Banks
Expansion of SAL utilization: for better or worse?
- PMK 88/2024 could add liquidity for the SOE banks, but with a CoF of c. 4.8%, we do not see it as plausible for the banks currently.
- On the other hand, the SAL loans can add competition as other non-bank SOE could get a lower rate from SAL compared to bank loans.
- BMRI and BBNI could be the biggest losers from SAL competition, while BBRI and BBTN could see potential benefits.
PMMK No 88/2024: Expanding the SAL utilization
PMK No. 88/2024 expands the scope of surplus budget fund utilization (SAL), allowing state-owned enterprises (BUMN), regional state-owned enterprises (BUMD), and local governments to access these funds for liquidity needs associated with national initiatives. Borrowers are required to provide guarantees, which could be either: 1) deposits amounting to at least 102% of the loan value plus interest, or 2) government bonds (SBN) amounting to at least 120% of the loan value plus interest. In our view, this regulation presents two primary risks for Indonesian banks. However, which one will prevail?
Indonesian banks could pledge their assets as collateral
SOE banks could benefit as they could add more liquidity from the SAL by using their deposits or SBN as collateral while ensuring the loan disbursement aligns with the government program, i.e., micro loans, subsidized housing program, etc. However, we note that the SAL loans come with interest as stipulated in the regulation. The interest rate for these loans will be set to be at least equal to the rate that the government receives from its placements in BI. We found that government rupiah placements in BI receive 80.476% of the benchmark rate, which is equal to c. 4.8% currently. With such a rate, we believe this is not compelling as BBRI, BMRI, and BBNI CoFs were at 3.7%, 2.8%, and 3.2% in 10M24. BBTN could see some use with its CoF of 4.9%, but we do not find it plausible at the current government FLPP scheme rate of 5%.
Competition to lending yield from SOE counterparts
Based on the regulation, non-SOE banks could potentially obtain SAL loans by pledging their deposits or SBN. With a rate of c. 4.8%, this could pressure the bank’s lending yield, which currently stands at c. 7%. Among the SOE banks, we think BMRI and BBNI will be the most impacted by the SAL competition. As of 9M24, BMRI’s and BBNI’s loans to related parties amounted to Rp274tr and Rp137tr, respectively, which are higher than BBRI’s Rp90tr. Our economist estimates the current SAL budget at Rp300tr, which is at c. 4% of total industry loan.
Maintain Overweight, with BBCA remaining as our top pick
We believe BBRI and BTPS will be the least impacted by the downside risk from SAL loan yield competition as their core businesses are in micro loans. However, currently, BBRI is shifting towards corporate as it slows down its micro loan disbursement, which could put the bank at risk in the near term. In the long term, BBRI could see some use of the SAL loan with its high-yield micro loans. BMRI and BBNI could be negatively impacted, while BBTN could see potential upside if the FLPP scheme rate can be adjusted higher.
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