Banking - NIM remain under pressure

Banking - NIM remain under pressure The banking sector's efforts to generate profit seem to be increasingly difficult. This is evident from the net interest margin (NIM) ratio, one of the indicators of a bank's profitability, which is currently on a downward trend. The Financial Services Authority (OJK) recorded the banking NIM ratio in February 2025 at 4.39%. This figure is lower than the achievement in December 2024 at the level of 4.62% and in February 2024 at the level of 4.49%. The majority of the giant banks in Indonesia that are part of KBMI 4 also recorded a monthly decline in NIM. BBCA's NIM in February 2025 was 5.40%, a decrease of 51 basis points (bps) from the January 2025 position. Meanwhile, BMRI also experienced a decrease in NIM by 43 bps to 3.99% in February 2025. he NIM of BBNI also decreased by 27 bps in February 2025 to 3.44%. The only one that experienced a monthly increase in NIM was BBRI by 24 bps to 6.39%. (Source : Kontan) Comment : The declining NIM trend in the Indonesian banking sector warrants close monitoring. While the OJK and individual banks offer valid counterpoints by highlighting other profitability indicators and factors, the decrease in NIM suggests increasing headwinds for traditional banking profit generation. Banks will likely need to strategically navigate the evolving economic landscape by optimizing their funding strategies, managing lending risks effectively, diversifying their revenue streams, and focusing on operational efficiency to sustain healthy profitability. The performance of other profitability metrics like ROE and ROA will be crucial in providing a more comprehensive understanding of the overall health and resilience of the Indonesian banking sector. Maintain our overweight stance for the banking sector with BBCA and BMRI as our picks and BRIS as our preference in the syariah banking landscape.