Banking - As of Dec23, loan yield slightly declined amid higher deposit rate

Banking - As of Dec23, loan yield slightly declined amid higher deposit rate Bank Indonesia reported developments in banking interest rates at the end of 2023, where deposit interest rates were recorded to have increased, while credit interest rates were recorded to have decreased. Bank Indonesia, in its report recorded a weighted average credit interest rate of 9.25%, lower than the previous month of 9.29%. Meanwhile, interest rates on term deposits increased for tenors of 1 month, 3 months, 6 months and 12 months (4.71%, 5.26%, 5.52% and 5.74%), compared to Nov23 which recorded at 4.50%, 5.00%, 5.32% and 5.37% respectively. (Source: Kontan) Comment: We believe softened CoF will play important role on banks NIM, amid our expectation on latest round of slight loan yield repricing. On the scenario benchmark rate cuts turned into reality, we expect it will happen in 1H24, otherwise impact to overall banks performance will be as soon as in the 1Q25 period. In all, we expect banks under our coverage to record better TPF and loan growth with manageable CIR and steady low provisions. This will overall help PPOP and earnings in ‘24F to grow better year-on-year vs ‘23F earnings.