Indonesian Banking Sector Diverges in 2025: Digital Banks Lead the Way

Contrasting Performance Between Large and Small Banks

The Indonesian banking sector showed mixed results in 2025, with a clear divergence between digital banks and traditional large banks. While major banks generally underperformed, smaller and digital banks captured investor attention with significant gains ¹

Digital Banks Outperform

Digital banks and smaller players led the sector's positive performances: - PT Bank Permata Tbk (BNLI) surged 444.97% to Rp5,150 per share - PT Bank Neo Commerce Tbk (BBYB) rose 120.18% - PT Allo Bank Indonesia Tbk (BBHI) gained 112.86% - PT Bank Capital Indonesia Tbk (BACA) increased by 78.63% ⁵

Large Banks Underperform

In contrast, major banks faced challenges: - PT Bank Central Asia Tbk (BBCA) declined 16.54% - PT Bank Mandiri (Persero) Tbk (BMRI) fell 10.53% - PT Bank Rakyat Indonesia (Persero) Tbk (BBRI) dropped 10.29% - PT Bank Negara Indonesia (Persero) Tbk (BBNI) remained relatively flat with a 0.46% gain ¹

Market Dynamics and Future Outlook

The contrasting performance reflects broader market trends and investor preferences shifting towards smaller, growth-oriented banks with potentially higher return prospects. Analysts suggest that the 125 basis point rate cut throughout 2025 could be a positive catalyst for bank stocks, particularly through reduced funding costs and potential net interest margin recovery ⁵

Investment Implications

The sector rotation from commodity to financial stocks is expected to continue supporting the market, particularly as banking valuations remain at historically discounted levels. The combination of sector rotation, global interest rate normalization, and potential earnings recovery in 2026 could provide further support for the banking sector ⁵

Mutual Funds Performance

The strong performance of certain bank stocks also correlates with the overall positive return of equity mutual funds in 2025. Equity funds recorded a 20.62% return year-to-date, slightly below the 22.17% increase in the Indonesia Composite Index (IHSG) ²