Big Banks Are Pulling Profits Out Of Indonesia Fast

There's a real split happening right now in how people are reading Indonesia's economy, and it's worth understanding both sides before deciding which one you believe.

On one side: Citigroup, HSBC, and Standard Chartered have been aggressively pulling profits out of Indonesia and sending them back to their parent companies, spooked by the country's increasingly state-led economic policies. On the other side: there's a genuine, credible case that Indonesia's long-term trajectory is still one of the more compelling stories in Southeast Asia, and that pulling out now might mean missing the actual opportunity.

Here's what's driving both sides of that split.

Why the big banks are getting nervous

Bloomberg recently reported that since 2024, Citigroup, HSBC, and Standard Chartered have collectively remitted about $640 million out of Indonesia back to their parent companies, and notably, that figure is actually more than what those three banks earned in the country over the same period. That's a meaningful signal on its own: banks pulling out more than they're making suggests genuine unease about staying exposed, not just routine profit management.

A few specific things are driving that unease. Currency volatility is a big one. The rupiah has fallen to historic lows against the US dollar. There's also pressure on banks to support various government initiatives, which cuts into how freely they can operate on their own commercial terms.

Indonesia's policy direction has played a real role here too. The government has been "canalising" major commodity exports coal, nickel, and palm oil, under a central agency, concentrating control in a way that's dented investor confidence. On top of that, there have been issues around managed trades of shares on the equity market, which has contributed to capital outflows.

Perhaps the most striking move: Jakarta has confiscated roughly five million hectares of oil palm acreage and industrial forest concessions since last year, consolidating much of it into a new state-owned entity, PT Agrinas Palma Nusantara which, through that consolidation, became the largest oil palm company in the world.

That's the kind of state intervention that makes foreign investors nervous, and it's a big part of why these major banks have been actively de-risking rather than waiting to see how things play out.

Why Malaysian companies specifically should be paying attention

This isn't just an abstract macro story it has direct relevance for major Malaysian companies with real operations in Indonesia. CIMB Group and Maybank both have substantial banking operations there. On the plantation side, companies like SD Guthrie, United Plantations, Kuala Lumpur Kepong, IOI Corp, and Genting Plantations have all played significant roles in helping Indonesia become the world's largest palm oil producer.

Given what Citigroup, HSBC, and Standard Chartered have already done, there's a reasonable argument that these Malaysian firms should be actively managing their own risk exposure the same way accepting the negative impact of the weak rupiah-ringgit exchange rate as a relatively small price to pay for protecting capital and shareholder interests.

There's also a domestic angle here worth noting: doing so would help address ongoing pressure from institutional shareholders in Malaysia pushing for better shareholder returns, and it would align with what the MY Value Up programme is specifically trying to achieve.

But here's the case for staying in, or even leaning in further

Despite all of that negative news flow, there's a genuine argument that Malaysian investors should be thinking about Indonesia with a long-term lens rather than reacting to short-term headlines.

Start with the banking sector specifically. Fitch is projecting Indonesia's Islamic banking financing to grow around 10% in 2026, holding its share of the overall banking system at roughly 8%. That growth is expected to be driven by government-led consolidation, financial inclusion initiatives, and new services like bullion banking all specifically aimed at capturing Indonesia's large, currently under-banked Muslim population. That's a real, structural growth opportunity for CIMB and Maybank specifically, not just a hopeful projection.

Zoom out further and the scale of the opportunity gets genuinely hard to ignore. Indonesia is projected to become the world's fourth-largest economy by 2045. It's already the only trillion-dollar economy in ASEAN, with a population of 280 million people. It holds the world's largest nickel reserves and is the largest exporter of both coal and palm oil. This is not a small or peripheral market by any measure.

The industrial policy angle

Indonesia's broader economic strategy is increasingly built around adding value to its natural resources rather than just exporting raw commodities, which is presumably part of the logic behind moves like the commodity export canalisation that's been spooking foreign banks in the first place. Alongside that, the government is directing real investment into digital infrastructure, AI, advanced manufacturing, and fintech, all aimed at creating jobs and lifting income levels over time.

Jakarta's also using its sovereign wealth fund, Danantara, which holds roughly $900 billion in assets, to tackle structural issues like the country's low tax-to-GDP ratio and to fund infrastructure investment more broadly.

The credit rating and bond market signals are actually pretty reassuring

Here's where the picture gets genuinely more optimistic. S&P recently affirmed Indonesia's BBB/A-2 sovereign credit rating, characterizing the country's recent fiscal strains as likely temporary, and expecting them to be offset by stronger commodity prices and spending cuts. S&P also expects government revenue to keep recovering this year, with export receipts rebounding as commodity prices strengthen.

International investors also don't seem nearly as spooked as the retreating banks would suggest. Danantara raised $1.5 billion in June through its first-ever international bond issue and that issue was more than three times oversubscribed, strong enough demand that it led to the bond being upsized and priced at a lower yield than originally expected. Bond investors get repaid through dividends Danantara earns from its underlying assets, so that level of oversubscription reflects real institutional confidence in the fund's asset base and Indonesia's broader trajectory, not just retail speculation.

The bigger argument: don't judge a country by one administration's policies

The core case for staying invested in Indonesia long-term comes down to this: Indonesia is a long-term investment thesis, not something tied to the fortunes of a single government. The country runs a functioning democratic system, imperfect, like most democracies, but real with general elections held every five years. A government that underperforms can genuinely be replaced, and its policies changed with it.

That's a meaningfully different situation from an authoritarian system where a specific administration's approach is effectively permanent. If the current state-led policy direction is genuinely hurting investor confidence and capital flows, as the bank repatriation numbers suggest it already is, that creates real democratic and political pressure for course correction over time pressure that doesn't really exist in the same way under more closed political systems.

Where this actually leaves things

There's no clean, single answer here, and that's honestly the whole point. Citigroup, HSBC, and Standard Chartered have already made their call pull profits out faster than they're coming in, and de-risk. That's a defensible, rational response to real near-term concerns: state intervention in commodity markets, currency weakness, and pressure on banks to serve government priorities over commercial ones.

But the credit rating affirmation, the heavily oversubscribed bond issue, the projected Islamic banking growth, and Indonesia's sheer scale and long-term trajectory toward becoming the world's fourth-largest economy all point toward a country that international capital markets, at least in aggregate, still have real confidence in.

For Malaysian companies with meaningful Indonesian exposure, such as CIMB, Maybank, and the major plantation players, the actual decision isn't necessarily "stay or leave." It's about managing near-term currency and policy risk actively, the way the retreating global banks have done, while still keeping enough skin in the game to benefit from what could genuinely be one of the more significant economic growth stories in Southeast Asia over the next two decades.