3 reasons why Indonesia's top 4 banks can't be knocked off

Are domestic peers still no match?

According to Moody's, the top four Indonesian banks generally have higher profitability compared to other domestic peers, owing to better pricing power, more established non-fund based business, and stronger asset quality.

BRI is the most profitable bank in Indonesia, based on various metrics such as return on equity (ROE), return on average assets (ROAA), and net income/risk-weighted assets.

Here's more from Moody's:

This is supported by its unrivaled franchise in the highly profitable micro-lending business which is reflected in BRI’s very high NIM. Such high profitability suggests strong internal capital generation capacity, providing a high loss-absorption cushion. 

Bank Central Asia is one of the most profitable banks in Indonesia, owing to its low cost of funding, good cost management and exceptionally strong credit quality. These strengths compensate for its absence in the highly profitable micro-lending segment, its high proportion of excess funds, and its large exposure to the low-margin and highly competitive corporate lending segment (accounting for 32.6% of total loans at end-June 2013). 

Bank Mandiri’s profitability has risen over the years, on the back of an improving asset quality, strong loan growth, a greater focus on non-interest income and cost discipline. These factors have helped to offset its weaker NIM.

Based on the average ratio for the past three years, Bank Mandiri has the lowest cost-to-income and cost-to-asset ratios.

While BNI’s profitability has improved in recent years, with the ratio of net income/risk-weighted assets reaching 3.20% at end-June 2013 from the 0.94% at end-2008, it is still at levels weaker than that of its larger peers because of BNI’s lower operating efficiency and weaker asset quality.

The bank’s weak operating efficiency is a function of modest cost management and low staff productivity. In our view, BNI’s deep-seated corporate culture and legacy banking practices will continue to pose a challenge to any efforts by management to significantly improve the bank’s profitability levels through better cost management and internal controls.