Fitch Upgrades BTPN; Affirms KEB Hana Indonesia and ICBC Indonesia
In addition, the agency has assigned KEB Hana Indonesia a Long-Term Foreign Currency IDR of 'BBB', Long-Term Local Currency IDR of 'BBB+', Short-Term Foreign Currency IDR of 'F3', Support Rating '2', and Viability Rating of 'bb-'. A full list of rating actions is provided 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.
'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 VIABILITY RATING
The upgrade of BTPN's National ratings reflects the stronger credit profile of its 40% parent Sumitomo Mitsui Banking Corporation (SMBC). Fitch upgraded SMBC's rating in November 2015 to 'A' from 'A-', with Stable Outlook. BTPN's rating also reflects Fitch's view that SMBC has high propensity to support BTPN, if needed, due to its strategically important role to SMBC.
The ratings of KEB Hana Indonesia and ICBC Indonesia reflect Fitch's view of parental support and linkage for the two banks.
Fitch believes timely support for KEB Hana Indonesia and ICBC Indonesia is highly likely to be forthcoming from their higher-rated parents, namely Korea-based KEB Hana Bank (A-/Stable) and Industrial and Commercial Bank of China (ICBC; A/Stable), respectively.
KEB Hana Indonesia's Viability Rating reflects the bank's strong asset-quality management and relationship with Korea-based customers, despite its small franchise and moderate profitability compared to its larger peers. The VR also takes into account on-going support from its parent, especially in funding, liquidity and capitalisation.
In line with its criteria on rating financial institution subsidiaries and holding companies, the agency classifies KEB Hana Indonesia and ICBC Indonesia as strategically important subsidiaries for their respective parents. ICBC Indonesia's loan portfolio is mainly derived from larger corporations while KEB Hana Indonesia's loan portfolio is proportionately distributed between SME and commercial segments. BTPN focuses on lending to pensioners and micro lending.
KEB Hana Indonesia and BTPN have maintained satisfactory capital profiles with their parents' support. Their Tier 1 capital ratios stood at 24.5% and 22.9%, respectively, at end-September 2015. ICBC Indonesia's Tier 1 ratio remained modest at 10.1%, which means the bank will need a capital injection in the near term from its parent to support its business growth. The loan/deposit ratios (LDR) of KEB Hana Indonesia and ICBC Indonesia are likely to remain high in the near term as they seek higher loan growth. However, the liquidity risks associated with high loan growth are mitigated by liquidity support from their parents, which Fitch expects to be forthcoming in times of need.
Profitability is likely to be subdued due to intense competition for low-cost funding with larger peer banks, with the three banks' at a disadvantage because of their smaller and limited franchises. In Fitch's view, the asset quality of KEB Hana Indonesia, ICBC Indonesia and BTPN may come under pressure in the near future due to a more challenging economic environment that includes high interest rates and low commodity prices.
RATING SENSITIVITIES
IDRS and NATIONAL RATINGS
Upside potential for KEB Hana Indonesia's IDRs may result from an upgrade of Indonesia's Country Ceiling of 'BBB', but only if the parent's ratings remain above Indonesia's Country Ceiling. The Support Rating is likely to remain unchanged unless there is a multiple-notch change in its parent's IDRs. There is no rating upside for the three banks' National Ratings 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. 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.
VIABILITY RATING
Rating upside on KEB Hana Indonesia's VR may result if its franchise expands to be more comparable to the major Indonesian banks', while it maintains sound asset quality, healthy risk-adjusted profitability, and a predominantly low-cost deposit-funded balance sheet. Rating downside may result from significant deterioration in asset quality and capitalisation, and/or marked weakening in its liquidity profiles, particularly if the economic environment were to deteriorate.
DEBT RATINGS
The ratings of the banks' rupiah-denominated senior bonds are the same as their National Long-Term and Short-Term Ratings in accordance with Fitch criteria. Any changes in the National Ratings would affect these issue ratings.
The full list of rating actions is as follows:
KEB Hana Indonesia
Long-Term Issuer Default Rating assigned at 'BBB'; Outlook Stable
Long-Term Local Currency Issuer Default Ratings assigned at 'BBB+'; Outlook Stable
Short-Term Issuer Default Rating assigned at 'F3'; Outlook Stable
Support Rating assigned at '2'
Viability Rating assigned at 'bb-'
National Long-Term rating affirmed at 'AAA(idn)'; Outlook Stable
National Short-Term rating affirmed at 'F1+(idn)'
ICBC Indonesia
National Long-Term rating affirmed at 'AAA(idn)'; Outlook Stable
National Short-Term rating affirmed at 'F1+(idn)'
Medium-Term Notes 2014 affirmed at 'AAA(idn)'
BTPN
National Long-Term rating upgraded to 'AAA(idn)' from 'AA+(idn)'; Outlook Stable
National Short-Term rating affirmed at 'F1+(idn)'
Rupiah senior unsecured bond tranches under programme I 2011 upgraded to 'AAA(idn)' from 'AA+(idn)'
Rupiah senior unsecured bond tranches under programme II 2013 upgraded to 'AAA(idn)' from 'AA+(idn)'.
Комментарии