Fitch Rates BII's Senior Sukuk 'AAA(idn)' and Subordinated Bond 'AA(idn)'

Mon Jun 23, 2014 2:01am EDT

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(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.

Contacts: Primary Analyst Stefanus Yuniardhi Director PT Fitch Ratings Indonesia Financial Institution DBS Bank Tower 24th Floor, Suite 2403 Jl. Prof. Dr. Satrio Kav 3-5 Jakarta, Indonesia 12940 +62 21 2988 6809 Committee Chairperson Jonathan Lee Senior Director +886 2 8175 7601 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(idn)' for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable. Additional information is available at www.fitchratings.com. Applicable criteria, "Global Financial Institutions Rating Criteria", dated 31 January 2014, "Rating FI Subsidiaries and Holding Companies", dated 10 August 2012, "National Scale Ratings Criteria", dated 30 October 2013, "Assessing and Rating Bank Subordinated and Hybrid Securities" dated 31 January 2014 and "Rating Financial Institutions Above the Sovereign", dated 12 December 2012, are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Rating FI Subsidiaries and Holding Companies here National Scale Ratings Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Rating Financial Institutions Above the Sovereign here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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