Indonesian banks' loan growth won't rally faster in 2H13

But high LDRs among banks loom.

According to Maybank Kim Eng, although 2Q13 results were largely in line with estimates, Indonesia’s moderating macroeconomic backdrop will elevate competition among banks. Higher funding cost is evident, initiated by BCA in May 2013. 

Here's more from Maybank Kim Eng:

We see a possibility for BCA to become even more aggressive in raising TD considering that LDR is approaching the bank’s 75% internal cap. These could potentially turn into NIM issues for other banks with a weak CASA base.

While we do not expect loan growth to rally faster in 2H13, we will look out for high LDRs among banks as LDRs will influence sustainable loan growth. Another common concern among bankers is the risk that NPL might surge if lending rates accelerated along with TD rates.

We will be more cautious on banks with slow progress in cleaning up their balance sheets, such as BTN and BJB.