Executive Summary

Key insights and market outlook

Indonesian banks are showing signs of improved credit quality as the Loan at Risk (LaR) ratio declined to 9.41% in October 2025, down from 9.52% in the previous month and 9.94% earlier ¹

². Bank BTN, focusing on property credit, has seen its LaR drop below 20% and expects further improvement to 17-18% in 2026 ¹. The trend indicates a positive outlook for the banking sector heading into 2026.

Full Analysis

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Deep Dive Analysis

Indonesian Banking Sector Shows Resilience with Improving Credit Quality

Loan at Risk Ratio Declines

The Indonesian banking sector is demonstrating improved credit quality as evidenced by the decline in the Loan at Risk (LaR) ratio to 9.41% in October 2025 ¹

². This represents a significant improvement from the previous month's 9.52% and the earlier rate of 9.94%. Although it remains slightly higher than the 9.28% recorded in December 2024, the downward trend is a positive indicator for the sector's health.

Bank BTN's Performance

Bank BTN, a major player in property credit, has seen its LaR ratio drop below the 20% mark ¹

. According to Setiyo Wibowo, Director of Risk Management at BTN, the bank is optimistic about further improvement. BTN expects its LaR to reach 17-18% in 2026, indicating a positive outlook for the bank's credit portfolio.

Sector Outlook

The overall decline in LaR across the banking sector suggests a more prudent risk management approach and potentially better credit quality. This trend is crucial as banks prepare for the challenges and opportunities in 2026. The Financial Services Authority (OJK) continues to monitor these developments closely, ensuring that the sector remains stable and resilient.

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