Bank Mandiri (Mandiri) is the largest state-owned bank in Indonesia with 60% government ownership. We therefore expect a very high likelihood of government support in times of need.

Mandiri’s strength had been its large corporate loan portfolio, which has allowed the bank to book lower credit costs compared to its peers over the pandemic. Mandiri is well capitalised in line with the other Indonesian banks that have relatively high CET1 ratios in the region, though we expect this to be reduced by higher dividend payouts over time.

The liquidity environment showed a turning point in September, aided by BI rate cuts, smaller SRBI issuance and yields, higher government spending, and the government’s cash injection into key state banks, supporting loan growth momentum.

While Indonesia’s growth is projected at ~5% in 2025 and could pickup over the medium term under the Prabowo administration, volatile sentiment towards Indonesia over growth slowdown concerns, weak state finances, and governance and policy uncertainties could weigh on spreads.

We see governance risks as increased with the move of SOE banks including BNI to Danantara; higher dividend payouts to fund government policies are likely. However, we are comfortable with the CET1 ratio dropping to the 14-16% range of other APAC banks.

Asset quality has trended better than peers due to its loan book and growth being predominantly in large corporates. However, we see the possibility of more state directed lending to less commercially viable projects, but the effects would take a few years to play out.