B

eing one of the most profitable businesses in the country, the banking sector has become one of the best performing businesses in the local stock exchange.

The surge in the prices of banking shares has outperformed the Jakarta Composite Index (JCI) this year and the trend will likely continue until next year, analysts say.

 “All banking stocks, not only those with big market capitalizations, are doing quite well because they have their own buyers. They’ve also outperformed the index this year,” Michael Tjoajadi of PT Schroder Investment Management Indonesia, said.

 “In the last three years, the banking sector has made a significant contribution to the economy and the price index. Stocks have been one of our investment choices, particularly banking stocks,” said, Elvyn G Masassya, the president director of state-owned PT Jamsostek, which manages Rp 134 trillion (US$14 billion) in assets, said.  

Elvyn cited that, in the last five years, the return on investment of finance stocks listed on the Indonesia Stock Exchange (IDX) reached 143.68 percent, outperforming the JCI by 104.06 percent.

The best performer in the last five years, according figures from Jamsostek, is Bank Central Asia (BCA) whose stocks gave returns of 187.55 percent from September 2007 to September 2012. The second best performer was Bank Mandiri (BMRI) with a 176.69 percent return, followed by Bank Rakyat Indonesia (BBRI) with 154.56 percent and Bank Negara Indonesia (BBNI) with 125.8 percent.

On a year-to-date basis, Bank Danamon (BDMN) is the best performer among the other four big banks. Shares in BDMN have increased by 51.58 percent so far this year, particularly due to the planned acquisition of the lender by Southeast Asia’s largest bank, Singapore’s DBS Group Holdings Ltd. BMRI is the second-best performer with its shares rising by 27 percent so far this year.

“The banking sector is very sensitive to the economic situation. When the economy is positive, banking shares generally provide higher returns,” Elvyn said.

Indonesia’s economic growth stood at 6.1 percent up to the third quarter of the year. The government is optimistic that growth will be at 6.5 percent by the year’s end and up to 6.8 percent next year despite the slowing global economy.

The positive outlook in the macroeconomy will support the growth in lending.

Agus Yanuar, the president director of PT Samuel Sekuritas, said that his company would likely increase its investment portfolio in the banking sector next year.

“The contribution of the banking sector to the [growth of] JCI will be bigger next year. The JCI will likely grow 10 to 15 percent next year and the banking sector at around 20 percent. We will increase our portfolio share of banking stocks to about 30 percent,” Agus said.

A new banking index called Infobank 15 was introduced on the local stock market last week to
give investors more price indicators to gauge their investments in banking stocks. The new banking index covers 15 banking stocks listed on the IDX.

The index consists of stocks of BBCA, BMRI, BBRI, BBNI, BDMN, Bank Tabungan Negara (BBTN), Bank Rakyat Indonesia Agroniaga (AGRO), Bank Bukopin (BBKP), BPD Jawa Barat dan Banten (BJBR),
Bank Internasional Indonesia (BNII), Bank Permata (BNLI), Bank Sinarmas (BSIM), Bank Tabungan Pensiunan Nasional (BTPN), Bank OCBC NISP (NISP) and Bank Pan Indonesia (PNBN).   

“We hope that the new index will be a benchmark to view the performance of stocks listed on the bourse and will be used by investment managers to develop their products. The banking sector is the motor of economic growth and the most mature sector because all big lenders are already listed on the bourse,” IDX president director Ito Warsito said.