Moody's reviews, upgrades RI banks

Moody's reviews, upgrades RI banks

JAKARTA (Dow Jones): Moody's Investors Service Inc. has placed
Bank Danamon Indonesia's Caa3 rating for long-term deposits and
senior debt, and its E financial strength rating on review for
possible upgrade.

Moody's said it has also upgraded from stable to positive the
outlook for Bank Negara Indonesia (BNI) and Bank Rakyat Indonesia
(BRI).

It said the upgrades were due to an easing of systemic
volatility in Indonesia's banking industry.

However, Moody's said it has changed the outlook for Bank Bali
from stable to developing due to the growing uncertainty about
its future.

The agency said the review of Bank Danamon will focus on its
absorption of eight other nationalized banks, and its role as a
government-designated "core" institution in the country's banking
system.

The review will also look at Bank Danamon's capacity to
develop a meaningful franchise, and the prospects for the bank's
eventual re-privatization.

The agency said the positive outlook for Bank Negara Indonesia
and Bank Rakyat Indonesia is based on progress in the
reconstruction of both banks as potentially viable and
commercially oriented institutions.

Bank Negara Indonesia has already received a significant
capital injection from the government, and is due to receive
further funds soon. Bank Rakyat Indonesia is undergoing
restructuring and is expected to receive government funding later
this year.

Moody's said the prospects for Bank Bali are increasingly
uncertain due to a number of pending lawsuits against and
concerning the bank.

The Indonesian government is expected to decide soon whether
to recapitalize Bank Bali or close it down.

The government's plan to recapitalize Bank Bali was torpedoed
in March after an Indonesian court said the authorities' takeover
of the bank was illegal.

The government has filed an appeal against the ruling, but a
new decision hasn't been made.