Banking - Banks prepare to adjust deposit interest

Banking - Banks prepare to adjust deposit interest Bank Indonesia (BI) has again held its benchmark interest rate, or BI Rate, at the level of 6%. Even though the benchmark interest rate is still on hold, BI noted that bank deposit interest rates are starting to decline. Based on BI data, the 1-month deposit interest rate in February 2024 was at 4.52%, down 10 bps compared to the previous month, January 2024, where the 1-month deposit interest rate was at 4.62%. BI indeed projects that there will be a reduction in the benchmark interest rate this year. BI Governor Perry Warjiyo said that his party saw open room for a reduction in the BI rate in semester II/2024. (Source: Kontan) Comment : The BI projection is in line with our expectations. We forecast banks under our coverage will record a softened interest expense and thus will overall help NIM expansion. Assuming loan growth will be higher this year, CIR will continue to improve than last year, and provisions will remain low, then banks PATMI could grow better than ours and street expectations. Maintain our OW stance on the banking sector, with BBRI and BBNI as our top picks.