Fitch Rates Bank Sinarmas 'A(idn)'; Outlook Stable
OREANDA-NEWS. Fitch Ratings Indonesia has assigned Indonesia-based PT Bank Sinarmas Tbk (Bank Sinarmas) a National Long-Term Rating of 'A(idn)' and National Short-Term Rating of 'F1(idn)'. The Outlook is Stable.
'A' National Long-Term 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 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
Bank Sinarmas's ratings are derived from its standalone financial profile. The bank is part of PT Sinarmas Multiartha Tbk (SMMA), which is a holding company of the Sinarmas Financial Services Group that directly holds 53.20% of Bank Sinarmas's shares. SMMA is a non-operating holding company that focuses on the financial services sector, including banking, multi-finance, insurance and stock broking.
Bank Sinarmas's ratings are constrained by its high loan growth in the face of unfavourable economic conditions. Loans increased by 37% yoy in 3Q15 (2014: 30%), higher than the industry average of 11% during the same period. Bank Sinarmas focuses on corporate lending, which accounted for 71% of its total loan portfolio at end-September 2015.The bank will continue its loan portfolio diversification through commercial lending, particularly to micro-, small- and medium-sized merchants and traders.
Bank Sinarmas's asset quality remained manageable with the non-performing loan ratio improving to 2.3% at end-September 2015 (end-2014: 3%), lower than the industry average of 2.7%. However, asset quality may come under pressure in 2016 as "special-mention loans" increased to 14.5% at end-September 2015 from 10.9% a year earlier.
The bank's capital position remained satisfactory due mainly to several rights issues in the past few years. However, Fitch believes this strong capital position can be easily eroded by high growth because of the company's weak internal capital generation and potentially higher credit costs arising from its rapid loan expansion in recent years.
Fitch believes Bank Sinarmas is of limited importance to the holding company, which has many interests in the financial sector. In addition, Bank Sinarmas is sizeable relative to SMMA in terms of total assets, which reduces the holding company's ability to provide support to the bank, even though SMMA has strong willingness to do so.
Fitch's assessment of SMMA's credit strength is based on the composite credit profiles of PT Asuransi Jiwa Sinarmas MSIG (Sinarmas MSIG), the group's insurance arm, and Bank Sinarmas. The two companies together accounted for 80% of SMMA's assets at end-June 2015.
RATING SENSITIVITIES
NATIONAL RATINGS
Sustained aggressive loan growth or significant weakening in asset quality could lead to negative rating action.
Rating upside may result from the bank's ability to maintain healthy loan growth, and a track record of sound asset quality and high core capitalisation.
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