Fitch Rates BII's Senior Sukuk 'AAA(idn)' and Subordinated Bond 'AA(idn)'
(The following statement was released by the rating agency) JAKARTA/TAIPEI/SINGAPORE, June 23 (Fitch) Fitch Ratings has assigned ratings to Indonesia-based PT Bank Internasional Indonesia Tbk's (BII; AAA(idn)/Stable) proposed rupiah sharia bond programme, subordinated bond programme and the first tranche to be issued this year under these programmes. The ratings are as follows: - Sharia senior bond programme 2014 of up to IDR1trn, assigned National Long-Term (LT) Rating of 'AAA(idn)' - Sharia senior bond with maturity of three years, assigned National LT rating of 'AAA(idn)' - Subordinated bond programme 2014 of up to IDR3trn, assigned National LT Rating of 'AA(idn)' - Subordinated bond with maturity of seven years, assigned National LT Rating of 'AA(idn)' The sharia senior bond tranche 1 issue will be up to IDR300bn in size and the subordinated bond issue tranche 1 will be up to IDR1.5trn in size. The proceeds will be used to support the company's business growth.
'AAA' 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. 'AA' National Ratings denote expectations of very low default risk relative to other issuers or obligations in the same country. The default risk inherently differs only slightly from that of the country's highest rated issuers or obligations. KEY RATING DRIVERS The proposed senior debt is rated at the same level as BII's National Long-Term Ratings as it constitutes direct, unsubordinated and senior unsecured obligations of the company and rank equally with all other unsecured and unsubordinated obligations. The proposed subordinated debt is rated two notches below BII's National Long-Term Rating - one notch for loss severity (reflecting the equity conversion and write-down features) and one notch for non-performance risk (reflecting their subordinated status and coupon and/or principal deferral risk). The notes will represent direct, subordinated and unsecured obligations of the bank and rank equally with all its other unsecured and subordinated obligations. BII's rating reflects Fitch's view of a high likelihood of timely support from its higher-rated parent, Malaysia-based Malayan Banking Berhard (Maybank; A-/Negative), in time of need. This view is based on BII's strategic importance to Maybank's regional business expansion in Southeast Asia, the parent's majority ownership/control and a high level of integration with its parent. BII's asset quality remained manageable with NPL ratio at 2.1% at end-Mar 2014 and 2013. The bank's core capitalisation remained below the industry average of about 18%, with Tier 1 ratio at about 10% at end-Mar 2014. Fitch believes that BII would need periodic capital injections from the parent to support its business growth. ROA decreased to 0.6% in Q114 (2013: 1.3%), which remained below the industry average of about 2.9%. Fitch expects that the bank's profitability will be under-pressured under more challenging economic conditions. RATING SENSITIVITIES Any changes in the company's National Ratings would affect these issue ratings. Downward rating pressure may arise from any developments leading to a weakening of perceived support from the parent, such as major changes to ownership or a significant weakening in the parent's financial ability, although Fitch believes this to be a remote prospect in the near to medium term. There is no rating upside as the rating is at the top of the scale.
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