APAC Focus: Indonesian Banks "assessing asset quality risk" Tanja

Research evidence excerpt

APAC Focus: Indonesian Banks "assessing asset quality risk" Tanja

Global Research

19 June 2026ab

Indonesian Banks Equities

IndonesiaAPAC Focus: assessing asset quality risk

Banks, Ex-S&L

Joshua Tanja, CFA

Analyst

joshua.tanja@ubs.com

+62-21-2554 7030

Ivan Reynaldo Sutheja

ivan-reynaldo.sutheja@ubs.com

+62-21-2554 7037

Elisabeth Angelina Inggriani

Associate Analyst

elisabeth-angelina.inggriani@ubs.com

+62-21-2554 7006Investorsare concerned that external shocks, especially a weaker Rp and high oil

prices, may cause deterioration in banks' asset quality and earnings. We utilise our

corporate bank relationship database and regression based stress tests of corporate

debt serviceability and NPL formation using three macro scenarios. We believe

consensus does not fully reflect the risks: we now forecast flat sector earnings in

2027, c12% below consensus. We view retail as more vulnerable than corporate

banking, while consensus applies a uniform view. We prefer Bank Central Asia

(reiterate Buy rating) as the most resilient and attractively valued, but downgrade

Bank Negara Indonesia from Buy to Sell and Bank Rakyat from Buy to Neutral.

Our methodologies and scenarios: downside risk to growth

Our analysis combines two approaches: regression-based modelling of segment NPL

sensitivity to macro variables and a bottom-up stress test of around 800 listed

corporates. In our scenarios that range from moderate to severe oil, GDP and FX

pressures, higher oil prices have more correlation to consumer NPL growth, while Rp

depreciation is more correlated with the SME and corporate segments. In our base case,

which assumes a US$100/bbl oil price and a Rp18,500/US$ FX rate, our 2027E earnings

are 12% below consensus due to higher expected credit costs. In the worst-case