JAKARTA (TheInsiderStories) – Moody’s Investors Service has affirmed PT Bank Permata Tbk (IDX: BNLI)’ Baa2 long-term local and foreign currency deposit ratings with outlook stable. The agency has also affirmed the lender ba1 baseline credit assessment (BCA) and baa2 adjusted BCA.
The affirmation of Bank Permata’ ratings follows the affirmation of parent Bangkok Bank Public Co., Lt., (Baa1 stable, baa1) ratings on March 31, 2021. The lender long-term Baa2 deposit ratings and baa2 adjusted BCA incorporate Moody’s assessment of a very high probability of support from Bangkok Bank in times of need, which results in a two-notch uplift from the bank’s ba1 BCA.
The support assumption takes into consideration Bangkok Bank‘ controlling stake in the bank, as well as the strategic importance of Indonesia in the bank ASEAN strategy. Bank Permata’ Baa2 long-term deposit ratings do not benefit from uplift due to support from the government Indonesia (Baa2 stable) because the bank’ adjusted BCA, after incorporating support from BBL, is already the same as the sovereign rating.
The rating reflects the bank’s modest franchise compared with other Moody’s-rated banks in Indonesia. The BCA also takes into consideration the bank’ improved capitalization which, together with ample loan-loss reserves, will provide sufficient buffers against asset risks.
Bank Permata restructured a signification portion of its loans as a result of the pandemic. Restructured loans that are classified as performing increased to 12.4 percent of the bank’ total loans as of Dec. 31, 2020 from 3.9 percent a year ago. While these restructured loans are not classified as non-performing due to regulatory forbearance, Moody’s expects some to default eventually, with the extent depending on the pace of economic recovery.
However, the issuer has ample capital and loan loss provisions that will mitigate asset risks. End of last year, the bank’ loan-loss coverage ratio and tangible common equity as a percentage of risk-weighted assets were very high at 239.5 percent and 24.2 percent, respectively. The capital ratio strengthened further following the merger with Bangkok Bank’ branches in December 2020.
The bank’ liquidity also remains robust, with an average liquidity coverage ratio of 275.5 percent in the fourth quarter of 2020, well above the 85 percent regulatory minimum. Moody’s expects the bank’ profitability to improve over the next 12 – 18 months as a result of lower credit costs given the improving economy and frontloading of provisions in 2020.
Bank Permata‘ return on average assets fell sharply to 0.4 percent in 2020 from 1.0 percent in 2019, mainly because of proactive provisioning. The lender is headquartered in Jakarta and reported consolidated assets of Rp197.7 trillion (US$13.72 billion) as of end 2020.
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