RPT-Fitch Affirms National Ratings on CIMB Niaga, BII, OCBC NISP and UOBI

Tue Apr 15, 2014 6:21am EDT

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April 15 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed the Long-Term Foreign Currency Issuer Default Ratings (IDR) and National Ratings of four foreign-owned banks in Indonesia - PT Bank CIMB Niaga Tbk (CIMB Niaga), PT Bank Internasional Indonesia (BII), PT Bank OCBC NISP Tbk (OCBC NISP) and PT Bank UOB Indonesia (UOBI). A full list of rating actions is at the end of this rating action commentary.

'AAA' Long-Term National Ratings denote the highest rating assigned by Fitch on its national rating scale for that country. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country.

'F1' Short-Term National Ratings indicate the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. On Fitch's National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country. Where the liquidity profile is particularly strong, a "+" is added to the assigned rating.

The affirmation of the IDRs and National Long-Term Ratings reflects strong parental support and linkage for the four banks. The affirmation of Viability Ratings (VRs) on CIMB Niaga, BII and OCBC NISP reflect the banks' moderate franchises and broadly stable standalone credit profiles under increased pressure arising from lower profitability for all these banks and, in case of CIMB Niaga and BII, weaker asset quality.

Fitch has also assigned a Short-Term Foreign Currency IDR of 'F3' to CIMB Niaga and National Short-Term ratings of 'F1+(idn)' to CIMB Niaga, BII and UOBI.

KEY RATING DRIVERS - IDRs, National Ratings & Support Ratings

The IDRs, Support Ratings and National ratings on the four banks reflect Fitch's view that each bank's higher-rated foreign parent has a high propensity to provide timely support to its subsidiary, if needed. The Long-Term Foreign Currency IDRs are constrained by Indonesia's Country Ceiling of 'BBB', while the Long-Term Local Currency IDRs are constrained by a three-notch uplift from Indonesia's Long-Term Local Currency IDR. Fitch's view of support is reinforced by the growing strategic importance of these Indonesian subsidiaries to the parents' Asia franchises, the parents' majority ownership/control and a high level of integration with their parents. CIMB Niaga is owned by Malaysia-based CIMB Group Holdings Bhd and BII is owned by Malayan Banking Berhard (Maybank; A-/Negative). OCBC NISP and UOBI are majority owned by Singapore-based Overseas-Chinese Banking Corp (OCBC; AA-/Negative) and United Overseas Bank Limited (UOB; AA-/Stable), respectively.

KEY RATING DRIVERS - Viability Ratings

CIMB Niaga's VR of 'bb' reflects its franchise as Indonesia's fifth-largest bank by assets at end-2013 and its moderate asset quality, capital position, profitability and funding profile. BII's VR of 'bb' reflects its modest capitalisation and profitability, and its smaller franchise compared with CIMB Niaga. However, this is counterbalanced by BII's slightly lower non-performing loan ratio and better funding profile compared with CIMB Niaga. OCBC NISP's VR of 'bb' takes into account its consistently strong asset quality and satisfactory capital position, despite its smaller franchise, modest profitability and weaker funding profile compared with CIMB Niaga and BII.

RATING SENSITIVITIES - IDRs, National and Support Ratings

Upside potential for the banks' IDRs may result from an upgrade of the Indonesian Country Ceiling, but only if the parents' ratings remain above Indonesia's Country Ceiling. Support ratings are likely to remain unchanged barring multiple notches of rating changes of their parents' IDRs. There is no rating upside for the National Ratings as they are already at the top end of the scale.

Downward rating pressure may arise from any developments leading to a weakening of perceived support from their parents, such as major changes to ownership or a significant weakening in their parents' financial ability, although Fitch believes this to be a remote prospect in the near- to medium-term. Deterioration in the banks' standalone financial profile is unlikely to impact their IDRs and National Rating unless the factors underpinning the parent support also weaken. OCBC's ratings are presently on Rating Watch Negative (RWN), reflecting OCBC's planned acquisition of Hong Kong's Wing Hang Bank Limited (see "Fitch Places OCBC on Watch Negative on Wing Hang Bank Takeover Plan", dated 2 April 2014). In Fitch's view, the RWN on OCBC's ratings is less likely to impact OCBC NISP's ratings as OCBC's ratings are much higher than the current Indonesian Country Ceiling.

RATING SENSITIVITIES - VRs

Rating upside on the banks' VRs may result if their franchises grow to be more comparable to the major Indonesian banks', while they maintain healthy risk-adjusted profitability, high core capitalisation, predominantly low-cost deposit-funded balance sheets and sound asset quality record. Rating downside may result from rapid loan growth adversely affecting asset quality and capitalisation, and/or marked weakening in their liquidity profiles, particularly if the economic environment were to deteriorate.

RATING SENSITIVITIES - Debt Ratings

The ratings of the companies' rupiah-denominated senior bonds and bond programme are the same as their National Long-Term 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-Term and Short-Term Ratings would affect these issue ratings.

The subordinated debts are rated two notches below the banks' National Long-Term Rating, comprising one notch for loss severity and one notch for non-performance risk (partially neutralised by parent support ) to reflect their subordination status and coupon and/or principal deferral risk.

FULL LIST OF RATING ACTIONS:

CIMB Niaga

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

Short-Term Foreign Currency IDR assigned at 'F3'

Viability Rating affirmed at 'bb'

Support Rating affirmed at '2'

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

National Short-Term rating assigned at 'F1+(idn)'

Rupiah Senior Bond Programme 1 2012 affirmed at 'AAA(idn)'

Rupiah Senior Bond Programme 1 tranche 1and 2 2013 affirmed at 'AAA(idn)'

Rupiah Subordinated bonds affirmed at 'AA(idn)'

BII

Long-Term Foreign Currency IDR affirmed at 'BBB', Outlook Stable

Short-Term Foreign Currency IDR affirmed at 'F3'

Viability Rating affirmed at 'bb'

Support Rating affirmed at '2'

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

National Short-Term rating assigned at 'F1+(idn)'

Senior unsecured bond tranche II/2012 affirmed at 'AAA(idn)'

Senior debt programme I/2011 affirmed at 'AAA(idn)'

Senior unsecured bond tranche I/2011 affirmed at 'AAA(idn)'

Subordinated bond tranche II/2012 affirmed at 'AA(idn)'

Subordinated debt programme I/2011 affirmed at 'AA(idn)'

Subordinated bond tranche I/2011 affirmed at 'AA(idn)'

Subordinated bond I/2011 affirmed at 'AA(idn)'

OCBC NISP

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

Long-Term Local Currency IDRs affirmed 'A-'; Outlook Stable

Short-Term Foreign Currency IDR affirmed at 'F3'

Viability Rating affirmed at 'bb'

Support Rating affirmed at '2'

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

National Short-Term rating affirmed at 'F1+(idn)'

Rupiah Senior Bond Programme 1 2012 affirmed at 'AAA(idn)'/'F1+(idn)'

Rupiah Senior Bond Programme 1 tranche 1 2013 affirmed at 'AAA(idn)'/'F1+(idn)'

Rupiah Subordinated bond affirmed at 'AA(idn)'

UOBI

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

National Short-Term rating assigned at 'F1+(idn)'

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