Banking - Total industry loan grows 12.15% as of May24

Banking - Total industry loan grows 12.15% as of May24 The flow of banking credit is still flowing profusely. Bank Indonesia (BI) noted that banking credit distribution as of May 2024 grew 12.15% on an annual basis or yoy. BI Governor Perry Warjiyo said that this credit disbursement was driven by credit growth in most economic sectors, especially trade, industry and business services. However, credit growth as of May 2024 appears to be slowing compared to the performance of banking credit distribution in the previous month or April 2024 which was 13.09% yoy. Based on usage groups, credit growth in May 2024 was supported by investment credit, working capital credit, and consumption credit, which respectively grew by 14.80% yoy, 11.59% yoy, and 10.47% yoy. Sharia financing grew high at 14.07% yoy, while MSME credit rose 6.74% yoy. With these developments, credit growth in 2024 is predicted to be at the upper limit of the 10%-12% range. From the supply side, interest in lending was maintained, supported by an increase in third party funds (DPK) of 8.63% yoy. Also, the continuation of the strategy of reallocating liquid assets to credit by banks and liquidity support in line with the implementation of BI's Macroprudential Liquidity Incentive Policy (KLM). (Source : Kontan) Comment : We like domestic banking sector loan growth in May 24, despite being softer than the previous month. All in all, we believe both the OJK and BI ‘24F targets for total loan growth are achievable. Our ‘24F for the Indonesia banking sector loan growth is around 10% yoy. This will be supported by working capital and consumer loans. We also view that investment loans will play a crucial role, despite the ongoing concern on weakening rupiah. It is worth noting that, amid the continuing uncertainty, we expect investment loans to grow higher than our forecast and offset the potential for softer consumer loans. Maintain our OW stance for the banking sector.