Banking - Credit grew by 9.6% yoy in 2025

Banking - Credit grew by 9.6% yoy in 2025 The Financial Services Authority (OJK) assesses that the performance of national banking intermediation throughout 2025 will continue to contribute to the economy with a maintained risk profile and strong fundamentals. Chairman of the OJK Board of Commissioners, Mahendra Siregar, stated that bank credit in December 2025 grew by 9.6% yoy to IDR8,585 tn. This credit growth was primarily driven by investment credit, which recorded a high increase of 20.81% yoy, in line with the increase in investment activities. In line with credit growth, third-party funds (DPK) in the banking sector also recorded solid growth. In December 2025, DPK grew 13.83% yoy to IDR10,059 tn. This growth was driven by a 19.13% yoy increase in current accounts, an 8.19% year-on-year increase in savings, and a 14.28% yoy increase in deposits. From an asset quality perspective, the national banking sector remains in a healthy condition. The gross Non-Performing Loan (NPL) ratio was recorded at 2.05%, while the net NPL was at 0.79%. Loan at Risk (LaR) remained relatively stable at 8.77%, reflecting well-maintained credit risk management amidst economic dynamics. From a liquidity perspective, the banking sector remains adequate. The Loan to Deposit Ratio (LDR) was recorded at 85.35%. Meanwhile, the ratio of Liquid Assets to Non-Core Deposits (AL/NCD) reached 126.15% and Liquid Assets to DPK (AL/DPK) was 28.57%, far exceeding the minimum thresholds of 50% and 10% respectively. (Source : Kontan) Comment : Indonesia’s banking sector wrapped up 2025 with solid momentum (a spike in investment loans and robust liquidity). While 1Q26 loan growth may face seasonal moderation and market confidence remain flattish due to prolonged domestic cautious business activity outlook as well as boiling geopolitical uncertainties, the outlook for the sector should remain intact as declining funding costs, sticky loan yield, steady solid CIR, Non-II and manageable provisions are expected to sustain earnings. Pressure on the banking stocks has provide an attractive discount. We favor BMRI, BBCA, and BRIS as top picks, betting on their ability to leverage volume growth and operational efficiency to navigate potential yield compression and maintain steady performance throughout the year. Maintain Overweight on the banking sector with stocks pick: BMRI IJ > BBCA IJ > BRIS IJ.