TEXT-Fitch affirms ratings of 4 state owned banks of Indonesia

Mon Oct 15, 2012 6:12am EDT

Related News

Changes to the state rating ('BBB-' / Stable) can lead to changes in the ratings of the banks. Decline in the financial performance of state bank profile does not affect the Issuer Default Ratings (IDRs) and national rating unless the factors underlying government support are also weakened.

Viability Rating (Viability Rating / VR) Bank Mandiri at 'bb +' reflects an improving asset quality, healthy profitability, sufficient capital, the majority state ownership and its position as the largest bank in Indonesia. BRI Viability Rating at 'bb +' reflects the strong profitability - one of the highest in the industry - and its position as the second largest bank in Indonesia in Indonesia focusing on micro-credit with a satisfactory asset quality. BNI Viability Rating at 'bb' reflects the bank's performance is relatively weak, despite the improvement of asset quality and profitability, as well as smaller networks than Mandiri and BRI.

Improved Viability ranking (VR) may occur if the rate of profit and a healthy capital levels to be maintained in a sustainable and consistent improvement in credit risk management. The downgrade could occur as a result of the rapid growth in lending a negative effect on the quality of assets and capital, as well as weakening profitability significantly.

High credit growth in 2010-2012 and a challenging global economic outlook could lead to an increase in NPLs in 2013. However, Fitch found the possibility of asset quality degradation can be controlled given menbaiknya bank's credit risk management and a diversified loan portfolio.

Bank Mandiri has gradually diversified by increasing the share of consumer loans, the share of corporate loans decreased to approximately 34% of total loans at end-H112 from 42% at the end of 2008. Portion of restructured loans Bank Mandiri and BNI dropped to 4% -5% by the end of June 2012, from 5.5% -6.5% at the end of 2010. Micro-loans and consumer loans Bank BRI, which accounted for 51% of total loans at end-H112, remains solid with non-performing loans at below 2% in 2011-H112. The new provisions minimum down payment of 30% for Home Ownership Loan (mortgage) will improve the credit quality of the mortgage lender BTN in the medium term. Strong profitability government-owned banks and the high level of reserves will continue to provide an adequate buffer against a more challenging economic conditions.

Fitch estimates that, in the medium term, the financial performance of the banks owned by the government would be well maintained capital levels, supported by moderate loan growth, lower funding costs, strong fee income and credit costs are controlled. Based on the results of stress tests, state banks have sufficient income before provision for loan losses to absorb the rate is higher. For BRI, up to 6% of total loans, for Mandiri and BNI to 4% -5% and for BTN to 2% -3%. The loss rate is above the average historical loss for the year 2009-H112 is less than 1% for the BTN, 1% for the Independent, and 2% for the BRI and BNI. Although the cost of provisioning BTN lower than the other three state-owned banks, recovery (recovery) of troubled mortgage loans consistently better so as to provide an additional buffer against loan losses.

Bank Mandiri is the largest bank in Indonesia with 14% of banking assets at end-H112. BRI has the second-largest (12% of banking assets) and has the most extensive distribution network in Indonesia and incomparable to the microfinance sector in the country. BNI is the fourth largest bank with 8% of the banking assets. BTN is the tenth largest bank in Indonesia focuses on Home Loan Ownership loan (mortgage).

The subordinated debt rating lowered to BRI three levels of the national rankings from BRI standalone viability rating (VR), which consists of one notch for potential losses and two notches for the risk of non-performance.

Here is the complete list of ratings:

Mandiri

- Rating Long-Term Foreign Currency USD affirmed at 'BBB-'; Outlook Stable

- Rating Long-Term Local Currency USD affirmed at 'BBB-'; Outlook Stable

- Short-Term Rating Foreign Currency USD affirmed at 'F3'

- Minimum Support Rating affirmed at 'BBB-'

- Support Rating at '2 '- Viability Rating affirmed at' bb + '

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

BRI:

- Rating Long-Term Foreign Currency USD affirmed at 'BBB-'; Outlook Stable

- Short-term rating affirmed at S 'F3'

- Minimum Support Rating affirmed at 'BBB-'

- Support Rating at '2 '

- Viability Rating affirmed at' bb + '

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

- Dollar Subordinated Bonds II/2009 affirmed at' A + (idn)

BNI:

- Rating Long-Term Foreign Currency USD affirmed at 'BBB-'; Outlook Stable

- Rating Long-Term Local Currency USD affirmed at 'BBB-'; Outlook Stable

- Rating Short-Term Foreign Currency USD affirmed at 'F3'

- Support Rating minimum affirmed at 'BBB-'

- Support Rating at '2 '- Viability Rating affirmed at' bb '

- National Long-Term Rating affirmed at' AA + (idn) '; outlook Stable

- Senior Bond Rating affirmed at' BBB-'

BTN

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

- U.S. Senior bonds affirmed at 'AA (idn)'

- U.S. Senior Bonds program affirmed at 'AA (idn)'

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.