 14.4% the year before that. This is now a three-year climb in the payout ratio, not a one-off increase. It comes in the same half-year operating cash flow fell 70.8% year-over-year (see Key Financial Metrics) and provisioning expense (impairment losses on financial assets) fell 11.2% YoY to Rp2,571,339 million from Rp2,895,758 million - the same capital-allocation pattern the H1 2017 post named: a rising payout and a shrinking loss reserve moving in the same direction, in the same period cash generation weakened. BCA remains comfortably capitalized (CAR 22.81%) and this alone isn't a solvency concern, but it's the third consecutive year this series has found the same pairing.

Target Valuation Range

P/E of ~21.9x and P/B of ~3.87x - Bottom line: cheaper for the first time in four quarters this series has tracked - the price pulled back further than earnings did, even as the credit-quality picture that had worried the market through Q1 genuinely improved.

BCA's shares closed at approximately Rp21,475 on June 29, 2018 (converted from BCA's post-split share count, adjusted for the company's later 1:5 stock split in October 2021, since price data pulled today for this period reflects that split retroactively) - down 2.0% from Rp21,900 at Dec 29, 2017, and down 7.8% from the Rp23,300 close Q1 2018 reported. Over the full two-year window, shares are still up roughly 61.2% from around Rp13,325 (June 2016) - most of that gain concentrated well before this quarter, as prior posts in this series have already traced. The pullback wasn't a straight line down from the Mar 2018 peak: shares actually ticked up to roughly Rp22,700 by end-May before falling to Rp21,475 by quarter-end, meaning most of the quarter's decline came in June alone.

• P/E^»: ~21.9x, using trailing-twelve-month EPS of Rp981 (FY2017's Rp945, minus H1 2017's Rp427, plus H1 2018's Rp463) against the Rp21,475 June 29, 2018 close - down from ~24.1x at Q1 2018, the first multiple compression this series has recorded after three straight quarters of expansion.
• P/B^»: ~3.87x, using book value per share of Rp5,546 (per BCA's own presentation) - down from ~4.21x at Q1 2018.

Market cap → book value	Q2 2018
Share price (period-end)	Rp21,475
Shares outstanding	24,655,010,000
Market capitalization	Rp529,466B (~$36.94B)
Book value (equity attributable to owners)	Rp136,747B (~$9.54B)
P/B»	~3.87x

P/E and P/B	Q1 2018	Q2 2018	Change
EPS (trailing)	Rp966	Rp981	✅ up
P/E»	~24.1x	~21.9x	✅ down
Book value per share	Rp5,531	Rp5,546	✅ up
P/B»	~4.21x	~3.87x	✅ down

As in every prior post in this series, a full DCF isn't attempted here - a bank whose credit-quality trend just reversed direction after several quarters the opposite way isn't a stable enough base for a multi-year cash-flow model yet, and this half's 70.8% operating-cash-flow decline (see Beyond the Usual) makes near-term cash-flow-based modeling especially unreliable for BCA right now. The peer-multiple comparison this section would normally lean on isn't available either: no other IDX bank in this backlog has a post covering the same June 2018 quarter-end yet to compare against.

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