Banking - Banks strategy to maintain low funding costs when interest rates are high

Banking - Banks strategy to maintain low funding costs when interest rates are high Amidst a landscape of high interest rates, banks are deploying a range of strategies to attract low-cost funding and manage their cost of capital. Bank Tabungan Negara (BBTN), for instance, is targeting the "Emerging Affluent" segment—customers with savings between IDR100 mn and IDR500 mn—through its BTN Prospera product, aiming to attract both new and existing clients. Meanwhile, Bank Mandiri is focusing on banking innovations that prioritize customer convenience and transaction security. Bank Danamon Indonesia Tbk (BDMN) has launched the Danamon Gift Series (DHB) program, running from June 1, 2024, to January 31, 2025, as another strategy to attract low-cost funds. Bank CIMB Niaga Tbk (BNGA) aims to increase its portion of low-cost funds in the second half of 2024, focusing on CASA (Current Account Savings Account) acquisition through collaborations in payroll services, operating accounts, cash management, and digital ecosystems. (Source : Kontan) Comment : We believe that most banks will successfully maintain a low cost of funding despite the challenging interest rate environment. Key factors driving this success will be customer acquisition and ongoing product innovation. With an anticipated Fed rate cut and a potential 7DRR cut, we expect customer deposit mixes to strengthen, supporting NIM (Net Interest Margin) expansion for banks in the coming quarters. We maintain our Overweight stance on Banks, with BBRI and BBNI as our top picks.