IBCA downgrades rating for Bank Exim

IBCA downgrades rating for Bank Exim

JAKARTA (JP): International ratings agency Fitch IBCA has
assigned an individual rating of "D" for Bank Ekspor Impor
Indonesia (Exim) and changed its legal rating for the bank from
"2" to "2T."

Fitch IBCA said Wednesday that the change of its legal rating
for Bank Exim to "2T" indicated the potential for arising
transfer risk, given the current political, economic and
financial developments in Indonesia.

"All state banks have been supported historically but the
possibility of the government imposing foreign exchange controls
means that there is potential for the transfer of risk of
economic origin, which might prevent support for foreign currency
creditors," the agency said.

Fitch IBCA's assignment of the "T" suffix follows its
downgrade of Indonesia's sovereign rating to noninvestment grade
on Dec. 22.

Fitch IBCA's legal ratings deal with the question of whether
an institution receives support from either owners or government
authorities if it runs into difficulty.

The individual ratings permit, on the other hand, is an
evaluation divorced entirely from any consideration of outside
support.

Bank Exim is Indonesia's fifth largest and one of the better
state-owned banks, with levels of growth and performance more
akin to those of the faster growing private banks.

"However, the strong performance over the past three years has
been due to drastically reduced provisions rather than revenue
growth as margins have been squeezed," the ratings agency said.

As of last September, the bank's total capital weighted risks
ratio was just over 9 percent, the regulatory minimum, having
declined from 12 percent at the end of 1996.

Fitch IBCA said the severe depreciation of the rupiah and high
interest rates since August had led to a serious deterioration in
the operating environment of Indonesian banks.

"Unless interest rates come down and the rupiah stabilizes, we
expect a significant number of companies to default over the
coming months which will severely affect the asset quality of
Indonesian banks." (rid)