Indonesian lenders took three of the top six slots in a ranking of the 20 largest banks in Southeast Asia by market capitalization in the quarter ended June 30 as the country's economy recovered.
PT Bank Central Asia Tbk remained the largest Southeast Asian bank after its market cap increased 4.57% to $75.23 billion in the second quarter, according to S&P Global Market Intelligence data. PT Bank Rakyat Indonesia (Persero) Tbk secured the third place in the ranking with a market cap of $54.60 billion, while PT Bank Mandiri (Persero) Tbk was ranked sixth with a market cap of $32.37 billion. PT Bank Negara Indonesia (Persero) Tbk, the fourth Indonesian lender on the list, retained its 12th position.
Indonesia's "economy is benefitting from a sustained recovery in private consumption, which accounts for over 50% of Indonesia's GDP," Fiona Leong, head of regional banks at RHB Research Institute, told Market Intelligence in an email. "With economic growth expected to gather momentum in the second half of 2023, this should result in strong loan growth."
In addition to loan growth and improved asset quality, Indonesia's banks are likely to see more resilient net interest margins, helped by strong deposits in current account savings accounts (CASAs), which have kept lending rates stable, Leong added.
Indonesia's GDP expanded by 5.03% in the first quarter of 2023, Reuters reported in May, citing data from Statistics Indonesia. While GDP expansion is projected to moderate to 4.8% in 2023 from a multiyear high of 5.3% in 2022, the pace of growth will still settle at about 5% per year through 2026, S&P Global Ratings said in a July 5 report. The World Bank also expects the country's growth in 2023 to moderate to 4.9%, according to a report released in June.
Singapore banks decline
Singaporean banks saw their market caps decline in the second quarter even as they retained their top positions among the region's biggest banks. DBS Group Holdings Ltd. remained the second-largest bank in Southeast Asia despite a 4.51% quarter-over-quarter decline in its market cap to $59.93 billion as of June 30. Oversea-Chinese Banking Corp. Ltd.'s market cap dropped 0.71% to $40.78 billion, while United Overseas Bank Ltd.'s market cap dipped 5.79% to $34.65 billion.
"Singapore has been seeing a sharp slowdown in the country's two growth engines — manufacturing and financial services — since late 2022," Leong said. "Bank stocks, which are often seen as proxy of the economy, have been sold down as a result."
The Singapore economy grew 0.4% year over year in the first quarter as the manufacturing sector shrank 5.6%, according to data from the country's Ministry of Trade and Industry. GDP growth is forecast to slow to 1.8% in 2023 after growing at 3.6% in 2022, Rajiv Biswas, Asia-Pacific chief economist at Market Intelligence, wrote in a June 2 commentary.
Meanwhile, five banks from Thailand, three each from Malaysia and Vietnam, and two from the Philippines made it to the list of 20 largest banks in Southeast Asia, Market Intelligence data show. Krung Thai Bank PCL saw the largest gain in market cap — 17.58% — in the second quarter, while Joint Stock Commercial Bank for Investment and Development of Vietnam logged the steepest decline in market cap among the pack, at 6.17%.
Philippine lender BDO Unibank Inc. broke into the top-10 banks in the region by market capitalization, rising from 11th place three months prior. All nine biggest banks by market capitalization kept their rankings in the June quarter, Market Intelligence data show.