Banking - Interest rates remain high, non-interest income becomes the bank's mainstay

Banking - Interest rates remain high, non-interest income becomes the bank's mainstay The potential declining benchmark interest rates in 2025 have compelled banks to diversify revenue streams, with non-interest income emerging as a crucial growth area. While major banks demonstrated strong non-interest income growth in November 2024, with BRIS leading at 36.77% yoy and BBRI closely following at 33.97% yoy, some banks, such as BMRI (1.98% yoy) and BBCA (7.53% yoy), exhibited slower growth. Bank Mandiri, for instance, emphasizes sustainable, recurring non-interest income driven by customer transactions, prioritizing digital platforms like Livin' and KOPRA for revenue optimization. (Source : Kontan) Comment : The Indonesian banking sector is undergoing a significant transformation as it adapts to a changing interest rate environment. Non-interest income has become a critical pillar of revenue growth for many banks. Diversification strategies and leveraging digital channels are crucial for achieving sustainable growth in non-interest income. The varying growth rates among major banks suggest a need for continuous evaluation and adjustment of strategies to remain competitive. We maintain an overweight stance on the Indonesian banking sector, with BBCA and BMRI as our preferred picks. Within the Islamic banking segment, we favor BRIS over its peers.