March 10, 2014 / 8:02 AM / 4 years ago

RPT-Fitch Affirms Indonesia's SMF at 'AA(idn)'; Outlook Stable

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March 10 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Indonesia-based PT Sarana Multigriya Finansial (Persero)’s (SMF) National Long-Term Rating at ‘AA(idn)’ and its National Short-Term Rating at ‘F1+(idn)'.

The Outlook is Stable. Fitch has also affirmed SMF’s rupiah denominated senior bond at ‘AA(idn)'. A full list of rating actions is at the end of this commentary.

‘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.

‘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 ratings reflect Fitch’s expectation of extraordinary state support for the company, if needed. This expectation is based on SMF’s growing policy role in developing the secondary mortgage market in Indonesia and its 100% direct state ownership. The ratings also factor in the absence of an explicit state guarantee for SMF’s liabilities and lower systemic importance relative to large state-owned Indonesian banks.

Fitch expects SMF to expand its loan portfolio by IDR3trn in 2014, supported mainly by debt issues. Its total outstanding loans, comprising loans to banks and finance companies, have grown significantly to about IDR6.2trn at end-2013 from IDR4.8trn at end-2012 due to increasing mortgage demand. At end-2013 all loans were classified as performing.

SMF’s policy role is expanding as it facilitated the launch of six onshore residential mortgage-backed securities totalling IDR3.96trn in 2009-2013. This is in line with SMF’s long-term plan to develop its role as credit guarantor for mortgage lenders or mortgage-backed issues in addition to providing funds.

Fitch expects SMF’s profitability to remain thin given its role in providing long-term funding for the primary mortgage market at competitive rates. Profitability is not SMF’s main objective due to its public policy role. SMF was established by the government of Indonesia in 2005 and is regulated and supervised by the Ministry of Finance.


Downward rating pressure could arise from any perceived reduction in the government’s willingness to provide extraordinary support to SMF, especially if SMF’s mandate were to become less important for the mortgage sector’s development, although this seems unlikely in the medium-term. Although limited by SMF’s small size relative to larger government banks and the absence of an explicit state guarantee, positive rating action for SMF is possible if its policy role was to become more systemically important and backed by more tangible forms of state support.

A full list of rating actions is as follows:

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

National Short-Term Rating affirmed at ‘F1+(idn)’

Senior unsecured bond III/2010 affirmed at ‘AA(idn)’

Senior unsecured bond programme 2011 affirmed at ‘AA(idn)’

Senior unsecured bond programme tranche I 2011 affirmed at ‘AA(idn)’

Senior unsecured bond programme tranche II 2012 affirmed at ‘AA(idn)’

Medium term notes V/2013 affirmed at ‘F1+(idn)’

Medium term notes VI/2013 affirmed at ‘F1+(idn)'

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