Bret Ginesky looked at the historical performance of Indonesian banks during the period of rising and declining interest rates.
Historically, liability sensitive banks underperform in a rising inflation environment.
In a higher inflationary environment we believe investors should hold BCA (BBCA IJ), Mandiri (BMRI IJ), and BNI (BBNI IJ) and be cautious of Danamon (BDMN IJ) and BTN (BBTN IJ).
BMRI lagged the JCI when in 2005/6 and 2008/9 when inflation has topped 7%. We would however note that BMRI has a much different credit profile now. As such, we don’t think that the stock will perform similarly this time.
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