Moody's ups ratings on eight Indonesian banks

Moody's ups ratings on eight Indonesian banks

JAKARTA (JP): Moody's has upgraded the deposit ratings of
eight Indonesian banks to Caa1 following an improvement in their
financial performances.

The banks involved are: Bank Mandiri, Bank Negara Indonesia,
Bank Rakyat Indonesia, Bank Tabungan Negara, Bank Danamon, Bank
Internasional Indonesia, Bank Pan Indonesia and Bank Bali.

The U.S.-based rating agency said in a statement on Friday
that the long-term debt ratings of Bank Mandiri, Bank Negara
Indonesia and Bank Danamon had been upgraded to B3, while the
long-term debt rating of Bank Tabungan Negara had been upgraded
to Caa1.

Additionally, Moody's upgraded the financial strength rating
of Bank Danamon to E+ from E, and placed under review, for
possible upgrade, the financial strength ratings of Bank Rakyat
Indonesia and Bank Pan Indonesia.

The outlook for the ratings of Bank Tabungan Negara and Bank
Bali were changed to positive.

Moody's said the upgrades on the debt and deposit ratings are
the result of improvements in Indonesia's external position, the
predictability of the banks' access to foreign currency liquidity
in a timely manner and in the fundamental financial positions of
the banks themselves.

However, Moody's cautioned that the potential for further
political and social instability continued to depress confidence
levels, with ramifications on foreign currency liquidity, and
that this would continue to constrain bank ratings.

Moody's noted that the restructuring of the banking sector has
become a key element in the Indonesian government's measures to
restore economic stability.

The government has guaranteed all bank obligations and, in
cooperation with the IMF and World Bank, engaged in a bank
restructuring and recapitalization program equivalent to some 60
percent of GDP.

Efforts to tighten bank regulations and supervision have also
met with some success.

However, the banks' operating environment remains poor, the
rating agency said, adding that reform of the legal system has
made little progress.

"Consequently the pace of corporate debt restructuring has
been very slow, lowering potential recovery rates," it said.

The upgrade of the financial strength rating of Bank Danamon
to E+ from E, reflects the bank's improved financial condition
as a consequence of its privileged recapitalization by the
government.

This has provided Bank Danamon with increased financial
flexibility in relation to other banks. The upgrade also reflects
Bank Danamon's role as one of the country's largest banks, with a
widespread network that will support efforts to increase its
retail activities.

The bank's new senior management, who has considerable
experience with foreign banks, is focusing on strengthening the
bank's credit risk management function and core profitability.

The review for possible upgrade of the financial strength
rating of Bank Rakyat Indonesia will focus on the improvement in
the bank's financial condition resulting from its
recapitalization by the government and on moves to refocus on its
core business of lending to individuals and small businesses that
has proved highly profitable in the past.

The review for possible upgrade of the financial strength
rating of Bank Pan Indonesia (Panin Bank) will consider the
evolution of the bank's relationship with Australia's ANZ Bank,
which controls a 29 percent stake, and Panin's efforts to
increase its retail banking business.

The positive outlook for Bank Tabungan Negara reflects the
bank's ongoing restructuring and recapitalization by the
government.

The positive outlook for Bank Bali reflects the bank's recent
recapitalization by the government. (hen)