Banking - Measuring the impact of a lowered BI rate

Banking - Measuring the impact of a lowered BI rate Interest Room for a reduction in Bank Indonesia's (BI) benchmark interest rate is wide open after the Fed gave a signal to cut interest rates. However, it seems that this will not have a direct impact on bank credit interest. A decrease in the benchmark interest rate could be an indicator that credit interest rates, especially in the property sector, could decrease. Bearing this in mind, the growth rate of Home Ownership Credit (KPR) is slightly restrained in the high interest regime. Quoting data from Bank Indonesia (BI), credit growth for the Home Ownership Credit (KPR) and Apartment Ownership Credit (KPA) sectors showed a slight slowdown. In July 2024, KPR and KPA growth was recorded at 14.2% yoy, a slight decrease from the previous month, which reached 14.3% yoy. (Source : Kontan) Comment : Historically, the declining benchmark rate will have a lag time to banking loan yield. We believe the benefit of a lower benchmark rate will start to take effect next year. However, we still think 2H24 mortgage demand is likely to continue and is much better compared to other high-yield segment growth, such as the auto segment. Maintain our overweight stance for the banking sector with BBRI and BBNI as the picks.