JAKARTA • Weeks after Mr Armand Wahyudi Hartono became vice-president director of Indonesia's largest non-state bank, he noticed how the staff were leaving behind half-empty glasses of water after work. The next morning, he restricted the amount of drinking water available at the headquarters of Bank Central Asia (BCA).
Such stringent cost control is just an example of how the lender has managed to pare expenses and boost efficiency, wooing investors along the way. They have rewarded the company since it went public in 2000, pushing its stock up every year but one - 2008, when the global financial crisis hit.
Now BCA is the most expensive among the world's lenders, with a valuation exceeding US$50 billion (S$68 billion). And yet, investors are still willing to buy it.
"The high valuation of BCA is warranted as the company is a good defensive holding, especially in times of volatility," said Mr Bharat Joshi, Jakarta-based investment director at Aberdeen Standard Investments Indonesia, which owns more than 170 million BCA shares.
"We like the bank for many reasons, but above all is its strong management capabilities and proven track record."
BCA is benefiting from a growing middle class in Indonesia, South-east Asia's biggest economy. The nation of over 260 million people is forecast to expand at its fastest pace in seven years next year, even as the growth outlook sours abroad.
And thanks to a push to boost the banking industry, money circulating electronically almost trebled since Indonesian President Joko Widodo ordered in 2017 that e-payment be used for toll roads, Bank Indonesia data showed.
"Indonesians are getting richer at a much faster pace than what the headline suggests, and they are also getting smarter and they save more money," according to Mirae Asset Sekuritas Indonesia director of capital markets Taye Shim.
PROVEN TRACK RECORD
The high valuation of BCA is warranted as the company is a good defensive holding, especially in times of volatility. We like the bank for many reasons, but above all is its strong management capabilities and proven track record.
MR BHARAT JOSHI, investment director at Aberdeen Standard Investments Indonesia, which owns over 170 million BCA shares.
"The country's underbanked profile will continue to promise steady growth over the longer horizon, and BCA is the kind of bank that is preferred by the smarter and richer Indonesians."
The focus on reining in costs has been central to BCA's strategy. In addition to water limits, it has imposed an Internet quota for all staff. And meeting rooms do not come free: departments have to pay to use them.
At 63 per cent, BCA has the lowest operating-expense ratio of the nation's biggest traded banks, data compiled by Bloomberg showed. It offers one of the world's widest operating margins among the largest lenders, and its profits have risen by over 10 per cent every year but two in the past decade.
RECORD QUARTERLY PROFIT
The lender reported yesterday a net income of 8.1 trillion rupiah (S$786 million) for the three months ended Sept 30, its highest quarterly profit according to data compiled by Bloomberg.
BCA is also known for keeping a healthy debt level: Its gross non-performing loan ratio of 1.6 per cent in the first nine months of the year was well below the industry's 2.5 per cent. Its president director Jahja Setiaatmadja said this month that he expects the bank to achieve its loan-growth target of as much as 11 per cent for this year.
"They are not just very good in terms of attracting deposits, but they are also very good at underwriting policies," said Ms Pauline Ng, head of Asean equities at JPMorgan Asset Management, which oversees US$3 billion in South-east Asia.
"Because (BCA) is privately run, the decisions are always made on an economic basis. In our opinion, this is the best-run, private-sector bank in Indonesia."
BCA shares have rallied 19 per cent this year, adding some US$9 billion in market value. At US$54 billion, it is by far the biggest lender in the Jakarta Stock Exchange Finance Index, which is up 9.2 per cent for this year. The stock now trades at 4.8 times book value, the most among large global lenders.
Late businessman Sudono Salim laid BCA's foundation in 1955, before he lost his ownership after a government bailout during the Asian financial crisis of the late 1990s. The government then sold its majority stake to tycoons Robert Budi Hartono and Michael Bambang Hartono, who became the biggest owners of the bank. The billionaire brothers are the founders of Djarum, whose businesses range from finance and tobacco to e-commerce and electronics.
Mr Sebastian Tobing, an analyst at Trimegah Sekuritas Indonesia, said it is hard to ignore two decades of good share performance. "It's a bank you want to own when times are tough," he said.