The increase in deposits and CASA funds drove improvements in banking liquidity in 6M25. The Indonesian banking sector’s Loan to Deposit Ratio (LDR) was booked at 86.40% (-176 bps MoM; +65 bps YoY) in June 2025.

Five cuts in the benchmark interest rate will boost loan growth. Bank Indonesia (BI) lowered the interest rate by another 25 bps to 4.75% in September 2025, marking the fifth such reduction in 2025.

Asset quality improvements have the potential to continue in the 2H25. Non Performing Loan ratio (NPL) remained stable at 2.17%, down 60 bps YoY and 60 bps MoM in June 2025.

The Macroprudential Liquidity Policy, along with the transfer of IDR 200 trillion from the state budget to Himbara, has the potential to increase banking liquidity.

The trend in Islamic financing distribution in Indonesia shows positive growth, with total Islamic banking assets reaching nearly IDR 967 trillion in June 2025, and Islamic financing growing 8.38% YoY compared to conventional bank loan growth of +7.77% YoY in June 2025.

In line with these developments, conventional banks are currently starting to spin off Sharia Business Units in accordance with the provisions of POJK Number 12 of 2023.

The banks under our coverage booked mixed performances. BRIS, which booked loan growth (+23.97% YoY), ROE (+40 bps), and net profit (+10.21% YoY) in 6M25. BBCA also booked loan growth (+12.9% YoY), ROE (+40 bps), and net profit (+8.0% YoY) in 6M25. Meanwhile, BBRI, BMRI, and BBNI booked 6M25 performance below our expectations.

With the various catalysts above, as well as the performance of each bank in the banking sector, we make our top picks BRIS with a potential fair value of Rp3,580 and BBCA with a potential fair value of Rp11,400.

By PHINTRACO SEKURITAS | Research
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