Fitch Affirms BCAF's National Ratings; Outlook Stable
The affirmation of BCAF's ratings reflects Fitch's assessment of the continued support from and linkage with its 99.58%-shareholder, PT Bank Central Asia Tbk (BCA; AAA(idn)/Stable).
'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.
'F1' National Short-Term 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 - National Ratings
BCAF's ratings reflect Fitch's expectation of a strong probability of support from its parent in times of need. The ratings also take into account BCAF's role as BCA's core subsidiary to support BCA's business expansion in Indonesia's fast-growing consumer financing market as well as expected improvements in the regulatory framework for multi-finance companies. Having a single regulator for banks and finance companies may help ensure a level playing field and similar regulatory standards for banks and their finance-company units.
As an integral part of BCA's consumer business chain, BCAF has an important role in managing BCA's entire portfolio of car loans. The car loan portfolio formed a significant 36% of BCA's consumer loans at end-2014. BCA's support is manifested in the common brand name it shares with BCAF, the provision of funding and operational alignment, such as utilisation of BCA's branch network. The business referrals from BCA also remained significant at about 50% of BCAF's new financing in 2014. The Stable Outlook reflects Fitch's expectations that BCA will continue to support BCAF in case of need.
The strong funding support from its parent will help BCAF to sustain its competitive lending rates. BCAF's debt/equity ratio remained low at 2.5x at end-2014. This reflects substantial reliance on the without-recourse joint-financing from the parent, where BCA continues to bear the credit risk, rather than borrowings from the market. Fitch expects BCAF's asset quality to come under pressure in 2015, but losses will be manageable due to its strong underwriting criteria and collection team.
RATING SENSITIVITIES - National Ratings
Any significant dilution in BCA's ownership and deterioration in its performance or perceived weakening of support would exert downward pressure on the ratings on BCAF, including the possibility of multi-notch downgrades. However, Fitch sees this prospect as remote in the foreseeable future, given BCAF's core role in BCA's consumer business strategy. There is no rating upside as the rating is already at the top end of the scale.
RATING SENSITIVITIES - Debt Ratings
The senior bonds and bond programmes are rated at the same level as BCAF's National Long- and Short-Term Ratings in accordance with Fitch criteria. Any changes in the company's National Long- and Short-Term Ratings would affect these issue ratings.
The full list of rating actions follows:
National Long-Term Rating affirmed at at 'AAA(idn)'; Outlook Stable
National Short-Term Rating affirmed at 'F1+(idn)'
Bond Programme II 2014 and its tranches under the programme affirmed at 'AAA(idn)' and 'F1+(idn)'
Bond Programme I 2012 and its tranches under the program affirmed at 'AAA(idn)'
Rupiah Senior Bond IV/2011 affirmed at 'AAA(idn)'.
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