Indonesia Banks - SRBI update: BI holds at 5.75%, in line with our peak-rate thesis

SRBI update: BI holds at 5.75%, in line with our peak-rate thesis

Bank Indonesia (BI) left its policy rate unchanged at 5.75% at its 21-22 July meeting, against marginal consensus tilt expecting another 25bp hike and validating the near-peak rate view we highlighted last week. Since then, Sekuritas Rupiah Bank Indonesia (SRBI) outstanding has declined sharply from its June record despite yields remaining elevated, while the first 2Q26 bank result (BMRI IJ, Buy) confirms that NIM pressure persisted into the quarter.

BI kept the BI-Rate at 5.75%, alongside the deposit facility (DF) and lending facility (LF) at 4.75% and 6.50%, respectively, following 100bp of cumulative hikes in May-June. Governor Perry Warjiyo emphasized a broader policy mix – including expanded FX incentives, liquidity measures, and market-deepening initiatives – rather than relying solely on additional rate hikes to support the rupiah. The currency has remained broadly stable at ~IDR17,900-17,920/USD since the decision, reinforcing our view that the tightening cycle is close to its peak, with policy shifting from price-based measures (policy rates and SRBI yields) toward more targeted liquidity tools.

SRBI outstanding has fallen to IDR933tn as of 24 July from a record IDR1,073tn in June-a ~IDR140tn contraction in roughly one month-as the blended yield dipped slightly to 7.61% (vs 7.64% a week ago). The yield curve has also stayed broadly elevated (12M: 7.64%; 9M: 7.42%; 6M: 7.20%, versus 7.22% a week earlier). This suggests BI has eased back on the quantity of SRBI issuance now that policy uncertainty has diminished, rather than continuing to expand the instrument to defend the currency.

The decline in outstanding reflects a reshuffling of maturities rather than broad-based runoff. As of 24 July, the 6-9 month bucket increased to ~IDR158tn from ~IDR140tn, while the 9-12 month bucket edged down to ~IDR326tn from ~IDR337tn. Near-term maturities remained largely unchanged (<3 months: ~IDR244tn; 3-6 months: ~IDR204tn), with the four buckets reconciling to the IDR933tn outstanding balance. July ownership data has yet to be released (June non-resident holdings stood at IDR293tn), and we will monitor whether foreign participation continues to recover now that the policy path has become clearer.

BMRI reported a 2Q26 NIM of 4.40%, down from 4.55% in 1Q26 and the lowest level in our historical series, making it the first major bank to report ahead of its peers. The result provides the first confirmation that margin compression extended into 2Q26 despite the three-month average SRBI yield rebounding toward ~6.6%, consistent with the funding-cost framework outlined in our previous note. While BMRI was not our highest-conviction margin-risk call – that remains BBNI, given its lower absolute NIM and steeper 2024-25 compression – its results offer an important early read. We view BBNI's upcoming earnings as the key test of our margin-risk thesis.

Overall, BI's decision to pause and the sharp decline in SRBI outstanding reduce the immediate policy overhang identified last week, indicating the central bank is relying less on balance sheet expansion to support the rupiah. However, SRBI yields remain historically elevated across the curve (7.2-7.6%), leaving the medium-term NIM outlook largely unchanged. Within the Indonesian banking sector, we continue to prefer BBCA, as its NIM is likely to recover in 2H26.

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 - SRBI update: BI holds at 5.75%, in line with our peak-rate thesis

SRBI update: BI holds at 5.75%, in line with our peak-rate thesis

Fig. 1: Blended SRBI yield

Fig. 2: SRBI yield breakdowns

Fig. 3: SRBI outstanding

Fig. 4: SRBI ownerships

Fig. 5: SRBI maturities

Fig. 6: Major banks’ NIM vs 3MMA SRBI yields

Fig. 7: BBCA's NIM vs 3MMA 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 - SRBI update: BI holds at 5.75%, in line with our peak-rate thesis

Fig. 1: Blended SRBI yield

Fig. 2: SRBI yield breakdowns

Fig. 3: SRBI outstanding

Fig. 4: SRBI ownerships

Fig. 5: SRBI maturities

Fig. 6: Major banks’ NIM vs 3MMA SRBI yields

Fig. 7: BBCA's NIM vs 3MMA SRBI yields

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