Banking - Downstream projects fuel corporate banking growth

Banking - Downstream projects fuel corporate banking growth The continuation of extensive downstream projects under the leadership of President Prabowo Subianto has ignited a surge in corporate banking credit, particularly within the processing industry. This sector has emerged as a dominant force in corporate banking, accounting for a substantial portion of total credit disbursement. As of October 2024, credit extended to the processing industry reached a significant IDR 1,145.3 tn, representing 15.11% of total credit. While this figure falls slightly short of the Trade, Hotel, and Restaurant sector's 17.88% share, the processing industry's growth trajectory is particularly noteworthy. Despite single-digit growth rates in working capital (6.8% yoy) and investment loans (8.7% yoy), the sector's potential remains substantial. In contrast, the mining sector, which also benefits from downstream initiatives, has witnessed impressive growth rates, with working capital loans soaring by 43.8% yoy. (Source : Kontan) Comment : The latest sector figures are promising and point to strong potential for industry loan growth in 2025. Indonesia's focus on downstream industries creates a favorable environment for banks to extend credit to high-growth sectors. However, prudent risk assessment and selective lending will be crucial to maximize returns. We maintain our Overweight stance on the banking sector, favoring BBCA and BMRI. For Syariah Banking, BRIS remains our preferred pick.