Moody's lowered its outlook on the Indonesian banking system to stable from positive, following a sovereign upgrade and an upgrade of Indonesian lenders during the three months from April to June.
The rating agency said in an Aug. 8 report that Indonesian banks should exhibit stabilizing asset quality in a robust macroeconomic environment over the next 12 to 18 months.
Macroeconomic policies, it said, will help the country's real gross domestic product to grow 5.2% annually in each of 2018 and 2019, following a 5.1% expansion in 2017.
Indonesian lenders' robust revenue growth and declining credit costs will also allow them to generate sufficient capital to support accelerating asset growth, the report added.
Moody's also expects the banks' core profitability to remain strong, supported by wide net interest margins of around 5% which it noted is well above their regional peers.