Moody's Investors Service has placed on review for upgrade PT Bank Permata Tbk (IDX: BNLI)) Baa3 long-term local and foreign currency deposit ratings - Photo: Bank Permata.

JAKARTA (TheInsiderStories) – Moody’s Investors Service has placed on review for upgrade PT Bank Permata Tbk (IDX: BNLI)) Baa3 long-term local and foreign currency deposit ratings. At the same time, Moody’s has affirmed the bank’s short-term Counterparty Risk Assessment (CRA) of P-2(cr) and short-term local and foreign currency CRRs of P-2.

Moody’s has also placed the bank’s adjusted Baseline Credit Assessment (BCA) of ba1, long-term CRA of Baa2(cr), long-term local and foreign currency counterparty risk ratings (CRRs) of Baa2, and short-term local and foreign currency deposit ratings of P-3 on review for upgrade.

Moody’s said Bank Permata’s BCA of ba1 remains unchanged. The review for upgrade follows the announcement on 12 December that Bangkok Bank Public Company Limited (BBL, Baa1 positive, baa1) has entered into a share purchase agreement with PT Astra International Tbk (IDX: ASII) and Standard Chartered Bank (SCB, A1 stable, baa2) to acquire 89.12 percent of Bank Permata’s shares. The transaction is expected to close by the third quarter of 2020.

Upon completion of the transaction, Moody’s expects Bank Permata will receive extraordinary support from BBL in times of need, as Bank Permata will be BBL’s most significant investment outside of Thailand (Baa1 positive) and represent a key driver of its strategy to grow and diversify.

As a result, Moody’s will incorporate an uplift into Bank Permata‘s adjusted BCA and ratings based on BBL’s BCA. Bank Permata’s ratings do not benefit from any uplift due to either Astra or SCB, following the latter’s announcement in February of its intention to divest its stake.

Moody’s does not have any particular governance concern for Bank Permata and does not apply any corporate behavior adjustment to the bank. Upon completion of the transaction, Moody’s expects Bank Permata’s corporate governance to benefit from BBL’s oversight and strong risk management capabilities.

Upon completion of the transaction, Moody’s will assess the likely extraordinary support that Bank Permata will receive from BBL. Moody’s assessment of extraordinary support will take into account BBL’s final shareholding in Bank Permata, the planned management and the operational integration between the two banks.

Given the review for upgrade, Moody’s is unlikely to downgrade Bank Permata’s rating during the review period. Nevertheless, Moody’s could revert the bank’s outlook to stable if the planned transaction does not go ahead as planned.

Headquartered in Jakarta, Bank Permata reported total assets of Rp155.1 trillion (US$10.9 billion) at 30 September 2019.

US$1=RP14,000

Written by Lexy Nantu, Email: lexy@theinsiderstories.com