Problem loans may reach 60 percent of outstanding loans
Problem loans may reach 60 percent of outstanding loans
JAKARTA (JP): Problem loans in Indonesia's banking industry
may reach 60 percent of outstanding loans by the end of 1998, a
local rating agency has said.
"If the crisis persists and there is no clear solution to the
private corporate debt problem, the industry's level of problem
loans as a percentage of total loans may reach as high as 60
percent by the end of 1998," said Pefindo in a press statement
late Friday.
It explained that the banking sector has been facing an
increasingly difficult operating environment because corporate
borrowers have been confronted with a liquidity squeeze, and, at
the same time, consumers have been facing a contraction of
disposable income.
The banks' significant foreign exchange exposure, amid the
plunge in the rupiah, has a significant impact, especially in
deteriorating asset quality, Pefindo added.
"All of these are clear warning signals that there is an
urgent need to significantly improve the capitalization of all
banks," said the country's only rating agency.
Indonesia's monetary crisis, which started in July, has
undermined the banking sector. As part of an overall banking
reform program sponsored by the IMF, the government shut down 16
banks in November and another seven banks early this month. The
management of seven other banks have also been taken over by the
newly established Indonesian Bank Restructuring Agency (IBRA).
In addition, the agency has also placed 40 banks under its
supervision since its establishment in January. Eight of these
have been released from its supervision after their shareholders
agreed to inject fresh funds.
To prevent bank runs, the government has guaranteed all
depositors' money.
"Pefindo views positively the government guarantee scheme," it
said, but added that the rating agency remained concerned about
its mechanics, timeliness, and time-frame.
Pefindo also downgraded the ratings of all 10 rated banks on
the continuing deterioration in asset quality and substantial
forex exposure. Except for publicly listed Bank Tiara Asia and
Bank Modern, all were assigned a "negative outlook".
The ratings of the state Bank Tabungan Negara and its local
bonds has been lowered to BBB from A.
Listed Bank Internasional Indonesia (BII) and its long-term
debt instrument was downgraded to BB+ from BBB+.
"Although the bank's liquidity position seems to be relatively
less affected by the crisis, BII's weakening asset quality,
together with its substantial forex exposures, have put
additional pressure on its capitalization," Pefindo said.
Other listed banks which were downgraded are: Bank NISP, Bank
Mashill Utama and Bank Papan Sejahtera. (rei)