Pt Bank Central Asia Tbk · IDX:BBCA
Pt Bank Central Asia Tbk — Investor Presentation (December 2023)
58 slides from Pt Bank Central Asia Tbk's investor presentation, Dec 15, 2023
Slide 1: Marching Ahead Against External Hurdles
Marching Ahead Against External Hurdles Photo credit: unsplash.com/@marcogiuseppetimelli BCA Macroeconomic and Industry Research INDONESIA MACROECONOMIC OUTLOOK
Slide 2: Table of Contents
Executive Summary 3 Chapter 1 – Introduction 4 “A surprisingly Smooth Sailing in 2023” Chapter 2 – Of Rates and Policies 10 “Waiting for the Monsoon Wind” Table of Chapter 3 – Domestic Consumption “Refuel and Reload After a Long Cruise” 26 Contents Chapter 4 – Trade and Investments 37 “Going Full Sp
Slide 3: Executive Summary
Indonesia’s economic growth momentum would increasingly rely on domestic GDP factors as the global demand is expected to weaken in 2024. Higher fiscal spending amid the election period may fuel the economy towards another 5% YoY GDP growth in 2024, but concerns on whether the fiscal spree would last
Slide 4: #1: Introduction
#1: Introduction “A surprisingly smooth sailing in 2023” The global and domestic economy confounded gloomy expectations in 2023 – even the commodity headwinds are unlikely to push Indonesia’s GDP growth below its usual 5%-plus pace. But despite still-strong domestic demand, the global situation is s
Slide 5: The global economy is not in its best shape in 2023, but things are better than first expected
The global economy is not in its best shape in 2023, but things are better than first expected FY 2023 Annual GDP forecast, median of private forecasters (%) To discuss the Indonesian economic outlook for 2024, it is 6 % 3 % necessary to first look at the global situation in 2023. The prevailing f
Slide 6: China's dimming light poses problems for some economies more than the others
China’s dimming light poses problems for some economies more than the others -0.6 -0.4 -0.2 % 0.0 0.0 The risk of slowing growth in China spells Average % effect Impact of 1% drop in China’s trouble for the Indonesian economy in several Chart 1.3 China’s slowing growth on GDP GDP (relative to the
Slide 7: Indonesia increasingly relies on its internal market to keep the growth momentum alive
Indonesia increasingly relies on its internal market to keep the growth momentum alive 8 % The general downturn in commodity prices has under-cut Indonesia’s terms of trade – although its impact on real growth is much less dramatic as 5.46 export volumes to China has remained quite 5.06 4.94 robus
Slide 8: Fiscal policy has served as a brake for most of 2023, but things may be changing
Fiscal policy has served as a brake for most of 2023, but things may be changing 120 % 120 % 115.9 114.1 Chart 1.5-1.6 The Government Government expenses, government enjoyed 102.5 actual disbursement 99.2 revenue, actual strong revenue growth (% of target)* uptake 84.9 90.4 93.9 through 2022 and ear
Slide 9: External pressures make it hard for BI to turn its focus away from stability
External pressures make it hard for BI to turn its focus away from stability 1.20% 0.5% Just like the fiscal authorities, Bank Indonesia has Chart 1.7 The October rate hike maintained relatively short leash on the economy in BI’s first post- pandemic rate calmed the domestic DNDF 2023, but not for
Slide 10: #2: Of Rates and Policies
#2: Of Rates and Policies “Waiting for the monsoon wind” Despite its promising start, the still-volatile global expectations highlight the challenge facing the Indonesian financial market throughout 2023. As was the case at the beginning of 2023, the relatively calm domestic financial market conditi
Slide 11: Unfavourable regional situation compound the Rupiah's challenge in 2024
Unfavourable regional situation compound the Rupiah’s challenge in 2024 200 Changes in 10Y The high rates and volatile USD in 2023 seems to be the sovereign bond yield (YTD*, bps) crux of every central banker’s problem. For BI, however, the Saudi Arabia un-favourable state of its regional neighbou
Slide 12: The Rupiah can no longer rely on CA surplus to protect itself from external pressures
The Rupiah can no longer rely on CA surplus to protect itself from external pressures 20 USD Bn 5.0% High rates and strong USD was already a problem since 2022 – if anything, the Dollar index attained its post-GFC high (114.1) Chart 2.2 Export revenues are still in Sep-22 rather than 2023 (106.9 i
Slide 13: The volatile global rate expectations add to the challenge for the Rupiah
The volatile global rate expectations add to the challenge for the Rupiah 8 USD Bn 7.14 % 8 5.77 4 4.03 4 0 0 -0.62 Chart 2.3 Foreign capital inflows helped to protect the Rupiah in Equities (lhs) H1 2023, but the change in foreign investors’ expectations put the Bonds (lhs) Rupiah under considerabl
Slide 14: BI could not put market interventions on the shelf just yet
BI could not put market interventions on the shelf just yet Chart 2.4 BI continues to rely on its FX reserves to guard against the risk of Chart 2.5 … but the declining reserves versus potential outflows means that further capital outflows… intervention is mainly a tool of smoothing, not reversing,
Slide 15: New instruments by BI are competing for a finite, albeit increasing, supply of FX liquidity
New instruments by BI are competing for a finite, albeit increasing, supply of FX liquidity … 30 USD Bn Chart 2.6 New FX instruments have been a mixed success, but BI has tried, with some success, to bolster its FX excess liquidity has been building up in the domestic reserves, mostly by issuing n
Slide 16: FX crowding out is not a concern in the short-term as SOE liquidity improves
… although FX crowding out is not a concern in the short-term as SOE liquidity improves Chart 2.7 Despite capital outflows since May-23, domestic FX liquidity conditions Chart 2.8 The improvement in SOEs’ FX liquidity condition limit the demand for seems to be improving thanks to the declining deman
Slide 17: BI's new Rupiah instrument points to high-for-longer domestic interest rates
BI’s new Rupiah instrument points to high-for-longer domestic interest rates Chart 2.9 SRBI provides a more consistent pricing signal for Indonesia’s Chart 2.10 Continued increase in SRBI’s yield indicates the market’s preference short-term bond market for still-elevated rates in the coming months 7
Slide 18: Narrowing real rate differentials adds another challenge for the Rupiah
Narrowing real rate differentials adds another challenge for the Rupiah 12 % % 40 While the easing pressures on the global financial market 10.52 allow BI not to follow up on its surprise rate hike in Oct-23, Chart 2.11 The narrowing real rate differentials against the US exposed the then, the ele
Slide 19: High real interest rates may be a necessity considering still-strong investment growth
High real interest rates may be a necessity considering still- strong investment growth Chart 2.12 Loan growth has remained uncharacteristically strong given the Chart 2.13 Excess investment (vis-à-vis savings) could remain a persistent source precipitous decline in core inflation of pressure for th
Slide 20: IDR liquidity remains relatively abundant as "forced savings" begin to take effect
IDR liquidity remains relatively abundant as “forced savings” begin to take effect 1400 IDR Tn The effect of these “forced savings” are quite apparent Chart 2.12 Banks’ excess Rupiah liquidity is improving following when we look at the amount of BI instruments bought by its nadir in May 2023 as hi
Slide 21: The high amount of maturing bonds in Q1-24 adds to the government's substantial financing needs
The high amount of maturing bonds in Q1-24 adds to the government’s substantial financing needs 15 USD Bn 2.0 USD Bn Chart 2.15-2.16 The government Indonesia outstanding IDR bonds, and the corporate sector may by maturity date. Issued by: 1.68 Indonesia outstanding need to front-load their bond Gove
Slide 22: Demand from foreign investors will be crucial for government bond outlook
Demand from foreign investors will be crucial for government bond outlook … Foreign investors have been a key source of 10 % demand for new government bonds (SBN) JCI forward earnings yield (BEst) 10Y SBN yield issuance in 2023, which in a way represents a return to normalcy after the anomalous pa
Slide 23: Much-diminished domestic capacity to absorb additional government bonds
… given the much-diminished domestic capacity to absorb additional government bonds Chart 2.18 Domestic investors play a crucial role in driving the demand for SBN Chart 2.19 …but its already limited liquidity growth may restrict its ability to throughout 2023… drive the demand for SBN 1600 IDR Tn 2
Slide 24: Still-high liquidity in the public sector may help the government to manage its lending rate
Still-high liquidity in the public sector may help the government to manage its lending rate… 1600 Tn IDR Despite early signs of accelerated fiscal spending, Chart 2.20 The government’s strategy to slow down its the still-substantial banking sector’s liabilities to fiscal spending and thus increas
Slide 25: Indonesia's real sector may benefit more from timely fiscal disbursement
… but Indonesia’s real sector may benefit more from timely fiscal disbursement 300 Changes in public sector net bank Another possibility is that the government may opt balance (MoM), Tn IDR Chart 2.21 Close relationship between to scale back its spending, similar to how it has domestic liquidity a
Slide 26: #3: Domestic consumption
#3: Domestic consumption “Refuel and reload after a long cruise” Consumers have been living the high life in the past two years, buoyed by renewed optimism, excess savings, and a shot of global disinflation. Normalization beckons, but Election-related spending, consumption-oriented stimulus, and con
Slide 27: Two years of consumer feast – is famine coming next?
Two years of consumer feast – is famine coming next? 400 Tn IDR 334.76 172.47 200 0 -109.65 -200 -165.98 ▬ Households’ (incl. MSMEs) net bank balance (YoY changes) components: Chart 3.1 Households have been borrowing -282.13 -400 Deposit Loan more than they save in the past two years, running on acc
Slide 28: Aside from spending, consumers also move their money to time deposits
Aside from spending, consumers also move their money to time deposits 20 % YoY Households deposit balance (YoY The slowing household deposit growth was changes), by account type: evident since the economy reopened in Savings Account mid-2022, and seems to have bottomed Time Deposits out in mid-202
Slide 29: High-income households have retained optimism, but it has not fully translated to spending
High-income households have retained optimism, but it has not fully translated to spending Chart 3.3 Consumer confidence have plateaued at a high level following the Chart 3.4 …and this has generally been followed by big-ticket items, reopening of the economy … with motorcycles briefly being an exce
Slide 30: The general election is an oasis for the dry liquidity beds
The general election is an oasis for the dry liquidity beds Chart 3.5-3.6 The general election period typically is a peak spending for the government and NPOs, lifting aggregate demand and increasing money velocity The case for stronger consumer purchasing power in the short-term is straightforwar
Slide 31: Beyond Election-related spending, government spending may not be a major growth contributor
Beyond Election-related spending, government spending may not be a major growth contributor 15.0 % YoY spending grows The nagging question, of course, is whether there is faster than GDP 13.7 sufficient catalyst for consumption beyond the Elec- 13.2 12.6 tions. In general, the plans for public sec
Slide 32: Disinflation helps Indonesian consumers amid limited nominal gains in their earnings
Disinflation helps Indonesian consumers amid limited nominal gains in their earnings 40 % YoY The other potential tailwind for consumers is the continuing disinflation for much of consumer 30 goods. This is something we have seen for much of 2023, thanks largely due to supply overhang in 20 16.74
Slide 33: Demand for durable goods have been held aloft by disinflation
Demand for durable goods have been held aloft by disinflation 60 % YoY ▬ Consumer goods imports value Chart 3.9 Consumer goods imports have Peak electronics + (%YoY, WDA), by category: been steady throughout the year, with a vehicles imports 50 shift towards discretionary items Household goods Edibl
Slide 34: Inflation would remain moderate, but there is less room for further disinflation in 2024
Inflation would remain moderate, but there is less room for further disinflation in 2024 Chart 3.10 As fuel hike effect subsided, food inflation has taken over as the main Chart 3.11 The gradual slowing of China’s inventory growth could be a sign that inflation driver disinflation momentum is beginn
Slide 35: Can stimulus and competition in consumer loans cancel out the effect of rising real rates?
Can stimulus and competition in consumer loans cancel out the effect of rising real rates? Chart 3.12 The latest rate hike cycle has had very little transmission towards consumer loan rates … Given that consumers have been net borrowers – and 15 % that some “forced savings” might be induced by hig
Slide 36: Catering to the domestic market is still a reasonably attractive proposition for businesses
Catering to the domestic market is still a reasonably attractive proposition for businesses Chart 3.14 Post-pandemic revenue for consumer-oriented corporates have been Chart 3.15 … while on the other hand, margin compression for discretionary strong, albeit normalizing … products have begun to ease
Slide 37: #4: Trade and Investment
#4: Trade and Investment “Going full speed amidst the doldrums” With commodity boom in the rear-view mirror, Indonesia may be facing narrow, but persistent, CA deficit. This could be a problem given the still-strong appetite to invest among Indonesian corporates, plus the acceleration of public proj
Slide 38: China's continuing recovery could keep a decent floor on commodity prices
China’s continuing recovery could keep a decent floor on commodity prices… 150% YoY 30% The Indonesian economy has been considerably lucky in the Chart 4.1 Commodity prices showed YoY past three years. For instance, rather than hindering some upward movements in H2 116.8% economic recovery, supply
Slide 39: The ceiling on Indonesia's commodity exports may not be too high either
…but the ceiling on Indonesia’s commodity exports may not be too high either Chart 4.2 China’s recovery economy may not translate to a spike in coal prices, Chart 4.3 Global demand for coal have been greatly trailing production, given the increase in China’s own domestic production in a similar mann
Slide 40: The commodity terms of trade may not swing much in Indonesia's favour
The commodity terms of trade may not swing much in Indonesia’s favour 50 Index Ratio 6 The softening global demand for goods also does not bode well 45.35 for the sustainability of China’s industrial recovery – and thus, by Chart 4.4 Ongoing concerns regarding 5.29 extension, the demand for raw ma
Slide 41: Cheaper imports are a boon for local manufacturers
Cheaper imports are a boon for local manufacturers … 100 Import volume, T12M The same disinflationary trend extends beyond changes (% YoY) commodities and into intermediate and finished Higher volume, goods, given the excess supply in China. This has been HS3: Fish, Crustaceans, lower unit prices
Slide 42: Only of marginal benefit given Indonesia's commodity-dependent export profile
…but it is only of marginal benefit given Indonesia’s commodity-dependent export profile Chart 4.6 Recent export volumes growth is almost exclusively driven Chart 4.7 … while the prospect for growth in manufactured goods exports appears to be by commodified goods such as base metals … limited given
Slide 43: Relatively robust exchange rate may continue to work on importers' favour
Relatively robust exchange rate may continue to work on importers’ favour 20% Real effective exchange rate (2023 YTD YoY) The Rupiah’s relative strength versus other Asian currencies Mexico may also work to the disadvantage of Indonesian Hungary Chart 4.8 An expensive manufacturers. In fact, Indon
Slide 44: Price-stabilisation efforts further add to imports
Price-stabilisation efforts further add to imports Chart 4.9 Indonesian rice imports have increased significantly since H2-22 as the Chart 4.10 The share of fuel imports begins to rise again government prepares for potential disruptions in domestic rice supplies after it fell following the Sep-22 fu
Slide 45: The commodity-consumption engine has been sputtering, which undercuts corporate revenues
The commodity-consumption engine has been sputtering, which undercuts corporate Indonesia’s revenues … 40 % YoY All in all, a decline in commodity prices remains a net loss 34.3 in corporate Indonesia’s book. It also has negative impact on purchasing power, especially outside of Java where Chart 4
Slide 46: CAPEX remains uncharacteristically strong amidst the slowdown
… but CAPEX remains uncharacteristically strong amidst the slowdown 60% YoY 1 Accordingly, then, the strong capital expenditure (CAPEX) growth – Chart 4.12 The domestic corporate which is quite unusual given the weakening revenue – has been sector continue to allocate substantial driven mostly by
Slide 47: Investment growth are not entirely driven by commodities
Investment growth are not entirely driven by commodities Chart 4.13 Domestic investors dominate the service-heavy tertiary sectors, Chart 4.14 Indonesia’s resource nationalism has proven effective in attracting although interest in the “new economy” begins to pick up in Q3 2023 foreign investors int
Slide 48: China's share of the FDI pie has increased, but other countries have not lagged
China’s share of the FDI pie has increased, but other countries have not lagged too far behind 60 USD Bn, T12M The accelerating pace of FDI growth has been a constant theme in Indonesia’s economy in the past years. The allure of Chart 4.15 Chinese investors in Indonesia seem to be Indonesia’s mine
Slide 49: FDI inflows may continue to be "growth positive" but "liquidity neutral"
FDI inflows may continue to be a ”growth positive” but “liquidity neutral” event 300 Index, 2015 annualised While news of foreign-backed infrastructure projects and sum= 100 the fixed-asset investments component’s positive Chart 4.16 Recent FDI into the Indonesian economy contribution to the GDP g
Slide 50: Strong investment growth may not immediately translate to export growth
Strong investment growth may not immediately translate to export growth Chart 4.17 Some provinces find it difficult to improve their export competitiveness So we finally come full circle to the matter of exports. Given despite the considerable sum poured on SEZs and other infrastructure projects t
Slide 51: #5: Towards 2024
#5: Towards 2024 “A brisk walk in a dark alley”
Slide 52: The big picture: Our scenario analysis in summary
The big picture: Our scenario analysis in summary SUPPLY SHOCK BASELINE DEMAND SHOCK Commodity prices Higher Stable Lower Fed policy High for longer Slight moderation Rapid cuts Global demand Limited slowdown Limited slowdown Deep slowdown Neutral or slight Current account Narrow deficit Wider defic
Slide 53: The big picture: Our scenario analysis in summary
The big picture: Our scenario analysis in summary Geopolitical escalation US recession Indonesia’s economic prospects in 2024 would remain buffeted by strong winds from the global economy – be it Energy/food crisis China stimulus falters from the supply- or demand-side. Supply shock Demand
Slide 54: Ship-shape, despite some hitches
Baseline scenario (estimated probability: ~50%) Ship-shape, despite some hitches Main assumptions: Indicator 2024E Global aggregate demand slows, but at measured pace – as does inflation. This soft landing enables the Oil Price 86.9 Fed to enact some policy easing: ending QT (surely), but also poten
Slide 55: A gap year for growth
Demand-shock scenario (estimated probability: ~35%) A gap year for growth Main assumptions: Indicator 2024E Global aggregate demand slows dramatically, causing a recession in the US and many other countries – Oil Price 76.6 including potentially China, whose current manufacturing-led growth strategy
Slide 56: Higher highs and lower lows
Supply-shock scenario (estimated probability: ~15%) Higher highs and lower lows Main assumptions Indicator 2024E Global aggregate demand slows only marginally, and it is overtaken by shocks on the supply-side. Oil Price 123.6 Geopolitical flareups are the easy culprit du jour, but there are argument
Slide 57: Projections of macroeconomic indicators
Projections of macroeconomic indicators 2019 2020 2021 2022 2023E 2024E GDP growth 5.02 -2.07 3.69 5.3 5.1 5.0 (% YoY) GDP per capita (USD) 4,175 3,912 4,350 4,784 4,982 5,149 CPI inflation 2.59 1.68 1.87 5.5 2.8 3.2 (% YoY) BI 7-day Repo Rate (%) 5.00 3.75 3.50 5.50 6.00 5.50 10Y government debt 7.
Slide 58: Economic, Banking & Industry Research Team
Economic, Banking & Industry Research Team David E.Sumual Agus Salim Hardjodinoto Barra Kukuh Mamia Chief Economist Head of Industry and Regional Research Senior Economist david_sumual@bca.co.id agus_lim@bca.co.id barra_mamia@bca.co.id +6221 2358 8000 Ext:1051352 +6221 2358 8000 Ext: 1005314 +6221 2
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