Indonesian banks' loan growth remains weak at 3.8%

This may also be the case in 2018 despite better economic growth.

Banking industry loans on Indonesian banks have grown by a mere 3.8% YTD in September 2017, mimicking 2016’s disappointing growth trajectory, DBS Equity Research reports. They say investment loan is still weak, whilst consumer loan will support growth higher going forward.

Here’s more from DBS Equity Research:

We believe the Indonesian banks are at a crossroads, facing challenges in search of growth drivers. We have not seen any improvement of loan demand in 2017 despite better economic growth. We do not think it will be the case in 2018 either.

Private investment loans could be on wait-and-see mode as the country prepares for the next elections in 2019 (typically market starts to price in this event one year ahead).

On a more positive note, accelerated infra and consumer spending could drive overall loan growth. We do not expect the loan growth in 2018 to deviate much from the nominal GDP growth but better execution of infra projects could drive loan growth higher. Our 2018 loan growth forecast sits at 10%.

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