Here are 4 downside risks for Indonesian banks

And check out the 2 upside risks.

Barclays sees four key downside risks for Indonesian banks. One, a sharp slowdown in the Indonesian economy – potentially driven by drop in commodity prices – could hurt both credit growth and credit quality.

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Two, exchange rate volatility could lead to a flight of capital from Indonesia, which could lead to a drain on liquidity if bank deposits were to be taken out of the system.

Three, a greater-than-expected increase in the competitive intensity could lead to a sharper drop in asset  margins than we have estimated. And four, increased political noise accompanying the upcoming elections could prove destabilising – particularly at a time when the current account deficit is high.

There are two key upside risks for the Indonesian banks. One, stronger credit growth, potentially driven by greater growth in the infrastructure finance area. Two, greater-thanexpected industry pricing discipline.