Ratings of three Indonesian banks downgraded
Ratings of three Indonesian banks downgraded
JAKARTA (JP): PT Pemeringkat Efek Indonesia (Pefindo),
Indonesia's only rating agency, announced yesterday it had
downgraded three Indonesian banks and their long-term bonds
because of weak performance.
The agency downgraded publicly-listed Bank Papan Sejahtera and
its Rp 250 billion (US$60.9 million) long-term bonds to BBB-
(minus) from BBB, with a negative outlook.
The rating of the publicly-listed Bank Modern and its Rp 100
billion long-term bonds was lowered to BBB- from BBB, also with a
negative outlook.
BPD DKI Jaya (Bank DKI) and its Rp 500 billion long-term bonds
was downgraded to BBB from BBB+ (plus), with a negative outlook.
The rating agency said that the downgrading reflected the
banks' weakening profitability and slightly decreasing asset
quality.
Bank Papan Sejahtera mainly engaged in providing house
mortgage financing.
The agency reported that as of September, the bank's
profitability had deteriorated particularly due to decreasing
operational efficiency and a weakening interest spread.
The new management's heavy investment in human resources, and
in system and technology development was seen as not showing
equal returns, the agency said.
Bank Papan's asset quality also continued to deteriorate and
was deemed to be below average compared to its major competitors.
The agency said the bank's lending quality had not improved as
expected.
Despite the above weaknesses, the bank still dominated the
medium to upper-scale house mortgage market, it said.
Pefindo estimated if the currency crisis continued, the
quality of the bank's major exposures would most likely
deteriorate further in the future.
The agency reported that Bank Modern's exposure to Indonesia's
real estate sector affected its overall lending portfolio.
The bank's asset quality had slightly deteriorated although it
still appeared at a controllable level. Its loss reserves were
inadequate to defend itself from increasing nonperforming loans
and smaller current provisions.
As of September, the bank's deteriorating interest
differential influenced its weakened profitability sector.
A large portion of the bank's short-term funding sources had
been used to finance long-term lending resulting in a widening
liquidity gap, the agency said.
The agency also reported that by the end of October, Bank
DKI's asset mix, consisting of non-lending earning assets (51.63
percent) and lending assets (37.04 percent), was similar to other
regional development banks.
But Bank DKI's lending quality had deteriorated significantly,
mostly due to the currency crisis.
The absolute number of the bank's nonperforming loans had
increased. As a result, the bank's current loss reserves over
nonperforming loans was at the absolute minimum level required by
the central bank.
Bank DKI had a slightly below-average business position. The
rating was based on its relatively small asset size and
concentrated lending portfolio.
The bank's niche market, a strategic alliance with local
government and other regional development banks, was considered
to be the mitigating factors.
Despite the bank's focus within Jakarta and its surrounding
markets, exposure to outside the region remained limited.
The agency said the concentrated portfolio had also weakened
Bank DKI's ability to strengthen its overall business position.
(gis)