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.