S&P affirms rating, but revises outlook

S&P affirms rating, but revises outlook

SYDNEY (Reuter): Standard & Poor's said yesterday it affirmed
its ratings on Bank Negara Indonesia, Bank Danamon and Bank Umum
Nasional, but revised the outlook on these ratings to negative
from stable.

Bank Negara has a BBB counterparty rating for long-term debt
and A3 rating for short-term debt.

Bank Danamon and Bank Umum are rated BB for long-term debt.

S&P said Bank Niaga remains on creditwatch but with negative
implications, where it was placed on July 30.

It said the outlook revision reflected its expectation that
both the asset quality and profitability of Indonesia's banks
would weaken due to the increasingly challenging financial
environment.

Some banks, through positive U.S. dollar or marginally open
Indonesian rupiah positions, may have escaped losses from the
rupiah's recent sharp depreciation, but this may not hold for
corporate and commercial customers.

"This may lead to a deterioration in asset quality over the
short to medium term," the ratings agency said.

"In addition, the weakened performance of the Indonesian
stockmarket and increasing evidence of oversupply in some sectors
of the real estate market gives rise to possible concerns
regarding collateral values against loans extended," it said.

S&P said the government's tight liquidity policy should help
maintain interest rates at current high levels and lead to
further margin pressure in an already competitive market.

It said larger and more diverse institutions and those which
had shown more prudent growth strategies would have more
flexibility to weather the conditions.