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Singapore (TheInsiderStories) — In just over a week Moody’s Investors Service released the rating of nine Indonesian banks following the latest global economic conditions. Yesterday, the rating agency assigned Counterparty Risk Ratings (CRRs) to nine Indonesian banks.

The affected banks are: (1) Bank Rakyat Indonesia (P.T.) (BRI); (2) Bank
Mandiri (P.T.) (Mandiri); (3) Bank Central Asia Tbk (P.T.); (4) Bank Negara Indonesia TBK (P.T.) (BNI); (5) Bank Tabungan Negara (P.T.) (BTN); (6) PT Bank CIMB Niaga Tbk (CIMB Niaga); (7) Pan Indonesia Bank TBK (P.T.) (Panin); (8) Bank Danamon Indonesia TBK (P.T.) (BDI); and (9) Bank Permata TBK (P.T.) (Permata).

Moody’s Counterparty Risk Ratings are opinions of the ability of entities to honor the uncollateralized portion of non-debt counterparty financial liabilities (CRR liabilities) and also reflect the expected financial losses in the event that such liabilities are not honored. CRR liabilities typically relate to transactions with unrelated parties.

Examples of CRR liabilities include the uncollateralized portion of payables arising from derivatives transactions and the uncollateralized portion of liabilities under sale and repurchase agreements. CRRs are not applicable to funding commitments or other obligations associated with covered bonds, letters of credit, guarantees, servicer and trustee obligations, and other similar obligations that arise from a bank performing its essential operating functions.

RATINGS RATIONALE
The CRRs assigned to the nine Indonesian banks are in line with the with the Counterparty Risk Assessments (CRA) already assigned. Because Moody’s considers Indonesia not to have an operational resolution regime, in assigning CRRs to the Indonesian banks subject to this rating action, the rating agency applies its basic Loss Given Failure (LGF) approach.

Moody’s basic LGF analysis positions CRRs in line with the banks’ CRAs, one notch above their adjusted BCAs, prior to government support. Furthermore, the CRRs also incorporate between zero and one notch of uplift due to Moody’s assessment of government support for the nine banks in times of need, based on the banks’ systemic importance to Indonesia. The uplifts are in line with that applied to the CRAs.

OUTLOOK

CRRs do not carry outlooks.

FACTORS THAT COULD LEAD TO AN UPGRADE

For Mandiri and BNI, the deposit ratings are already at the level of the sovereign rating of Baa2 with a stable outlook. As such, Moody’s could
upgrade the banks’ ratings, if Moody’s upgrades Indonesia’s sovereign
rating.

And, Moody’s could upgrade the banks’ BCAs if the banks demonstrate an improvement in their asset quality, supported by continued strength in their loss-absorbing buffers, including loan-loss reserves and core capital.

For BRI and Bank Central Asia, their deposit ratings and BCA are already
at the level of the sovereign rating of Baa2 with a stable outlook. As such, Moody’s could upgrade the banks’ ratings and BCAs if Moody’s upgrades the sovereign rating, and their credit fundamentals remain robust and reflect stabilizing asset quality and strong capitalization.

For BTN, CIMB Niaga and BDI, their deposit ratings are already at the level of the sovereign rating of Baa2 with a stable outlook. As such, Moody’s could upgrade their ratings if Moody’s upgrades the sovereign rating.

And, Moody’s could upgrade the bank’s BCAs if they demonstrate an improvement in their asset quality, loss-absorbing buffers — including loan-loss reserves and core capital — as well as a sustained improvement in funding, as reflected by track records of lower deposit funding costs.

For Panin and Permata, Moody’s could upgrade the banks’ deposit ratings
and BCAs, if they demonstrate improvements in their asset quality, loss-absorbing buffers — including loan-loss reserves and core capital — as well as improvements in funding.

FACTORS THAT COULD LEAD TO A DOWNGRADE

For BRI, Mandiri, Bank Central Asia, BNI, BTN, Moody’s could downgrade the banks’ Baa2 deposit ratings if Moody’s downgrades the sovereign rating. For CIMB Niaga and BDI, Moody’s could downgrade the banks’ Baa2 deposit ratings if Moody’s downgrades the sovereign rating and the banks’ adjusted BCAs.

And, Moody’s could downgrade these banks’ BCAs, if their financial fundamentals deteriorate significantly. If all other rating factors are constant, their BCAs would come under adverse pressure if they report a continued increase in problem loans — including nonperforming and restructured loans — or a material decline in core capital ratios and/or profitability.

For Panin and Permata, Moody’s could downgrade the banks’ deposit ratings
and BCAs if their financial fundamentals deteriorate significantly. If all other rating factors are constant, their BCAs would come under adverse pressure, if they report a continued increase in problem loans — including nonperforming and restructured loans — or a material decline in core capital ratios and/or profitability.

The following ratings were assigned:

Bank Rakyat Indonesia (P.T.)
Local and foreign currency long-term Counterparty Risk ratings of Baa1
Local and foreign currency short-term Counterparty Risk ratings of P-2

Bank Mandiri (P.T.)
Local and foreign currency long-term Counterparty Risk ratings of Baa2
Local and foreign currency short-term Counterparty Risk ratings of P-2

Bank Central Asia Tbk (P.T.)
Local and foreign currency long-term Counterparty Risk ratings of Baa1
Local and foreign currency short-term Counterparty Risk ratings of P-2

Bank Negara Indonesia TBK (P.T.)
Local and foreign currency long-term Counterparty Risk ratings of Baa2
Local and foreign currency short-term Counterparty Risk ratings of P-2

Bank Tabungan Negara (P.T.)
Local and foreign currency long-term Counterparty Risk ratings of Baa2
Local and foreign currency short-term Counterparty Risk ratings of P-2

PT Bank CIMB Niaga Tbk
Local and foreign currency long-term Counterparty Risk ratings of Baa1
Local and foreign currency short-term Counterparty Risk ratings of P-2

Pan Indonesia Bank TBK (P.T.)
Local and foreign currency long-term Counterparty Risk ratings of Baa2
Local and foreign currency short-term Counterparty Risk ratings of P-2

Bank Danamon Indonesia TBK (P.T.)
Local and foreign currency long-term Counterparty Risk ratings of Baa1
Local and foreign currency short-term Counterparty Risk ratings of P-2

Bank Permata TBK (P.T.).
Local and foreign currency long-term Counterparty Risk ratings of Baa2
Local and foreign currency short-term Counterparty Risk ratings of P-2

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The Insider Stories Founder Linda Silaen has a solid, proven history, established over more than a decade as a journalist with a leading internasional news organization, of being the first with the biggest economic news stories in Indonesia. Specializing in corporate news, Linda is also a veteran of some of the biggest macroeconomic and general news stories as Indonesia rapidly transforms into a major market economy. One of the founders of the original blog from which this company developed, Linda’s knowledge of investors’ information communications and data us developed from unrivaled networking skills that make her a well-known name among CEOs, bankers, government officials and private equity investors both in Indonesia and other countries.

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