RPT-Fitch affirms Bank Internasional Indonesia and subsidiaries
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Aug 22 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed the ratings of PT Bank Internasional Indonesia Tbk (BII) and its subsidiaries, PT BII Finance Center (BII Finance) and PT Wahana Ottomitra Multhiartha Tbk (WOM). The Rating Outlooks are Stable. A full list of rating breakdown is provided at the end of this commentary.
The affirmation of BII's Long-Term Issuer Default Ratings (IDRs) and National Long-Term Ratings reflects unchanged parental support and linkage with its parent, Malayan Banking Berhad (Maybank) and that of the Viability Rating reflects BII's moderate standalone credit profile.
Key Rating Drivers
The Long-Term IDRs and National Long-Term ratings reflect Fitch's belief that BII?s parent, Maybank (A-/Negative), would be highly likely to provide extraordinary support, if needed. This is in view of BII's strategic importance to Maybank's regional ambitions, the parent's majority ownership (88.3%), and BII's growing integration with Maybank. The Viability Rating reflects BII's asset quality improvement in line with enhanced risk management, ongoing support from Maybank through capital injections, as well as its below-industry average capital position and profitability.
The Support Rating of '2' reflects Fitch view on the bank's stronger integration with Maybank in most key areas, including credit policies, risk management, operational and IT system, and periodic capital injection in times of need.
Rating Sensitivities - IDRs, National Ratings and Support Ratings
Any significant dilution in ownership by, or perceived weakening of support from, Maybank, would put pressure on BII's IDRs, National Ratings and Support Ratings. In Fitch's view reducing its stake, in order to comply with Indonesia's debt capital market regulatory requirement, to the maximum 80% will not impact Maybank's support to BII, given BII's strategic importance to Maybank's regional business. Thus, Fitch expects the IDR and National Long Term Ratings to remain unchanged. Fitch also expects that BII will gradually become a core subsidiary for Maybank as Indonesia is one of Maybank's core markets in Southeast Asia.
There is no upside potential for the National Rating, which is already at the top end of the scale. Any change in Indonesia's Country Ceiling (BBB) would have an impact on BII's IDR but would be unlikely to affect the National Rating as long as Maybank's IDR is above the Country Ceiling.
Rating Sensitivities - Viability Rating
Fitch believes strong ordinary support from Maybank would continue to help underpin BII's VR unless there is material weakening in BII's asset quality or capital position, particularly in a protracted downturn. A sustained improvement in risk underwriting and profitability, along with an ability to maintain sound liquidity and capitalisation with reduced reliance on Maybank, would be positive for the VR.
Key Rating Drivers and Rating Sensitivities - Subsidiary Ratings
The ratings of BIIF and WOM are driven by potential support from their majority shareholder, BII and the ultimate parent, Maybank, in case of need. These ratings take into account their linkage with and strategic importance to Maybank in expanding its footprint in Indonesia's fast-growing consumer market. BII continues to support the funding of its subsidiaries through a joint financing scheme where BII assumes the bulk of the credit risk.
BIIF's National Long-Term rating is a notch below its parent's National Long-Term Rating of 'AAA(idn)', reflecting strong linkages with and timely support from BII as a strategic subsidiary rather than as a core subsidiary of BII.
WOM is rated two notches below its parent's National Long-Term Rating, reflecting moderate linkages with BII in the form of the latter's 62% ownership and timely support for the important subsidiary in motorcycle financing. Any significant dilution in ownership or perceived weakening support from BII and Maybank will put pressure on the ratings of BII Finance and WOM. However, Fitch sees this prospect as remote in the foreseeable future, given BIIF's and WOM's strategic role to expand BII's auto financing exposure. On the other hand, stronger linkages between these subsidiaries and BII, such as a merger of these two subsidiaries, name-sharing and a significantly higher contribution to BII's revenue and assets may result in a positive rating action.
Key Rating Drivers and Rating Sensitivities - Debt Ratings
The ratings of the companies' rupiah-denominated senior bonds and bond programme are the same as their National Long- and Short-Term Ratings. This is because these debts constitute direct, unsubordinated and senior unsecured obligations of the concerned entities and rank equally with all their other unsecured and unsubordinated obligations. Any changes in the National Long- and Short-Term Ratings would affect these issue ratings.
The subordinated debt are rated two notches below the banks' National Long-Term Rating, comprising one notch for loss severity and one notch for non-performance risk to reflect their subordination status and coupon and/or principal deferral risk.
The list of rating actions is as follows:
- Long-Term IDR affirmed at 'BBB', Outlook Stable
- Short-Term IDR affirmed at 'F3'
- National Long-Term Rating affirmed at 'AAA(idn)', Outlook Stable
- Senior unsecured bond tranche II/2012 affirmed at 'AAA(idn)'
- Subordinated bond tranche II/2012 affirmed at 'AA(idn)'
- Senior debt programme I/2011 affirmed at 'AAA(idn)'
- Subordinated debt programme I/2011 affirmed at 'AA(idn)'
- Senior unsecured bond tranche I/2011 affirmed at 'AAA(idn)'
- Subordinated bond tranche I/2011 affirmed at 'AA(idn)'
- Subordinated bond I/2011 affirmed at 'AA(idn)'
- Support Rating affirmed at '2'
- Viability Rating affirmed at 'bb'
- National Long-Term Rating affirmed at at 'AA+(idn)'; Outlook Stable
- National Short-Term Rating affirmed at 'F1+(idn)'
- I/2012 bond affirmed at 'AA+(idn)'
- II/2013 bond affirmed at 'AA+(idn)'
- Medium-term notes V/2013 affirmed at 'AA+(idn)'
- National Long-Term Rating affirmed at 'AA(idn)'; Outlook Stable
- National Short-term Rating affirmed at 'F1+(idn)'
- V/2011 bond affirmed at 'AA(idn)'
- Subordinated debt affirmed at 'AA-(idn)'