Jakarta. Indonesia's banking landscape is poised for a significant shake-up in 2025, as liquidity challenges and slowing credit growth reshape the industry. According to a report by CLSA, state-owned Bank Mandiri (IDX: BMRI) is projected to overtake state-owned Bank Rakyat Indonesia (IDX: BBRI) as the country’s most profitable bank by net earnings.

CLSA’s research forecasts Bank Mandiri’s net profit to grow modestly by 0.4 percent to Rp 60.3 trillion ($3.69 billion) in 2025, surpassing BRI’s expected net profit of Rp 57 trillion—a steep 19% decline from earlier projections. In contrast, net profit for Bank Central Asia (IDX: BBCA) is expected to fall slightly by 1 percent to Rp 57.6 trillion, placing it behind Mandiri.

The report highlights that Bank Mandiri’s steady performance, combined with a relatively high profit base, positions it as the top contender amid tightening liquidity conditions and challenges in credit expansion. For 2024, however, BRI is still anticipated to lead with a net profit of Rp 58.8 trillion, ahead of Mandiri (Rp 56 trillion) and BCA (Rp 54.5 trillion).

Indonesia’s government has set a credit growth target of 11-13 percent for 2025, slightly higher than the 10-12 percent target for 2024. However, the country’s four largest banks are signaling a more cautious outlook. CLSA notes that Mandiri’s slower credit growth stems from its already large base, while BRI remains conservative as it focuses on improving its micro-loan segment.

Retail credit is expected to be the main driver of growth in 2025, with potential support from monetary easing. CLSA predicts a 50-basis-point cut in the Bank Indonesia (BI) benchmark rate to 5.5 percent this year. However, liquidity challenges persist due to a volatile rupiah and expected increases in government bond issuances to support fiscal expansion.

CLSA maintains an “outperform” rating for major Indonesian banks, including Bank Central Asia, Bank Rakyat Indonesia, and Bank Mandiri, as well as state-owned Bank Negara Indonesia (IDX: BBNI) and Bank Tabungan Negara (IDX: BBTN). The target prices for these banks are Rp 12,100, Rp 5,100, Rp 7,700, Rp 5,950, and Rp 1,450, respectively. In contrast, BTPN Syariah (IDX: BTPS) and Bank Jago (IDX: ARTO) received a “hold” rating, reflecting their less favorable outlook.

Despite tightening liquidity, CLSA notes that asset quality remains stable, with adequate loan-at-risk coverage across major banks. Stable credit costs are expected to provide some relief to the sector as it navigates a challenging macroeconomic environment.