Indonesia's Big Banks Deliver $4.9 Billion Profit as Credit Growth Stays Strong, Analysts See Buying Opportunity

JAKARTA, Investortrust.id — Indonesia's largest lenders continued to deliver resilient earnings through May, reinforcing analysts' conviction that the country's banking sector remains one of the strongest corners of the equity market despite slowing economic momentum, persistent foreign capital outflows, and concerns over fiscal policy.

The country's four KBMI IV banks—PT Bank Central Asia Tbk (BBCA), Indonesia's largest private bank; PT Bank Mandiri Tbk (BMRI), the nation's biggest state-owned lender by assets; PT Bank Rakyat Indonesia (Persero) Tbk (BBRI), Southeast Asia's largest microfinance bank; and PT Bank Negara Indonesia (Persero) Tbk (BBNI)—reported a combined standalone net profit of Rp78.5 trillion ($4.9 billion) during January-May, up 9% year-over-year, according to research from MNC Sekuritas.

Indonesia's banking industry has emerged as one of the few sectors maintaining earnings momentum even as investors question the country's macro outlook.

Foreign investors have sold more than Rp76 trillion (about $4.8 billion) worth of Indonesian equities this year, pushing the Jakarta Composite Index into one of the world's weakest-performing major markets. Against that backdrop, the continued profitability of large banks suggests domestic credit demand and financial system stability remain intact, offering investors a relatively defensive exposure to Southeast Asia's largest economy.

Bank Mandiri Leads Earnings Growth

Among the four lenders, Bank Mandiri posted the strongest earnings expansion. The state-controlled lender generated Rp23 trillion ($1.45 billion) in net profit through May, representing 19% annual growth.

Bank Central Asia remained the largest profit contributor, earning Rp25.7 trillion ($1.62 billion), although profit growth slowed to 2% because of a high comparison base last year.

Bank Rakyat Indonesia reported Rp20 trillion ($1.26 billion) in profit, up 10%, while Bank Negara Indonesia earned Rp9.1 trillion ($572 million), increasing 7% from a year earlier.

"Monthly earnings also improved, with combined net profit rising 12% compared with April," MNC Sekuritas analyst Victoria Venny wrote in a research report released Wednesday.

Credit Expansion Remains Robust

Loan growth continued to outperform expectations despite tighter monetary conditions. Combined loans at the four banks expanded 15% year-over-year in May.

Bank Negara Indonesia led the industry with 25% loan growth, lifting its loan portfolio to Rp940.9 trillion ($59.2 billion). Bank Mandiri followed with 21% growth, reaching Rp1,580 trillion ($99.4 billion).

The industry's low-cost deposits remained healthy. Current and savings account (CASA) balances increased 16% to Rp4,112 trillion ($258.6 billion), while total deposits climbed 17% to Rp5,583 trillion ($351.1 billion).

The industry's loan-to-deposit ratio eased slightly to 87.9%, indicating banks continue to maintain ample liquidity.

Margins Face Pressure, But Asset Quality Holds Up

Net interest income across the four lenders rose 7% to Rp134.5 trillion ($8.46 billion). Bank Negara Indonesia posted the fastest net interest income growth at 15%, followed by Bank Mandiri at 10% and Bank Rakyat Indonesia at 7%.

Bank Central Asia was the only lender to report a decline, with net interest income slipping 1% because of last year's exceptionally strong base.

Meanwhile, industry-wide net interest margins narrowed by 21 basis points to 5.1%, reflecting lower asset yields despite improving funding costs.

Credit quality, however, remained stable. The sector's average cost of credit held at 1.4%, while Bank Central Asia continued to report the lowest credit cost at just 0.3%, underscoring its reputation for conservative risk management.

"Funding cost pressure could re-emerge if policy rates rise unexpectedly, creating additional pressure on banking sector margins," Venny wrote.

Analysts Stay Bullish on Bank Stocks

Despite margin headwinds, MNC Sekuritas continues to recommend an overweight position on Indonesia's banking sector.

The brokerage argues current valuations already reflect much of the downside risk, while attractive dividend yields, resilient earnings growth, and stable asset quality continue to support the investment case.

Its preferred picks remain Bank Central Asia, with a target price of Rp8,700, and Bank Mandiri, with a target price of Rp6,050.

Bank Rakyat Indonesia, Bank Negara Indonesia, and PT Bank Syariah Indonesia Tbk (BRIS)—Indonesia's largest Islamic bank—also retain buy recommendations, with target prices of Rp4,050, Rp5,100, and Rp3,000, respectively.