Banking - 1Q26 sharia banks shines, financing grew solid

Banking - 1Q26 sharia banks shines, financing grew solid The Islamic banking industry kicked off 1Q26 with a solid performance. Seeing financing jump by closed to double digits isn't just a win—it’s a clear sign that this sector still has plenty of runway to grow. According to the latest OJK data, financing from Sharia commercial banks climbed +9.82% YoY to IDR716.40 tn as of March ‘26. This surge helped push the industry's total assets up by +7.51% yoy, officially crossing the IDR1,061 tn mark. (Source : Kontan) Comment : The 1Q26 performance marks a genuine turning point for the industry. Sharia banking in Indonesia is no longer just a "niche alternative" for a specific group; it’s rapidly becoming a mainstream powerhouse. The fact that financing is growing at nearly 10% YoY despite global headwinds suggests that the domestic market is incredibly resilient. On the flip of coin, several challenges to watch are: literacy vs inclusion, whereas while more people have accounts (inclusion), understanding of complex Sharia contracts (Mudarabah, Musyarakah) remains lower than conventional banking. Lastly, the Sharia banks often face higher competition for low-cost third-party funds (CASA) compared to the massive conventional banking. As such, banks with highest yield will have more steady NIM. Maintain our Overweight stance for Banking sector, with stock pecking order of BMRI > BBCA > BRIS.