Market attention will turn to Bank Indonesia's Board of Governors Meeting (RDG BI) on 21–22 July, which could serve as the next key catalyst for the banking sector. The consensus expects BI to keep its policy rate unchanged at 5.75%, following two consecutive rate hikes since May. However, the Economist Intelligence Unit (EIU) still forecasts two additional 25bps rate hikes in 3Q26, suggesting that the risk of a higher-for-longer interest rate environment remains.

For the banking sector, the key concern is no longer the direction of interest rates, but how long funding cost pressures will persist. Competition for institutional and large-ticket deposits is expected to remain intense, while funding costs are likely to reprice faster than lending rates. As a result, our analyst has revised down Net Interest Margin (NIM) forecasts by 21bps for 2026F and 38bps for 2027F, while also lowering loan growth projections amid tighter liquidity and softer credit demand.
 

These revised assumptions have led our analyst to reduce banking sector target prices by an average of 26%, reflecting a more challenging profitability outlook in a prolonged high interest rate environment. Against this backdrop, we are becoming more selective across the banking sector, favoring banks with strong CASA franchises, better funding resilience, and more defensive margins. In this context, BBCA remains our preferred pick, while BRIS continues to offer an attractive long-term structural growth story.