TEXT-Fitch affirms Bank International Indonesia at AAA(idn);otlk stbl

Wed Sep 7, 2011 3:23am EDT

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(The following statement was released by the rating agency)

Sept 07 - Fitch) Fitch Ratings has affirmed PT Bank International Indonesia Tbk's (BII) Long-Term Issuer Default Rating (IDR) at 'BB+' with a Positive Outlook, and its National Long-Term Rating at 'AAA(idn)' with a Stable Outlook. A full list of rating actions is provided below.

BII's IDRs and National Long-Term ratings reflect strong support from its higher-rated parent bank, Malayan Banking Berhard (Maybank; 'A-'/Stable). The Viability rating reflects the bank's moderate financial position in terms of asset quality, profitability and capital.

Maybank's long-term plan is to develop BII as one of its key regional growth platforms given Indonesia's growth potential. Maybank is in the process of transferring its IT and risk management expertise to BII. Both banks have derived business synergies in global market/treasury, corporate banking activities, sharia banking, human capital, and risk management.

A stringent credit policy, stronger risk management and close monitoring of loan portfolios have resulted in stronger asset quality as NPLs decreased to 2.4% of total loans at end-H111 (2010: 3.1%). However, BII continues to face the challenge of managing asset quality at its subsidiary WOM Finance ('AA(idn)'/Stable). NPL reserve coverage remained adequate at 93% at end-H111 (2010: 90%).

BII's net interest margin (NIM) declined to 5.1% in H111 (2010: 5.5%) mainly due to keen competition in lending and deposit taking. Profitability from its core banking and automobile business under BII Finance ('AA+(idn)'/Stable) improved, though the challenge remains to improve WOM Finance's profitability. Return on assets (ROA) slightly improved to 0.9% in H111 (2010: 0.7%). BII's ROA was small compared with the industry average of 3%.

Maybank has supported BII through its sub-debt issue of IDR1.5tn in Q211, which lifted the latter's total capital adequacy ratio (CAR) to 13.06% at end-H111 (2010: 12.50%), although its Tier 1 decreased to 10.45% (2010: 11.64%) from loan growth and full implementation of Basel II operational risk. While rapid loan growth over the next three years will put downward pressure on the bank's capital, Fitch expects BII to maintain Tier 1 and CAR in line with Bank Indonesia's minimum requirements.

Established in 1959 and listed in 1989, BII is the eighth-largest bank in Indonesia with 2.6% of system assets.

BII ratings:

- Long-Term Foreign-Currency IDR affirmed at 'BB+'; Outlook Positive;

- Short-Term Foreign-Currency IDR affirmed at 'B';

- National Long-Term Rating affirmed at 'AAA(idn)'; Outlook Stable;

- Subordinated debt affirmed at 'AA(idn)'; - Support Rating affirmed at '3';

- Individual Rating affirmed at 'C/D'; and

- Viability Rating affirmed at 'bb'.

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