Indonesia's fund injection into state banks partly eases the strain on sector liquidity, and keeps banks' debt issuance modest as rate cuts and other measures take time to flow through. Time deposit-reliant lenders benefit most, but the move may not spur material credit growth amid weak loan demand and cautious lending. Bank Central Asia leads in liquidity strength. It faces the least liquidity strains and has the lowest funding costs.
Government Fund Injection Has Limitations
The Indonesian government's planned 200 trillion-rupiah injection into state-owned banks could convey greater benefit to lenders dependent on costly time deposits, such as Bank Rakyat, Bank Negara Indonesia and Bank Tabungan, as liquidity placements may enable cheaper deposit repricing. The move could lower sector loan-to-deposit ratios by about 400 basis points, though weak corporate demand and banks being cautious on consumer lending amid growing asset-quality headwinds may still restrain lending momentum. If loan disbursement lags, banks risk higher interest expenses from deposits, while aggressive pushes into micro loans – if as encouraged by the government – could pressure interest margins and asset quality.
Loan Growth to Moderate in 2025
Indonesia's banking sector may see 9-10% loan growth in 2025 as overall demand looks soft. Investment loans show no signs of acceleration, and working-capital demand remains weak. Lenders are cautious on consumer credit due to asset-quality concerns, tempering momentum.
Net Positive Senior Bond Supply in 2025
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Indonesian banks may issue modest net senior debt yet this year to diversify their funding and ease liquidity pressure, with their loan-to-deposit ratio high, at 88% in May amid expected rate cuts. The effects of rate cuts and favorable central bank policy will gradually take time to show, while the government's 200 trillion-rupiah reserve transfer to state banks could partly help to ease the sector's liquidity constraints. Senior debt issued has amounted to US$2.8 billion this year through Sept. 11. A higher foreign-funding cap of 35% adds flexibility for banks with thin liquidity buffers to secure external financing. Bank Mandiri, Bank Rakyat and Bank Negara Indonesia have refinanced their near-term maturities, while Bank Tabungan may follow given its elevated 94% loan-to-deposit ratio in 1Q2025.
