Indonesian banks' strong profits hide widening lending gap

There is also a gulf in banks’ high loan growth and low interest income growth.

Indonesian banks’ earnings resilience is masking a growing gap in lending, said UOB Kay Hian.

Loan growth is increasingly driven by large corporations and state-owned enterprises (SOEs), whilst retail and micro, small, and medium enterprises (MSME) demand remains subdued, said UOBKH analyst Posmarito Pakpahan.

Whilst headline loan growth is 24.5% year-on-year (YoY) and 20.6% YoY at Bank Negara Indonesia (BNI) and Bank Mandiri, respectively, the industry-wide MSME and household loan growth is just 0.6% YoY and 3.4% YoY, UOBKH said.

Strong fee income, disciplined cost control, and benign provisioning trends helped large banks deliver resilient earnings in Q2 2026, Pakpahan said, based on UOBKH’s meetings with Bank Central Asia (BCA), Bank Mandiri, and Bank Rakyat Indonesia (BRI).

The talks unearthed continued weakness in loan demand outside the corporate segment, as well as rising funding cost pressures.

There is also a widening gap between loan growth and interest income loan growth in the large banks. For example, Bank Mandiri’s loan growth is 20.6% in Q2, but interest income growth is just 5.8%. BNI (24.5% vs 15.6%) and BRI (11% vs 0.1%) follow the same trend.

Banks face fund cost pressures in the second half of 2026, with funding quality weakening, Pakpahan said.

“Whilst [Q2 2026] earnings should remain resilient, we expect the impact of tighter liquidity and higher funding costs to become increasingly visible from [H2 2026] onward,” Pakpahan said.