Despite expectations that Indonesia may further cut policy interest rates and bank reserve ratios in 2020, Indonesian lenders will likely continue to report some of the highest net interest margins in Southeast Asia.

Indonesian banks' NIMs have long been outpacing their regional peers', partly due to the country's historically high inflation rates and borrowers' risks. The aggregate NIM of SNL-covered banks in Indonesia stood at 5.52% as of end-2018. They were followed by Cambodian banks, which had an aggregate NIM of 3.96%, as well as Philippine and Thai lenders.

The NIMs at Indonesian lenders will likely hover at 2019 levels next year, according to Kevin Kwek, managing director for ASEAN macro and banks at Sanford C. Bernstein & Co. LLC. He expects the central bank there to cut policy rates two to three times in 2020.

"Liquidity will remain tight, so the banks will remain sensitive to funding; and if loan growth remains tepid, and loan growth doesn't come from high-yielding segments, the pressure [on NIMs] is downward. This is why the net impact will likely be washed out," he told S&P Global Market Intelligence in an e-mail.

Bank Indonesia lowered policy rates four times in 2019 in a bid to stimulate economic growth. At its November policy meeting, the central bank lowered the reserve requirement ratio for conventional commercial banks and Islamic banks to 5.50% and 4.00%, respectively, effective Jan. 2, 2020. The move was to ensure additional liquidity in the system, the central bank said.