Banking - Fitch cuts outlook for state-owned banks

Banking - Fitch cuts outlook for state-owned banks OJK Ensures Fundamentals Remain Solid The Financial Services Authority (OJK) assesses that the revised outlook by international rating agencies Fitch Ratings and Moody’s for several major banks in Indonesia, including the four Himbara banks, reflects changes in Indonesia's sovereign outlook rather than a weakening of the national banking industry's fundamentals. As is known, after Moody's previously downgraded the outlook of several major banks in Indonesia, it is now Fitch's turn to downgrade the outlook of state-owned banks from stable to negative. The banks whose rating outlooks were revised to negative are Bank Mandiri (BMRI), Bank Rakyat Indonesia (BBRI), and Bank Negara Indonesia (BBNI). The Head of the Banking Supervisory Executive of the OJK, Dian Ediana Rae, said that the adjustment of the outlook occurred in line with the change of Indonesia's sovereign outlook from stable to negative. Therefore, the rating agency's action is considered more related to external factors, global macroeconomic dynamics, and its connection to the sovereign profile. The adjustment more reflects external factors and global macroeconomic dynamics, as well as the connection to the sovereign profile, and not due to a decline in the fundamental performance of the banks in question. According to Dian, amidst global uncertainty, Himbara banks continue to show stable intermediation performance and play a strategic role in supporting financing for the real sector and the government's priority programs. Thus, the OJK views the negative outlook more as a signal of caution against external and fiscal risks, rather than a direct indication of pressure on the health of state-owned banks. The OJK also assesses that the resilience of the national banking sector, including Himbara banks, remains at a strong level. By the end of 2025, the majority of Himbara banks are recorded to have achieved double-digit credit growth, surpassing the banking industry's credit growth of 9.6%. (Source : Kontan) Comment : The outlook revision is a macro-prudential warning signal regarding Indonesia's fiscal environment and global position, not a red flag regarding the banks' internal health. Investors should view the resulting stock volatility as a potential "valuation play" rather than a sign of a banking crisis. We maintain our cautiously optimistic stance for the banking sector in 2026, with stock picks of: BMRI, BBCA and BRIS (syharia banking sector).