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Fitch Affirms PT Sarana Multigriya Financial (Persero) at 'AA(idn)'; Outlook Stable
April 9, 2013 / 5:58 AM / in 5 years

Fitch Affirms PT Sarana Multigriya Financial (Persero) at 'AA(idn)'; Outlook Stable

(The following statement was released by the rating agency) JAKARTA/TAIPEI/SINGAPORE, April 09 (Fitch) Fitch Ratings has affirmed Indonesia-based PT Sarana Multigriya Finansial (Persero)'s (SMF) National Long-Term Rating and its rupiah senior bond at 'AA(idn)'. The Outlook is Stable. SMF's medium term notes with a maturity of 370 days have also been affirmed at 'F1+(idn)'. A list of ratings is provided at the end of this commentary. Rating Action Rationale The ratings reflect Fitch's expectation of extraordinary state support for the company if ever needed. This expectation is based on SMF's policy role in developing the secondary mortgage market in Indonesia and its 100% direct state ownership. The ratings also factor in the absence of an explicit state guarantee for SMF's liabilities and lower systemic importance relative to large state-owned Indonesian banks. Rating Driver and Sensitivities Downward rating pressure could arise from any perceived reduction in the government's willingness to provide extraordinary support to SMF, especially if SMF's mandate were to become less crucial for the mortgage sector development, although this seems unlikely in the medium-term. Although limited by SMF's small size relative to larger government banks and the absence of explicit state guarantee, positive rating action for SMF is possible if its policy role were to become even more systemically importance and backed by more tangible forms of state support. Fitch expects SMF to expand its loan portfolio by IDR1.4trn in 2013, supported mainly by debt issues. Loans to banks and finance companies have grown significantly to IDR4trn at end-September 2012 (December 2011: IDR2.6trn), due to increasing mortgage demand amid low interest rates. These mortgage lenders apply SMF's strict lending criteria on top of their own in their loan disbursements to borrowers - including that borrower must be the first-time buyer, a maximum loan to value of 70%, a debt to income ratio of 35% and maximum limit per loan of about USD30,000). At end-September 2012 all loans were classified as performing. SMF's policy role is expanding as it facilitated the launch of five onshore residential mortgage-backed securities totaling IDR2.96trn in 2009-2012. This is in line with SMF's long-term plan to develop its role as credit guarantor for mortgage lenders or mortgage-backed issues in addition to being a fund provider. Although borrowing costs in the market are low, Fitch expects SMF's profitability to remain thin given its role to provide long-term funding for the primary mortgage market at competitive rates. Profitability is not SMF's main key objective due to its public policy role. SMF was established by the government of Indonesia in 2005 and is regulated and supervised by the Ministry of Finance. The rating actions are detailed as below: - National Long Term Rating: affirmed at 'AA(idn)'; Stable Outlook - National Short Term Rating: affirmed at 'F1+(idn)' - Senior unsecured bond III/2010: affirmed at 'AA(idn)' - Senior unsecured bond programme 2011: affirmed at 'AA(idn)' - Senior unsecured bond programme tranche I 2011: affirmed at 'AA(idn)' - Senior unsecured bond programme tranche II 2012: affirmed at 'AA(idn)' - Medium term notes IV/2012: affirmed at 'F1+(idn)' Contacts: Primary Analyst Stefanus Yuniardhi Associate Director +62 21 2902 6407 PT Fitch Ratings Indonesia Prudential Tower Lt. 20 Jl. Jend. Sudirman Kav.79 Jakarta, Indonesia 12910 Secondary Analyst Julita Wikana Director +62 21 2902 6405 Committee Chairperson Jonathan Lee Senior Director +886 2 8175 7601 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. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(idn)' for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable. Additional information is available at The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable criteria, "Global Financial Institutions Rating Criteria", dated 15 August 2012,"National Ratings Criteria", dated 19 January 2011, are available at Applicable Criteria and Related Research Global Financial Institutions Rating Criteria here National Ratings Criteria here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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