JAKARTA, Sept 8, 2025 — Indonesia’s banking sector is entering a new phase of cautious optimism, as moderating loan growth is offset by healthier liquidity and the prospect of monetary easing that could restore margins in the quarters ahead.
According to a new report by Maybank Investment Banking Group (Maybank IBG), industry-wide loan growth slowed to 7.0% year-on-year (YoY) in July 2025, easing from 7.8% in June and well below the 10.4% expansion recorded in FY2024. While lending momentum has tapered, deposit growth has kept pace, also rising 7.0% YoY, which has helped the sector’s loan-to-deposit ratio (LDR) moderate to 86.5% from a December 2024 peak of 88.6%.
Loan Growth: Mixed Picture Across Segments
Investment loans led the way in July, growing 11.8% YoY, underscoring continued capital expenditure in sectors such as mining and infrastructure. Household consumption loans rose 7.9% YoY, supported by steady consumer spending, while working capital loans lagged, advancing only 2.7% YoY, reflecting ongoing caution in corporate short-term financing.
By industry, mining and quarrying delivered a robust 22.0% YoY surge, buoyed by commodity demand, while transportation and communications expanded 14.9% YoY, supported by logistics and digital infrastructure. However, key pillars of the economy such as utilities, manufacturing, trade, and agriculture reported weaker credit growth, pointing to uneven recovery trends.
On the retail side, loan momentum slowed across major categories. Mortgages grew 7.5% YoY, auto loans rose 6.0% YoY, and multipurpose loans gained 8.3% YoY—all lower compared to 2024 levels, as households adjusted to higher borrowing costs. Maybank IBG expects lending growth to stabilise within the 7–9% range in FY2025, reflecting a soft landing after last year’s double-digit pace.
Deposits: A Stable Anchor
The report highlighted that deposit growth remains a bright spot. Current and savings accounts (CASA) climbed 5.1% YoY, while time deposits increased 2.6% YoY, underscoring steady household and institutional savings behaviour. The balance between lending and deposit growth has eased pressure on bank funding, lowering competition for deposits and creating room for banks to reduce financing costs.
This improved liquidity backdrop is crucial, as Indonesian banks historically operate with higher loan-to-deposit ratios compared with regional peers. The moderation from December’s highs indicates a more comfortable funding environment heading into the second half of 2025.
Rate Cuts: The Next Catalyst
Looking ahead, the sector’s outlook hinges on monetary policy. With the rupiah stable and inflation contained, Bank Indonesia has signalled potential rate cuts later this year. Analysts believe lower policy rates would stimulate credit demand, especially in interest rate-sensitive sectors like consumer lending and mortgages, while simultaneously easing funding costs.
Maybank IBG notes that bank margins, which have compressed in recent quarters, appear to have bottomed out. A rate-cut cycle could gradually expand net interest margins, offering a tailwind to profitability. “The combination of improved liquidity and anticipated monetary easing positions Indonesian banks favourably for a recovery in margins,” the report said.
Investment Outlook
Maybank IBG reaffirmed its preference for large, well-capitalised banks that stand to benefit most from falling rates. Its top picks include Bank Rakyat Indonesia (BBRI), Bank Central Asia (BBCA), Bank Syariah Indonesia (BRIS), Bank Negara Indonesia (BBNI), and Bank Mandiri (BMRI). These institutions not only have strong balance sheets but also broad loan franchises capable of capturing incremental credit demand once monetary conditions ease.
For investors, the near-term picture may still be clouded by modest loan growth and weak performance in certain industries. But the medium-term trajectory suggests a more supportive environment for profitability, underpinned by rate cuts, steady deposits, and targeted government stimulus in infrastructure and consumer spending.
As Indonesia continues to balance growth with stability, its banking sector appears poised to enter a new cycle of margin recovery, offering investors a cautiously optimistic narrative heading into 2026.
