Indonesia Banks - BI governer resignation: impact on our peak-rate thesis

BI governer resignation: impact on our peak-rate thesis

Bank Indonesia Governor Perry Warjiyo resigned on 27 July, five days after the policy meeting, which we discussed in our report last week. Senior Deputy Governor Destry Damayanti is serving as acting governor pending appointment of a permanent successor. Sekuritas Rupiah Bank Indonesia (SRBI) outstanding balance and yields have exhibited limited movement since the announcement – however, the rupiah continues to trade near cycle-lows despite the 5.75% policy rate, and we view institutional risk as an increasingly material factor for Indonesian assets along with the monetary policy trajectory.

Despite the BI-Rate at 5.75% and SRBI yields near cycle highs, USD/IDR remains range-bound at IDR18,100-18,200, modestly above the IDR18,247 high reached on 8 June – suggesting diminished currency responsiveness to the rate/SRBI transmission mechanism. We believe a governance risk premium may now be embedded in asset pricing, and view our prior peak-rate thesis as contingent on the appointment of a credible, market-oriented permanent governor. A dovish or politically driven appointment could necessitate further rate or SRBI-yield increases to restore policy credibility, notwithstanding the cyclical case for a pause.

SRBI’s outstandings declined to IDR923tn as of 31 July, from IDR933tn a week earlier and below the June peak of IDR1,073tn. The blended yield edged lower to 7.62% from 7.64%, with the tenor curve broadly stable (12-mth 7.64%, 9-mth 7.42%, 6-mth 7.20%) – the SRBI complex has shown resilience through the governance transition to date.

The maturity profile as of 31 July showed the 9-12 month segment broadly unchanged at IDR332,983bn, the 6-9 month bucket flat at IDR157,285bn, while 3-6 months declined to IDR186,778bn and the near-term (<3m) segment increased to IDR246,161bn – the four segments total ~IDR923tn, consistent with the outstanding figure. Ownership data for July has not yet been released (latest available remains June, with non-resident holdings at IDR293tn); we await this data for insight into foreign SRBI demand trends following the governance development.

BBCA reported 2Q26 NIM of 5.53%, essentially flat vs. 1Q26 (~5.55%) despite the SRBI 3-month moving average rising toward ~6.6% – validating the CASA-driven margin resilience we highlighted in our 20 July note. BMRI's 2Q26 NIM, reported last week at 4.40%, continues to exhibit a steeper downward trajectory. BBRI, BBNI and BRIS have yet to report; we view BBNI's result as particularly important given its lower absolute NIM and more pronounced compression during 2024-2025 within our coverage universe.

Our SRBI/funding-cost framework remains intact and is further supported by BBCA's 2Q26 NIM outcome confirming the resilience thesis. The incremental factor is governance risk: Warjiyo's resignation and the succession process represent a meaningful uncertainty for rupiah stability and the SRBI complex in coming weeks, independent of the cyclical policy path. We maintain our Buy rating on all four major banks we cover (BBCA IJ, BMRI IJ, BBRI IJ, BBNI IJ) and retain BBCA as our top pick – its CASA franchise provides the strongest buffer whether or not the near-term outlook entails a genuine policy pause or renewed tightening driven by governance-related currency pressure. We continue to highlight BBNI as the key name for margin risk monitoring, and now add the BI governor succession as an additional catalyst alongside bank-specific fundamentals.

Valuations and risks

BBCA IJ (Buy) – We derive our TP of IDR10,100 using DuPont analysis, with the following key parameters: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 0.9x and a CAR-adjusted ROAE of 24.5%. Our TP implies 4.1x FY26F P/B (vs current valuation of 3.3x) and 20.8x FY26F P/E (vs current price valuation of 16.9x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BMRI IJ (Buy) – We derive our TP of IDR6,000 using the DuPont analysis with the following key parameters: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 11.0%, beta of 1.09x and a CAR-adjusted ROAE of 18.0%. Our TP implies 1.7x FY26F P/B (vs 1.5x currently) and 9.7x FY26F P/E (vs 8.2x currently). Risks are worsening macroeconomic trends, tighter liquidity competition, and/or higher credit costs and opex growth.

BBRI IJ (Buy) – We derive our TP of IDR4,500 using DuPont analysis, with the following key parameters: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 0.9x and a CAR-adjusted ROAE of 18.0%. Our TP implies 2.1x 2026F P/B (vs 1.4x currently) and 11.6x 2026F P/E (vs 7.9x currently). Risks are worsening macroeconomic trends, unfavorable regulatory changes, and tighter liquidity competition, which could increase funding costs, worsening credit quality that would raise credit costs, and higher opex. Changes in management could affect the bank’s write-off policies and thus, credit costs. This would ultimately affect the bank’s near-term earnings, in our view.

BBNI IJ (Buy) – We derive our TP of IDR5,500 using DuPont analysis with the following key parameters: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 8.5%, beta of 1.04x and a CAR-adjusted ROAE of 15.6%. Our TP implies 1.2x FY26F P/B (vs current price valuation of 1.0x) and 9.9x FY26F P/E (vs current price valuation of 8.1x). Key risks are worsening macroeconomic trends, tighter liquidity competition, and/or higher credit costs and opex growth.

BRIS IJ (Buy) - We derive our TP of IDR3,250 using DuPont analysis, with the following key parameters: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 15.0%, beta of 1.2x and a CAR-adjusted ROAE of 17.6%. Our TP implies 2.6x FY26F P/B (vs 1.7x currently) and 17.9 FY26F P/E (vs 13.2x currently). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general.

GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.

This report is not to be construed as an offer or a solicitation of an offer to buy or sell any securities or financial products. PTVSI and its associates, its directors, and/or its employees may from time to time have interests in the securities mentioned in this report or it may or will engage in any securities transaction or other capital market services for the company (companies) mentioned herein.

ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

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Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

Tags: BANKS, Indonesia Banks, Erwin Wijaya

Indonesia Banks - BI governer resignation: impact on our peak-rate thesis

BI governer resignation: impact on our peak-rate thesis

Fig. 1: Blended SRBI yield %

Fig. 2: SRBI yields %

Fig. 3: SRBI outstanding (IDRtn)

Fig. 4: SRBI maturity profiles as of 31/07/26

Fig. 5: Major banks' NIM vs SRBI yields (%)

Research Analysts

yudi Administrator

Bank Central Asia BBCA IJ - Buy - Solid YTD Jul-24 results

Bank Rakyat Indonesia -BBRI IJ- Buy - Towards more commercial micro

Bank Negara Indonesia BBNI IJ - Buy - Operating 1H24 results were below

Bank Rakyat Indonesia -BBRI IJ- Buy - YTD Jul-24 bank only results - steady progress

Bank Rakyat Indonesia -BBRI IJ- Buy - ROAE uptrend on positive micro trends

Bank Central Asia -BBCA IJ- Buy - Steady growth reiterate Buy new TP IDR13200

Indonesia Banks - BI governer resignation: impact on our peak-rate thesis

Fig. 1: Blended SRBI yield %

Fig. 2: SRBI yields %

Fig. 3: SRBI outstanding (IDRtn)

Fig. 4: SRBI maturity profiles as of 31/07/26

Fig. 5: Major banks' NIM vs SRBI yields (%)

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