Rating lowered for Indonesian state banks

Rating lowered for Indonesian state banks

HONG KONG (Dow Jones): Thomson BankWatch announced Wednesday
it has downgraded the short-term local currency debt ratings for
six Indonesian state banks.

The credit ratings agency downgraded the local currency debt
ratings of Bank Tabungan Negara, Bank Dagang Negara, Bank Bumi
Daya, Bank Pembangunan Indonesia and Bank Negara Indonesia to LC-
4 from LC-3. In addition, it has placed Bank Ekspor-Impor
Indonesia under review for possible downgrade. The bank's rating
is currently LC-3.

"The ratings for the banks have been re-visited in light of
the most recent performance-related date," said Philippe
Delhaise, the rating agency's president, referring to the first
half results.

"The systemic risks facing the banks also continue to grow and
although we do not question the willingness of the Indonesian
government to support its banks, we consider that it is
increasingly important (in light of the government's own
precarious financial position) that the ratings of all banks must
reflect stand-alone financial viability," Delhaise said.

Of all the banks, only Bank Negara had recorded positive net
interest income for the period, it said, adding that higher
funding costs and "massive" non-performing loans are hobbling
interest income growth.

Indonesian authorities have already said non-performing loans
in the country's banking sector now stand at more than 50
percent, and "it is difficult to imagine the state banks
bettering this figure," Thomson said.

"Adding to this concern is the high level of forex (foreign
exchange) loans, primarily U.S. dollars, in the portfolios of all
state banks, with the exception of housing finance provider, Bank
Tabungan Negara. Across the board, forex loans are problematic as
borrowers are unable or unwilling to pay," it said.