Jan 10 - Fitch Ratings has upgraded PT BFI Finance Indonesia Tbk's (BFI Finance) National Long-Term rating to 'A+(idn)' from 'A(idn)'. The Outlook is Stable.
Fitch has also upgraded BFI Finance's bond programme, its IDR575bn rupiah bond issued under the programme as well as its IDR225bn MTNs to 'A+(idn)' from 'A(idn)'. Fitch has also assigned the second rupiah bond issued under the programme with a maturity of up to three years an 'A+(idn)' rating.
The upgrade reflects BFI Finance's continued strong capitalisation and low leverage. The sustained improvements have resulted in ample liquidity and higher profitability relative to its peers, making BFI Finance the strongest standalone finance company in Indonesia.
However, a further upgrade is unlikely due to its limited franchise and reliance on wholesale funding leading to inherently higher liquidity risk compared with banks. Its rating also recognises its modest asset quality, which weakened slightly in Q312.
BFI Finance managed to report healthy profitability at end-Q312 despite tighter consumer finance regulations in 2012. Its leverage remains low at 1.3x compared with its rated peers' 4x. Liquidity remains satisfactory with sound asset-liability management. The company also benefits from funding support from its largest shareholder, Trinugraha Capital, a fund management company led by TPG Capital, which also owns majority stakes in Bank BTPN. The company had unutilised credit facilities totalling IDR370bn from the bank (33% of total unutilised credit facilities) in Q312.
Fitch believes that the company's asset quality will be under pressure in the near- to medium-term as demand for leasing equipment from the commodity sector, which counts for about 20%of its total financing portfolio, will remain weak in 2013. However, deterioration in asset quality should remain manageable given that its capitalisation, at IDR2.7trn, is one of the highest in the industry. BFI Finance also formed a new risk management division in 2012 to improve controls over credit and operation risk.
Established in 1982, BFI Finance focuses on the leasing and consumer financing business in Java, Sumatra, Kalimantan and Eastern Indonesia areas. BFI Finance is owned by international fund management companies, including Trinugraha Capital (44.95%) and Northern Trust S/A AVFC (8.3%).