Banking - A lower deposit rate likely happened following the cut rate

Banking - A lower deposit rate likely happened following the cut rate The potential for a decrease in the benchmark interest rate will potentially be immediately followed by interest on bank deposits. This is slightly inversely proportional to the condition of credit interest, which is unlikely to decrease. During the era of high interest rates, banks increased interest on deposits more often, which caused interest expenses to increase. In contrast, banks are more likely to refrain from increasing credit interest so as not to compete with other banks. Bank Indonesia noted that as of July 2024, interest rates on term deposits increased for tenors of 1 month, 3 months, and 24 months, respectively 4.75%, 5.41%, and 4.39%. The increase is in the range of 10 basis points to 20 basis points. (Source : Kontan) Comment : Historically, transmission on a lower or higher benchmark rate will have a time lag. Assuming the Fed rate cut will be followed by a lower domestic benchmark rate, the average lower deposit rate is likely to take place as soon as in the beginning of 2025. While waiting for the rollover period, we still maintain our same rate assumption for all of our model for banking stocks under our coverage. Maintain OW for the banking sector with BBRI and BBNI as our picks.