Indonesian banks' loan growth poised to hit 8.3% in Q1

Manufacturing loans, which accounts for a lion's share of credit, is expected to register sluggish growth.

Loan growth for Indonesian banks are expected to stay in the single digits at approximately 8.3% YoY in Q1, according to Maybank Kim Eng.

Manufacturing loans, which accounts for the second largest component of credit, is also expected to post a seasonally sluggish growth, dragging overall figures.

Also read: Indonesian banks shoulder growing bad debt burden

Bank loans rose 8.2% YoY in February which represents a slightly faster monthly expansion than in January, according to the country’s Financial Services Authority.

However, trading, transportation and mortgage lending have been picking up pace lately which collectively accounts for over a third (38%) of total portfolio.

“Within our coverage, banks with a niche retail market are likely to outperform the industry,” noted analyst Rahmi Marina. Average loan growth for Indonesia’s big banks Bank Rakyat Indonesia (BBRI), Bank Central Asia (BBCA), Bank Tabungan Negara (BBTN), and Bank Pembangunan Daerah Jawa Barat dan Banten Tbk (BJBR) should reach 13% YoY in 1Q18.

Here’s more from Maybank Kim Eng: 

Recent statistics indicate that NPL peaked in 2017. Hence, BMRI and BDMN are likely to post strong 1Q18 YoY profit growth on lower provisioning expense. But this is likely to be short term, if not a one-off event. For a more sustainable and attractive profit, NII growth and a healthy loan book are key. BBRI, BBNI, and BBTN fit the criteria. We estimate these banks will book 8-14% YoY profit growth in 1Q18 on the back of strong NII.

With 1Q18 numbers expected to be largely on track with our FY18 forecast, we maintain our POSITIVE view on the sector. While noise on pricing intervention might emerge ahead of the 2019 election, we believe the risk should be limited to several government projects.