Indonesia banks - BI’s five-point stabilization package

BI’s five-point stabilization package

Bank Indonesia (BI) announced a comprehensive five-point policy package (Link: https://www.youtube.com/watch?v=CM4j3v0Nlpo) in a move that signals a materially more hawkish policy stance as follows: 1) BI raised the BI-Rate by 25bp to 5.50%, the second increases following its first 50bp rate hike on 20 May 2026, underscoring the central bank's prioritizations of exchange rate and capital flow stability over near-term growth support. 2) Alongside the rate hike, BI also raised the Sekuritas Rupiah Bank Indonesia (SRBI) rate to enhance the instrument's attractiveness as a yield anchor for foreign portfolio inflows. 3) Complementing the SRBI adjustment, BI introduced a 10% discount on FX swap rates (hedging costs) specifically for foreign investors investing into IDR-denominated assets — equities, government bonds, or SRBI — a direct attempt to reduce the all-in cost of carry for offshore participants and improve Indonesia's competitiveness relative to regional EM peers. 4) BI also announced the provision of term repos across 3-, 6-, 9- and 12-month tenors to inject targeted structural liquidity into the banking system, addressing potential duration mismatches as rate conditions tighten. 5) Finally, BI flagged an intensification of its FX intervention and monetary operations to defend the Rupiah and anchor market expectations.

The cumulative 75bp tightening in under three weeks is a decisive signal that exchange rate defence takes precedence over growth support, at least until external pressures abate. Critically, this policy pivot did not emerge in isolation: blended SRBI yields already repriced from a trough of 4.65% in Oct-25 to 7.21% by 5 June 2026 (+256bp in under a year), reflecting BI's use of SRBI as a pre-emptive FX stabilisation tool well before the formal rate moves. SRBI outstanding surged to IDR958tn in Apr-26 (from a trough of IDR706tn in Oct-25), with BI adding approximately IDR200tn YTD. The maturity profile is front-loaded, with IDR482tn maturing within six months (as of 05 June 2026), implying continued aggressive rollover.

We believe for Indonesia’s banks, the new policy has four key implications: (1) asset yields should bottom out as lending rate compression ends, although repricing remains gradual; (2) funding cost pressure is increasing as higher SRBI yields intensify deposit competition and pressure CASA ratios; (3) an NIM recovery is likely limited as higher asset yields are offset by rising term deposit costs and competition from SRBI/SBN; and (4) credit quality risks remain elevated amid slower growth, higher rates, and IDR-driven cost pressures. Among the major banks, we believe BBCA, BMRI and BBNI may benefit from lending rate repricing – as the banks' NIMs exhibit a positive correlation with SRBI yields, suggesting their floating-rate asset books are well-positioned to reprice upward in a rising rate environment. BRIS' NIM has remained relatively insulated – the fixed-rate nature of its shariah financing portfolio provides a natural hedge against rate volatility, contributing to the observed NIM stability across cycles. Meanwhile, BBRI faces asymmetric funding cost risk – BBRI's loan yields are structurally capped by program rate constraints, limiting its ability to pass through higher funding costs and creating NIM compression risk in a rising SRBI yield environment.

Valuation 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.

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.

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.

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
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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’s five-point stabilization package

BI’s five-point stabilization package

Fig. 1: SRBI issuance IDRbn

Fig. 2: Blended SRBI yield %

Fig. 3: SRBI maturities as of 05/06/26

Fig. 4: Major Banks' NIM vs SRBI Yield (%)

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’s five-point stabilization package

Fig. 1: SRBI issuance IDRbn

Fig. 2: Blended SRBI yield %

Fig. 3: SRBI maturities as of 05/06/26

Fig. 4: Major Banks' NIM vs SRBI Yield (%)

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