YTD, our covered major Indonesia banks (BBCA / BMRI / BBRI / BBNI – all rated Buy) have seen large foreign investor outflows amounting to ~USD3.7bn (exceeding the total outflow in the broader market of ~USD3.3bn). Understandably, in our view, this outflow primarily reflects macroeconomic concerns (and hence earnings risks for these banks). However, we think, going into 2026F, earnings risks for these banks should have largely been priced in. The key positive factors for these banks are:

1. Increased government spending. The Ministry of Finance (MoF) seeks to provide stimulus amounting to IDR46tn in 4Q25 (vs 1Q25’s IDR39tn / 2Q25’s IDR24tn / 3Q25 none). It should not increase the deficit, as this stimulus comes from the reallocation from other spending programs. This should help mass market segments of the population.
2. Liquidity injection (and loan yield). The MoF recently injected additional liquidity amounting to IDR200tn to all the SOE banks (BBRI/BMRI/BBNI /BBTN/BRIS). These liquidity injections have, so far, allowed these banks to cut funding costs for special rate deposits. This should help ease off liquidity pressure (as well as minimize margin risks) for the remainder of 2025F and potentially continue into 1H26F. So far, the broad system loan-to-deposit ratio (LDR) eased to ~93% in Aug’25 from the peak of ~96% in May’25. This should continue to moderate towards ~90-92% in Sep/Oct25, we think.   
3. Loan growth flat (as our covered major banks are likely to gain market share from small-to-mid-sized banks). We estimate broad loan demand (and thus growth) to be ~7-10% in 2025F. And, this is likely to persist into 2026F we believe. Loan demand may come from large corporates, in part driven by working capital (and to some extent investment loans that reflect their multi-year expansion plans).
4. Government-linked loan programs have been largely priced in, and probably not as bad as market concerns. For instance, the Red and White Village Cooperative Program (KDMP) may seek up to IDR240tn in financing; however, we do not think this will be in one-go and credit risks remained largely covered by village funds. The latest proposal suggests that lending will be towards Agrinas, as opposed to banks’ conducting credit assessments on individual KDMPs which can be time-consuming.
5. Credit costs largely stable. With the broader economic growth expected to hover at ~5.0%, as well as combined with a lower rate environment, we think incremental credit risks will likely be muted. This suggest that credit costs for most of these banks remain at current levels.  
6. Expect interim dividend from these banks towards end-2025F. Amongst the major banks we cover, we expect only BBCA to have a higher payout ratio (both for interim and/or final dividends). 
7. Major banks’ valuation multiples have de-rated in recent years, where average PERs at these banks is more than 1-SD below their respective historical mean.

Given the above, we think, going into 2026F, the major banks we cover should have better (core) operating results, as we expect margins to be more stable. Under these circumstances, we reiterate our preference towards the major banks. We retain BBCA / BRIS as our preferred banking stocks. Tactically, BBNI may also benefit from these liquidity additions.

Valuations and risks

BBCA (Buy) – Our TP of IDR12,300 is based on DuPont analysis, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 0.8x and a CAR-adjusted ROAE of 24.5%. Our TP implies 5.4x FY25F P/B (vs 3.9x currently) and 26.7x FY25F P/E (vs 19.3x currently). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BMRI (Buy) – Our TP of IDR6,500 is based on DuPont analysis, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 11.0%, beta 1.08x and a CAR-adjusted ROAE of 19.0%. Our TP implies 2.1x FY25F P/B (vs 1.5x currently) and 11.3x FY25F P/E (vs 8.1x currently). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BBRI (Buy) – Our TP of IDR5,000 is based on DuPont analysis, with key parameters comprising: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 9.3%, beta of 0.85x and a CAR-adjusted ROAE of 18.0%. Our TP implies 2.3x FY25F P/B (vs 1.7x currently) and 12.8x FY25F P/E (vs 9.8x currently). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BBNI (Buy) – Our TP of IDR5,500 is based on DuPont analysis, with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 8.5%, beta of 1.04x and a CAR-adjusted ROAE of 16.0%. Our TP implies 1.2x FY25F P/B (vs 1.0x currently) and 9.7x FY25F P/E (vs 7.7x currently). Key risks are worsening macroeconomic trends, tighter liquidity competition, and/or higher credit costs and opex growth.

BRIS (Buy) – Our TP of IDR3,500 is based on DuPont analysis, with key parameters including: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 1.2x and a CAR-adjusted ROAE of 18.0%. Our TP implies 3.2x FY25F P/B (vs 2.3x currently) and 21.3 FY25F P/E (vs 15.2x currently). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

Fig. 1: Government’s budget plan

Fig. 2: Budget breakdown

Fig. 3: M2 growth %

Fig. 4: LDR

Fig. 5: BBCA Fwd PE (x)

Fig. 6: BMRI Fwd PE (x)

Fig. 7: BBRI Fwd PE (x)

Fig. 8: BBNI Fwd PE (x)

Fig. 9: BRIS Fwd PE (x)

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

GENERAL DISCLOSURE/DISCLAIMER 
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

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ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

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Erwin Wijaya (erwin.wijaya@verdhana.id)