Indonesian Small Banks' Stocks Outperform Big Banks in Early 2026

Regulatory Changes Drive Market Reaction

Shares of smaller Indonesian banks have outperformed their larger counterparts in early 2026, driven by potential regulatory changes announced by the Financial Services Authority (OJK). The OJK plans to modify regulations for banks classified under Core Capital Bank Group (KBMI) I, which could lead to industry consolidation and increased capital requirements.

Market Performance Comparison

The contrast between small and large banks' stock performance is stark. While major banks like PT Bank Mandiri (Persero) Tbk. (BMRI) saw their shares drop 5.69% year-to-date, smaller banks experienced significant gains. Notable performers include:

• PT Bank Amar Indonesia Tbk. (AMAR) up 5.45% to Rp232
• PT Bank KB Indonesia Tbk. (BBKP) rising 10.39% to Rp85
• PT Bank Victoria International Tbk. (BVIC) surging 37.39% to Rp158
• PT Bank Sinarmas Tbk. (BSIM) jumping 63.95% to Rp1,410

Analyst Insights

Analysts attribute the positive performance to market speculation about potential mergers and capital injections following the regulatory changes. Oktavianus Audi from Kiwoom Sekuritas Indonesia notes that domestic investors are the primary drivers of this growth, as foreign inflows remain limited, constituting only about 2% of total transactions in the past six months.

Big Banks' Prospects

While smaller banks are currently in the spotlight, analysts see potential for larger banks as well. Kiwoom Sekuritas recommends buying BMRI with a target price of Rp5,500, BBCA at Rp9,000, and BBRI at Rp4,250. The firm expects credit growth to pick up, particularly if it reaches double digits, which could boost big banks' performance. However, risks remain, including slowing credit growth, limited interest rate cuts, and potential asset quality issues.

Market Outlook

Muhammad Wafi from KISI Sekuritas believes that the varied performance among big banks' stocks is due to rotation and valuation factors rather than fundamental changes. He remains positive on the sector for 2026, suggesting that BMRI, BBRI, and BBCA remain relevant for different investment strategies.