Bank Central Asia (BCA): Reducing PT on higher cost of equity; stay Neutral

We are adjusting our model for BCA post 3Q numbers, with a lower PT of Rp4,800 (Dec-27, 2-stage DDM derived). We believe NII should hold up at the bank, as the market share for the private sector should continue to improve. SoE banks appear to be increasingly witnessing higher demand for loans from government and related entities, which limits their ability to lend to private sector borrowers beyond a point. At the same time, tight system liquidity is limiting the ability of smaller banks (domestic as well as foreign) to lend to corporates and SME at reasonable yields. Accordingly, BCA is gaining share in profit pools, due to having one of the best liability and underwriting franchises in the country; and arguably one of the best across EM banking. Yet, broader trends on risk-free rate as well as the equity risk premium should continue to impact the stock price in the near term. Accordingly, we maintain our Neutral rating on the stock. Foreign ownership stands at 69% of free-float as o