S&P Global Ratings warn that Indonesia’s state‑owned banks face rising credit and earnings risks after government‑driven lending pushed loan growth to more than double the industry pace. Analysts led by Nikita Anand say net interest margins at PT Bank Mandiri, PT Bank Rakyat Indonesia and PT Bank Negara Indonesia could fall 10‑20 basis points over the next 12‑18 months as lower‑yielding loans expand amid higher funding costs. The surge, largely from loans to state‑owned enterprises and government programs, reached an average 26% year‑on‑year by June, exceeding S&P forecasts and the banks’ guidance.

A key test of asset quality looms this month when PT Agrinas Pangan Nusantara, a Danantara‑controlled firm managing President Prabowo Subianto’s village cooperative program, makes its first repayment; SOE loans represent 2‑6% of each bank’s total lending. While banks can claim shortfalls from the government, the mechanism remains untested. S&P expects loan growth to slow to 8‑10% next year as liquidity tightens and short‑term debt is repaid, noting that a healthy tier‑1 capital ratio of 16‑20% provides a buffer.