Banking - Corporate credit growth in 2025 may be hindered by economic slowdown concerns

Banking - Corporate credit growth in 2025 may be hindered by economic slowdown concerns The growth of corporate credit disbursement in 2025 is expected to be constrained due to the risk of economic slowdown that continues to haunt corporate businesses. This is due to the continued impact of global economic uncertainty. According to the Bank Indonesia (BI) money supply analysis report, corporate banking credit in the country appears to be growing at a slower pace. As of Nov24, corporate credit only grew by 15.4% yoy to reach IDR4,106.1 tn, down from Oct24 which grew by 15.6% yoy to reach IDR4,068.0 tn. (Source : Kontan). Comment : The observed 20 basis point deceleration in credit growth from October to November 2024 is considered acceptable, given the typical seasonal slowdown in lending demand towards the year's end. Notably, November's credit growth remains significantly above the targets set by BI, OJK, and our (KBVS) 24F for the banking sector loan growth. Assuming other factors remain constant, loan growth in 2025 is projected to maintain double-digit figures, albeit potentially appearing slower due to the high base effect established in 2024. Conversely, the anticipated softening of blended borrowing costs is expected to positively impact net interest income. Furthermore, consistent NII generation and a manageable CIR will continue to support PPoP growth. While we anticipate a sustained low CoC, its impact on ‘25F banking earnings growth is expected to be meaningful. We maintain our overweight stance on the banking sector, with BBCA, BMRI as our preferred picks and BRIS is favored among Islamic banking stocks.