Indonesia’s banks breathe easier after rate cuts, but cracks in retail credit remain

[JAKARTA] After five interest rate cuts and a government liquidity boost, Indonesia’s biggest banks are breathing easier, though not enough to mask deeper cracks in consumer lending and asset quality.

Based on the sector’s nine-month showing, amid a turbulent operating climate marked by rising credit risks, sluggish retail demand and uneven profitability, state lenders are feeling the pinch from higher provisions. Meanwhile, private banks have held firmer ground owing to stronger fee income and lower-cost funding.

Jayden Vantarakis, head of Asean equity research at Macquarie Capital, said Indonesian banks are benefiting from lower funding costs as monetary easing begins to take effect, which should help lift net interest margins (NIMs).