Macquarie prefers large Indonesian bank stocks on margin pressure By Investing.com

Net interest margins fell 14 bps from Q4 2025 in February 2026 while average funding costs across the top 15 banks declined 9 bps (BBRI down 21 bps). Loan growth reached 10.4% YoY and deposits rose 14.8% YoY, pushing the combined loan-to-deposit ratio to 87% (from 88% ex-BBCA). Return on assets slid to 2.16% annualized (a three-year low) even as profit grew 10.8% YoY for Jan-Feb 2026 and credit charges stayed around 1.26%. Macquarie keeps Outperform on BBCA and BMRI, prefers BRIS among smaller lenders, and cites Mandiri and BRIS as best positioned to sustain YoY growth based on asset quality and balance-sheet trends.

Analysis

The recent margin compression dynamic is not a one-off line-item — it reallocates banks' return engines toward scale, fee income and liability management. Large, deposit-rich lenders can reprice slower, cross-sell higher‑margin products and absorb short-term NIM pressure with scale economies; smaller banks face either margin-driven margin calls on ROE or the need to chase yield through asset-risking.

Excess deposit growth relative to credit demand creates a structural supply of investable liquidity that will push banks into longer‑duration sovereign and corporate bonds or drive an uptick in fee-generating activities (wealth, transaction banking) over the next 6–18 months. That shift mechanically compresses short-term interest income but can increase interest rate sensitivity of bank balance sheets (duration risk) and raise operational leverage as fee initiatives incur upfront costs.

Key catalysts to watch: (1) a sustained pickup in loan origination over 3–9 months would re‑expand margins as loan yields reset faster than new funding, (2) regulatory capital actions or M&A among smaller banks over 12–24 months could concentrate franchises and redistribute profitability, and (3) an abrupt global or domestic rate reversal could widen margins quickly but also reveal credit stress. The consensus underprices the optionality in scale — if credit charge momentum keeps improving, larger banks’ earnings could re-rate materially even without NIM normalization.

Key Decisions for Investors

• Long IDX:BMRI (12-month horizon) — accumulate on pullbacks toward the 6-month moving average or after the next quarterly release that shows stable credit charge momentum. Position size: 3–5% net equity; target +30–40% total return if earnings re-rate; hard stop at -12% (or hedge by selling 25% notional 12-month puts).
• Pair trade: Long IDX:BBCA / Short IDX:BRIS (6–12 months) — play scale/fee resilience vs niche liquidity/margin pressure. Aim for 200–400 basis points of relative outperformance; trim if pair spread narrows by 100 bps or if macro credit indicators deteriorate.
• Options trade on IDX:BMRI — buy 9–12 month ATM call / sell 30% OTM call (call spread) to cap cost while capturing re‑rating upside. Risk/reward ~1:3 (max loss = premium, target = 200–300% of premium if bank rerates alongside improving credit momentum).
• Fixed‑income hedge/express: accumulate short-dated Indonesian sovereign paper (2–5y) or bank senior bonds selectively (3–12 months) to capture reinvestment into lower-yielding but stable credit assets amid deposit influx. Use as a partial hedge against further NIM compression; exit if sovereign yields rise >75 bps or loan growth accelerates.