Banks

Consumer Loan Positioning: A Clear Divide Between Growers and Retreaters

• Despite showing some stability on mom basis, MSME and consumer segments are still facing asset quality problems.
• Among our coverage, BBTN, BRIS, and BBNI have greater earnings sensitivity to consumer loans asset quality.
• We are Overweight on the sector with preference on banks with less consumer loan growth, i.e., BBCA, BTPS, and BNGA.

Wholesale continues to drive productive loan growth

System loan growth accelerated to 12.5% yoy in Jun26, driven by investment credit, which surged to 25% yoy. Consumer loan remained subdued with its loan growth continuing to decelerate towards 5% while working capital loan continued its recovery from low single digit in late FY25 approaching 9% yoy as of Jun26. MSME working capital, however, has deteriorated into outright contraction at approximately 4-5% yoy.

MSME and consumer loan remain stressed as of 1H26

MSME NPL, has drifted steadily upward from 3.7% in Jan23 to 4.5-4.7% by mid-26, a 90bp deterioration over three and a half years. However, we see the NPL has somewhat stabilized, albeit still high, in 1H26. Consumer NPL has been gradually increasing across the entire period, from 1.6% as of Jan23 to 2.4-2.5% in mid-26. The increase in NPL was driven by a combination of slower loan disbursement and asset quality deterioration. Nominal NPL, albeit improving by 2% mom, rose to Rp56.9tr as of Jun26, or increase 15% yoy.

Persistent stress on consumers even before rate hike took place

BCA's deliberate consumer loan contraction, historically a reliable bellwether, signals that consumer credit risk is more elevated than industry NPL ratios currently reflect. We see the growth exposure divergence of BBTN, BRIS, and BBNI whose consumer loan grew 9-10% yoy in 1H26, may potentially translate to greater earnings sensitivity to further consumer asset quality deterioration, especially under higher BI rate and higher inflationary environment.

Overweight with cautious view in navigating asset quality issues

Since our sector rating upgrade on mid Jun26, the sector has appreciated by 6.1% with the private group-owned banks, our preferred picks, outperforming at 10.5%. While valuation remained attractive across the banks at 1.5x FY26C PBV, at -2.0SD below 5 Year average, we remain cautious on potential further consumer asset quality issue in the near term given the high oil prices, higher BI rate, and potential inflationary environment. We maintain BBCA as our top pick, followed by BTPS and BNGA, which aside from facing less risk of intervention from govt program, also have less exposure in the consumer loan growth.

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