Fitch Ratings upgrades ratings of 10 Indonesian banks
Leony Aurora, The Jakarta Post, Jakarta
In light of the positive changes in Indonesia's banking sector and recent upgrade in its sovereign rating, international agency Fitch Ratings has raised the ratings of 10 major lenders in the country.
According to a statement released by Fitch recently, Bank Mandiri, Bank Central Asia (BCA), Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI), Bank Danamon, Bank NISP, Bank Buana and Bank International Indonesia (BII) have had their long-term foreign currency ratings raised one notch from B+ to BB- with a positive outlook.
The BB- rating, which indicates a speculative environment with a possibility of credit risk developing, remains three levels from the lowest investment grade of BBB-.
Meanwhile, the individual ratings of Bank Niaga and Bank Permata went up one rung from D/E to D, two notches below "adequate", the statement said.
The upgraded ratings are another vote of confidence for Indonesia's financial sector. Fitch upgraded Indonesia's long- term foreign and local currency ratings last month to BB- from B+, and affirmed its short-term rating at B, both with positive outlooks, citing its confidence in the government's policies in improving the country's economy.
Fitch also cited the "very positive changes" in the country's banking system as one of the reasons for the upgrade.
To speed up the process of consolidation in the sector, Bank Indonesia recently announced a new policy stipulating that funds injected from one bank to another bank would not be calculated in its legal lending limit, provided that their financial statements were consolidated.
After being crushed in the monetary crisis in 1997, the banking sector in Indonesia has got back on its feet and begun to flourish somewhat.
With the improving economy that has spurred consumer lending and a declining trend in the central bank's benchmark interest rate (SBI) last year, banks are enjoying hefty net interest earnings.
The nation's second largest lender BCA, for example, estimates its unaudited 2004 profit to rise by 30 percent to Rp 3.1 trillion (US$336 million) from Rp 2.39 trillion the year before.
BNI estimates that its 2004 profit will likely reach Rp 3.1 trillion, a seven-fold increase over the Rp 420 billion posted in 2003.
The improved credit rating from Fitch is another positive point in a string of upgrades by the company and other global rating agencies.
Two months ago, Standard and Poor's also raised Indonesia's creditworthiness rating. It upgraded the country's long-term foreign currency one step to a B+ from a B, while the local currency rating was upgraded two levels to BB from B+.
Along with the country's ratings, S&P upgraded the long-term foreign currency credit ratings on Bank Mandiri, Bank Danamon and BNI to B-plus from B.
Moody's Investors Service, another acknowledged credit rating agency, at present rates Indonesia's ceiling for foreign currency debt at B2, while its ceiling for foreign-currency bank deposits is rated B3 -- both considered stable.