Banking - The COVID-19 credit restructuring policy has officially ended

Banking - The COVID-19 credit restructuring policy has officially ended The Financial Services Authority (FSA) officially ended its bank credit restructuring incentive policy for the impact of COVID-19 today, March 31, 2024. This is in line with considerations of the Indonesian economy that has recovered from the pandemic, including the real sector. The Chairman of the Board of Commissioners of OJK, Mahendra Siregar, said that the restructuring of COVID-19 credit has been largely exploited by debtors, especially UMKM perpetrators, and that these debtors finally managed to get through the pandemic well. Following the withdrawal of this restructuring, Mahendra sees the current Indonesian banking condition as having strong resilience in the face of economic dynamics. Latest data in Jan24 remain looks quite good, such as the capital adequacy ratio (CAR), which is at a level of 27.54% and LCR ratio is at the level of 231.4% and AL/NCD is 123.42%. Moreover, credit quality of the bank also remained below the threshold of 5%. NPL gross of 2.35% and NPL net of 0.79%. (Source: Kontan). Comment : We believe Indonesian banking, especially banks under our coverage, will continue in good shape after the policy is fully lifted. We expect to witness several key metrics in the Mar24 and 1Q24 figures that will remain solid. With the continued steady loan growth demand and better NIM coupled with steady CIR and asset quality improvement, we believe banks under our coverage will continue to record ‘24F solid earnings growth. Maintain our overweight stance in the banking sector with BUY BBRI and BBNI as our top picks.