Banking - Bank credit grows 10.93% as of December 2024, BI: 2025 target 11-13%

Banking - Bank credit grows 10.93% as of December 2024, BI: 2025 target 11-13% Bank Indonesia (BI) projects robust credit growth of 11-13% in 2025, mirroring the strong 10.93% growth achieved in 2024. Key drivers of credit growth in 2024 included working capital loans (8.35%), investment loans (13.62%), consumption loans (10.61%), Sharia financing (9.8%), and MSME credit (3.37%). To sustain this momentum, BI will strengthen the Macroprudential Liquidity Incentive (KLM) policy, directing support towards priority sectors such as agriculture, trade, manufacturing, tourism, and MSMEs. The banking sector remains robust, with a strong Capital Adequacy Ratio (CAR) of 26.89% and low Non-Performing Loan (NPL) ratios. While acknowledging global uncertainties, BI emphasizes the importance of continued risk mitigation efforts in collaboration with the Financial Services Authority (OJK). (Source : Cnn Indonesia) Comment : Our conservative upper-range 2025 loan growth forecast for the banking sector (see our outlook ‘25F and latest banking sector report on 31st Dec 204) were aligns with Bank Indonesia's low-end projection. We anticipate this growth to be primarily driven by the wholesale segment. Within loan types, working capital loans are expected to remain a key driver, while we foresee a notable increase in investment financing demand, supported by various new government policies. In the consumer loan segment, we expect property loans to exhibit slightly stronger growth compared to auto financing. We maintain our Overweight stance on the banking sector, with Bank Central Asia (BBCA) and Bank Mandiri (BMRI) as our preferred picks. Within the Islamic banking segment, we favor Bank Rakyat Indonesia Syariah (BRIS).