Indonesia Diversified Banks: Indonesia Banks 2Q26 Earnings Preview

Research evidence excerpt

Indonesia Diversified Banks: Indonesia Banks 2Q26 Earnings Preview

Indonesia Diversified Banks

03 July 2026 Citi Research

Market Overview: Indonesian Banking Sector

Performance (YTD)

Year to date, the share prices of the major four Indonesian banks have experienced

a decline of 23%–30%. This contraction is attributable to a confluence of

geopolitical instability, challenging macroeconomic conditions, and negative

index-level sentiments.

MSCI Index Rebalancing and Capital Outflows

Since early 2026, concerns regarding the MSCI index review—specifically potential

downgrades or reduced weightings of Indonesian securities—have catalyzed

significant volatility and prompted substantial foreign capital outflows. While the

June 23, 2026, review confirmed Indonesia's continued inclusion in the Emerging

Markets index, investors remain cautious ahead of the upcoming November review.

We anticipate that valuation discounts will persist until there is tangible

improvement regarding free-float and price-discovery metrics. Nevertheless, the

implementation of structural reforms and a clear regulatory roadmap provide a

credible pathway toward resolving these concerns. Based on the market

accessibility by MSCI out of the 18 criteria, they still put Indonesia better than

countries like Korea, Taiwan, India, Thailand and the Philippines.

Figure 1. MSCI EM Market Accessibility Review

© 2026 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research, MSCI

IDR Volatility and Monetary Policy Response

The depreciation of the Indonesian Rupiah (IDR) against the US Dollar has been

primarily fueled by the escalation of conflict in the Middle East, which elevated

global energy costs and increased demand for the USD, coupled with domestic