Indonesia Bank Rally Imperilled by Sluggish Lending, Bad Loans
- Banks face stricter criteria on loan assessments from August
- Bank Central Asia is second-most valuable in Southeast Asia
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The rally in Indonesian bank stocks may be nearing an end amid sluggish credit growth and tougher regulations for loan quality assessments.
Equity analysts are now downgrading banking stocks after the Jakarta Finance Index rallied 21 percent this year -- more than double that of the main gauge -- as they expect nonperforming loans in the $527 billion industry to creep up again. Lenders may need to set aside bigger buffers against bad loans after the Financial Services Authority of Indonesia, known as OJK, decided against extending a rule first introduced in 2015 that allowed for looser provisioning terms.