JAKARTA (TheInsiderStories)Moody’s Investors Service has assigned a Baa2 long-term foreign currency senior unsecured rating to PT Bank Rakyat Indonesia (IDX: BBRI)proposed US dollar denominated senior unsecured notes.

The rating outlook is stable. The notes will have a maturity of five years and will be listed on the Singapore Stock Exchange. The rating is subject to receipt of final documentation, the terms, and conditions, which are not expected to change in any material way from the draft documents that Moody’s has reviewed.

RATINGS RATIONALE

The Baa2 long-term foreign currency senior unsecured rating is in line with the bank’s Baa2 foreign currency deposit rating. The US dollar denominated senior unsecured notes constitute BRI‘s unsubordinated, and unsecured obligations, and will and rank pari-passu
with the bank’s other senior unsecured obligations.

The Baa2 rating is underpinned by BRI‘s baa2 baseline credit assessment (BCA) and Moody’s expectation of a very high probability of support for the bank from the Government of Indonesia (Baa2 stable) in times of need. The rating does not receive an uplift because the bank’s baa2 BCA is already at the same level as the sovereign rating.

BRI’s baa2 BCA takes into account the bank’s strong capital and profitability levels which are underpinned by its solid and profitable micro-financing franchise, its stabilizing asset quality, as well as its stable funding and liquidity.

WHAT COULD MOVE THE RATING UP

An upgrade is unlikely because both the bank’s BCA and its ratings are at the same level as the sovereign rating. The bank’s ratings could be upgraded if the sovereign rating is upgraded.

In the event of a higher sovereign rating, we would consider raising BRI’s BCA if the bank’s credit fundamentals remain robust and it demonstrates a sharp improvement in its asset quality, especially in the corporate lending segment, leading to its gross problem loans staying low for a prolonged period.

WHAT COULD MOVE THE RATING DOWN

We would consider lowering the bank’s BCA if (1) its market share, especially in micro-lending, and profitability deteriorate significantly; or (2) the bank experiences a sharp slippage in credit quality or there is a material deterioration in asset quality, which results in a significant deterioration in its loss-absorbing buffers or; (3) a downgrade of the sovereign rating results in a downgrade of BRI’s deposit ratings.

BRI is headquartered in Jakarta and reported total assets of Rp1.12 quadrillion (US$81 billion) at the end of March 2018.

Email: fauzulmuna@theinsiderstories.com

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