JAKARTA (TheInsiderStories) – Fitch Ratings Indonesia has rated for four local bank owned by foreign investors. The agency affirmed PT Bank Tabungan Pensiunan Nasional Tbk (IDX: BTPN) at AAA. While its unit PT BTPN Syariah’ National Long Term Rating AA to Positive Rating Watch.
Then, PT Bank KEB Hana Indonesia rating lift up from F3 to F2, PT Woori Saudara Indonesia 1906 Tbk (IDX: SDRA) AAA level and PT Sinarmas Hana Finance A+. The Outlook given by Fitch Ratings for the three financial institutions is ‘stable’.
National rankings in the AAA category show the highest rating given by Fitch on the national rating scale for Indonesia. This rating is given to issuers or debt securities with the lowest expected risk of default against issuers or other debt securities in Indonesia.
The F2 National Rating indicates the capacity to pay the strongest financial commitments on time to the issuers or other debt securities in Indonesia. In the Fitch national rating scale, this rating is given to the lowest risk of default relative to others in Indonesia.
Ratings for KEB Hana Indonesia, Bank Woori Saudara and BTPN Syariah reflect Fitch’s view that there will be support from a holding company that has a higher outlook. KEB Hana Indonesia is 89.0 percent owned by South Korean’ KEB Hana Bank (A-/Stable) Bank Woori Saudara also owned by South Korean’ Woori Bank (A-/Stable) at 79.9 percent.
In Fitch’s view, the three banks are subsidiaries with strategic interests for the parent company in supporting their own goals. KEB Hana Indonesia’s loan portfolio is distributed proportionally between the small medium enterprises (SME) and corporate segments.
Bank Woori Saudara focuses more on the corporate and consumer segments, while the BTPN after the merger will remain focused on the pensioner and micro segments but also adds corporate loans.
Fitch assessed that the parent bank has the ability to support the three subsidiaries, because the contribution of assets is less than 1 percent of the total consolidated assets of the parent at the end of nine months (9M) 2018.
KEB Hana Indonesia’s assets, BTPN and Bank Woori Saudara each contributed 0.6 percent, 1.3 percent and 0.4 percent to the banking industry’s total assets at the end of 9M18.
The three banks have maintained a satisfying capital profile with the support of their parent company. The Fitch Core Capital ratio for each bank is 17.9 percent, 26.3 percent and 23.5 percent at the end of 9M18.
KEB Hana Indonesia’s loan-to-deposit ratio and Bank Woori Saudara will remain high in the near term. This is due to weaker third party funding when compared to large banks in the industry and high loan growth.
However, liquidity risk associated with high loan growth will be mitigated by liquidity support from majority shareholders, which in Fitch’s view will be available when needed.
The level of profitability will be depressed in the short term due to the increasingly challenging environment, as reflected in the negative banking sector outlook for Indonesian banks in 2019.
Higher interest rates will have an impact on increasingly fierce competition for low-cost funds with large banks. The three banks have small and limited weaknesses due to franchising.
In Fitch’s view, higher interest rates can also reduce the ability to repay creditors. The quality of the assets of these three banks will allow it to remain under control in the near and medium term.
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