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Fitch Affirms Foreign-Owned Indonesian Banks and Subsidiaries
March 29, 2017 / 9:25 AM / 8 months ago

Fitch Affirms Foreign-Owned Indonesian Banks and Subsidiaries

(The following statement was released by the rating agency) SINGAPORE/JAKARTA, March 29 (Fitch) PT Fitch Ratings Indonesia has affirmed the National Ratings on four foreign-owned Indonesian banks and two of their financing subsidiaries. Fitch Ratings has also affirmed the international ratings on these entities. The Outlooks on the ratings are Stable The issuers are as follows: - PT Bank CIMB Niaga Tbk (CIMB Niaga) - PT Bank Maybank Indonesia Tbk (Maybank Indonesia) - PT Bank OCBC NISP Tbk (OCBC NISP) - PT Bank UOB Indonesia (UOBI) - PT CIMB Niaga Auto Finance (CNAF) - PT Maybank Indonesia Finance (MIF) PT Fitch Ratings Indonesia has also maintained the Rating Watch Negative (RWN) on PT Wahana Ottomitra Multiartha Tbk's (WOMF) National Long-Term Rating of 'AA(idn)'. The Rating Watch is pending the completion of the sale of its parent's stake in the company. A full list of rating actions is at the end of this commentary. 'AAA' National Ratings denote the highest rating assigned by Fitch on its national rating scale for that country. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country. 'AA' National Ratings denote expectations of low default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions may affect the capacity for timely repayment to a greater degree than is the case for financial commitments denoted by a higher rated category. 'F1' National Ratings indicate the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. On Fitch's National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country. Where the liquidity profile is particularly strong, a "+" is added to the assigned rating. KEY RATING DRIVERS IDRS, NATIONAL RATINGS AND SUPPORT RATINGS The Issuer Default Ratings (IDRs), Support Ratings and National Ratings on the four banks reflect Fitch's view that each bank's higher-rated foreign parent has the ability and high propensity to provide timely support to its subsidiary, if needed. The Long-Term Foreign-Currency IDRs are constrained by Indonesia's Country Ceiling of 'BBB'. Fitch's view of support is reinforced by the growing strategic importance of these Indonesian subsidiaries to the parents' Asian franchises, the parents' majority ownership or control, and a high level of integration with their parents. CIMB Niaga is owned by Malaysia-based CIMB Group Holdings Bhd and Maybank Indonesia is majority owned by Malayan Banking Berhad (Maybank; A-/Stable). OCBC NISP and UOBI are majority owned by Singapore-based Oversea-Chinese Banking Corp (OCBC; AA-/Stable) and United Overseas Bank Limited (UOB; AA-/Stable), respectively. The National Ratings of CNAF and MIF reflect Fitch's expectation of a strong probability of extraordinary support from their parents in times of need, and take into account their strategic importance to their parents in supporting the banks' business expansion in Indonesia's fast-growing consumer financing market. The parents' support is manifested in their full-ownership, name sharing, operational integration and the provision of funding. WOMF's ratings are support-driven, reflecting Fitch's expectation of a moderate probability of extraordinary support from Maybank Indonesia, if required. The RWN reflects Fitch's expectation that WOMF's rating after Maybank Indonesia sells its entire stake would be more likely driven by its weaker intrinsic credit profile. At this time Fitch has not assessed the prospective new shareholder PT Reliance Capital Management and its impact on WOMF following the acquisition. VIABILITY RATINGS The 'bb' VRs of CIMB Niaga and Maybank Indonesia reflect their medium franchises and satisfactory capitalisation profiles. It also takes into account their weaker asset quality, as reflected in their higher non-performing loan (NPL) and "special-mention" loan (SML) ratios, and lower profitability (return on average assets) compared with their peers. The 'bb' VR of OCBC NISP takes into account its steady performance, better capital position, as reflected in its higher capitalisation ratios, and stronger asset quality due to stricter credit risk management (as reflected in its below-industry average NPL and SML ratios), compared with CIMB Niaga and Maybank Indonesia, despite its smaller franchise. DEBT RATINGS The ratings of the rupiah-denominated senior bonds and bond programmes issued by the banks, MIF and WOMF are the same as their National Long-Term and Short-Term Ratings in accordance with Fitch's criteria. Fitch rates the legacy subordinated debts of CIMB Niaga, Maybank Indonesia and OCBC NISP two notches down from the issuer's anchor rating (National Long-Term Ratings in the case of the support-driven Indonesia subsidiaries). This comprises one notch for loss severity, reflecting their subordinated status, and one notch for non-performance risk, mainly to account for the bonds' interest and/or principal deferral features. The Basel III-compliant subordinated debts of Maybank Indonesia and UOBI are rated using the same approach as they have similar deferral features to the legacy subordinated debts. The notching for non-performance risk is only one, instead of the more common two, as the risk of non-performance is partly neutralised by potential parental support. RATING SENSITIVITIES IDRS, NATIONAL RATINGS AND SUPPORT RATINGS Upside potential for the banks' IDRs may result from an upgrade of Indonesia's Country Ceiling, but only if the parents' ratings remain above Indonesia's Country Ceiling. Support Ratings are likely to remain unchanged unless there are multiple-notch changes in their parents' IDRs. There is no rating upside for the National Ratings assigned to the banks as they are already at the top end of the scale. Downward rating pressure may arise from any developments leading to a weakening of perceived support from their parents, such as major changes to ownership or a significant weakening in their parents' financial ability, although Fitch believes this to be a remote prospect in the near to medium term. The banks' IDRs are sensitive to changes in the parents' ratings. Deterioration in the banks' standalone financial profiles is unlikely to impact their IDRs and National Ratings unless the factors underpinning support from their parents also weaken. Any significant decline in ownership by or perceived weakening of support from the parents would exert downward pressure on the ratings on CNAF and MIF, including the possibility of multi-notch downgrades. However, Fitch sees this prospect as remote in the foreseeable future, given the finance subsidiaries' importance to the parent banks' consumer businesses. A significant sustained weakening of CNAF' and MIF's contributions to their parents leading to a reassessment of the importance of the business would also exert downward pressure on the ratings. Rating upside could arise if Fitch were to perceive CNAF and MIF as core subsidiaries of CIMB Niaga and Maybank Indonesia, respectively. This would likely result in an equalisation of their ratings with their respective parents' national ratings, if there was further evidence of stronger operational integration between parent and subsidiary. Fitch will resolve the Rating Watch Negative on WOMF's ratings on completion of the ownership change, which is likely to result in a multiple-notch downgrade of WOMF's National Long-Term Rating due to the company's modest standalone profile. Fitch will also assess PT Reliance Capital Management's credit profile and linkage between WOMF and the Reliance group to assess how the company's rating may be supported or constrained under its new ownership. Fitch is likely to affirm the current ratings if the transaction does not proceed. VIABILITY RATINGS Rating upside on the banks' VRs may result if their franchises grow to be more comparable to those of the major Indonesian banks, while maintaining healthy risk-adjusted profitability, high core capitalisation, predominantly low-cost deposit-funded balance sheets and sound asset quality. Rating downside may result from a higher risk appetite, deterioration in asset quality leading to weaker capitalisation, or marked weakening in their liquidity profiles, particularly if the economic environment were to deteriorate further. DEBT RATINGS Any changes in the National Long-Term and Short-Term Ratings on the banks and their finance subsidiaries would affect the ratings on their debt issues. The rating actions are as follows: CIMB Niaga Long-Term Foreign-Currency IDR affirmed at 'BBB'; Outlook Stable Short-Term Foreign-Currency IDR affirmed at 'F3' Viability Rating affirmed at 'bb' Support Rating affirmed at '2' National Long-Term Rating affirmed at 'AAA(idn)'; Outlook Stable National Short-Term rating affirmed at 'F1+(idn)' Rupiah subordinated debt affirmed at 'AA(idn)' Rupiah senior debt affirmed at 'AAA(idn)' Maybank Indonesia Long-Term Foreign-Currency IDR affirmed at 'BBB'; Outlook Stable Short-Term Foreign-Currency IDR affirmed at 'F3' Viability Rating affirmed at 'bb' Support Rating affirmed at '2' National Long-Term Rating affirmed at 'AAA(idn)'; Outlook Stable National Short-Term Rating affirmed at 'F1+(idn)' Rupiah subordinated debt affirmed at 'AA(idn)' Rupiah senior debt programme and tranches under programme affirmed at 'AAA(idn)' Rupiah sharia senior debt affirmed at 'AAA(idn)' Basel III-compliant rupiah subordinated debt affirmed at 'AA(idn)' Basel III-compliant rupiah subordinated debt programme I/2016 and tranches under the programme affirmed at 'AA(idn)' OCBC NISP Long-Term Foreign-Currency IDRs affirmed at 'BBB'; Outlook Stable Long-Term Local-Currency IDRs affirmed 'A-'; Outlook Stable Short-Term Foreign-Currency IDR affirmed at 'F3' Viability Rating affirmed at 'bb' Support Rating affirmed at '2' National Long-Term Rating affirmed at 'AAA(idn)'; Outlook Stable National Short-Term Rating affirmed at 'F1+(idn)' Rupiah senior debt affirmed at 'AAA(idn)' Rupiah subordinated debt affirmed at 'AA(idn)' UOBI National Long-Term Rating affirmed at 'AAA(idn)'; Outlook Stable National Short-Term Rating affirmed at 'F1+(idn)' Basel III compliant rupiah subordinated debt affirmed at 'AA(idn)' Rupiah senior debt affirmed at 'AAA(idn)' and 'F1+(idn)' CNAF National Long-Term rating affirmed at 'AA+(idn)'; Outlook Stable National Short-Term rating affirmed at 'F1+(idn)' MIF National Long-Term Rating affirmed at 'AA+(idn)'; Outlook Stable National Short-Term Rating affirmed at 'F1+(idn)' Rupiah senior debts affirmed at 'AA+(idn)' Rupiah senior debt programme affirmed at 'AA+(idn)' and 'F1+(idn)' WOMF National Long-Term Rating of 'AA(idn)' maintained on Rating Watch Negative National Short-Term Rating of 'F1+(idn)' maintained on Rating Watch Negative Rating on rupiah senior debt of 'AA(idn)' maintained on Rating Watch Negative Ratings on rupiah senior debt programme II/2016 and tranches under the programme of 'AA(idn)' and 'F1+(idn)' maintained on Rating Watch Negative Contact: Primary Analysts Ambreesh Srivastava (International Ratings for CIMB Niaga, Maybank Indonesia and OCBC NISP) Senior Director +65 6796 7218 Fitch Ratings Singapore Pte Limited One Raffles Quay, South Tower #22-11 Singapore 048583 Gary Hanniffy, CFA (National Ratings for CIMB Niaga and Maybank Indonesia) Director +62 21 2988 6808 PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor, Suite 2403 Jl. Prof. Dr. Satrio Kav 3-5 Jakarta, Indonesia 12940 Iwan Wisaksana (National Ratings for UOB Indonesia) Director +62 21 2988 6807 Priscilla Tjitra (National Ratings for OCBC NISP and CNAF) Associate Director +62 21 2988 6809 Tomi Rustamiaji (National Ratings for MIF and WOMF) Analyst +62 21 2988 6810 Secondary Analysts Gary Hanniffy, CFA (International Ratings for CIMB Niaga and Maybank Indonesia) Director +62 21 2988 6808 Priscilla Tjitra (International Ratings for OCBC NISP) Associate Director +62 21 2988 6809 Committee Chairperson Mark Young Managing Director +65 6796 7229 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. 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