The banking sector is experiencing liquidity tightening in FY24. Indonesia’s banking sector’s loan-to-deposit ratio (LDR) increased by 474 bps YoY or 123 bps MoM to 88.57% in December 2024. All the banks under our coverage also saw increased LDR in FY24.

Bank support for the three million Houses could potentially reduce bank liquidity, but additional BI’s macroprudential incentives and the DHE policy are expected to mitigate the negative impact.

Asset quality improvement is expected to continue in 2025F. SPI’s non-performing loan (NPL decreased by 10 bps YoY or 22 bps MoM to 2.04% in December 2024

The Macroprudential Liquidity Policy (KLM) has the potential to increase banking liquidity in 2025. Bank Indonesia (BI) will increase macroprudential liquidity policy (KLM) by 1% to 5% in April 2025, compared to the previous 4%.

BI rate maintained at 5.75% amid the weakening rupiah exchange rate. This decision follows a previous rate cut in the RDG-BI in January. There is still room for a BI rate cut in 2025, considering Indonesia’s relatively solid macroeconomic conditions.

The depreciation of the Rupiah is still on par with its peers. Rupiah depreciated by 2.84% YoY or 1.24% YtD to IDR 16,290/USD on March 7, 2025. While, CNY depreciated by 3.63% YoY, the MRX depreciated by 10.92% YoY, and the Singapore Dollar depreciated by 4.71% YoY as of March 7, 2025.

With the various catalysts mentioned above, along with the performance of each banks in the banking sector, our top picks are BRIS with a fair value potential of Rp3,580, BBCA with a fair value potential of Rp11,600, and BMRI with a fair value potential of Rp6,325.

By PHINTRACO SEKURITAS | Research
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