S&P assigns 'BBB' rating to BNI's senior notes

JAKARTA (JP): Standard and Poor's (S&P) has assigned a "BBB" long-term rating to Bank Negara Indonesia's (BNI) US$145 million senior notes issue due 2007.

The international rating agency said yesterday the triple-B rating reflected the likelihood of Indonesian support for BNI if the bank became financially distressed.

While S&P believes that the government is likely to support BNI if it has financial problems, the government's willingness to intervene may be tempered in time. Such probable support is exemplified by the government's recent action of standing behind the debt obligations of the troubled state-owned Bank Pembangunan Indonesia (Bapindo).

But the government's willingness to extend support may moderate because of the trend toward partial privatization of state banks -- evidenced by the 1992 conversion of state banks into limited liability companies, recapitalization of state banks from 1992 to 1994 and the partial float of BNI in November 1996.

BNI's liabilities are not guaranteed by the government.

BNI, the first state bank listed on the Jakarta Stock Exchange, has an established name and a 9 percent market share of commercial banking assets, which provides potential economies of scale.

S&P said that BNI's initial public offering in November last year had increased the bank's equity to $1.13 billion, translating to an equity-to-assets ratio of 8 percent, comparable with those of larger private sector banks.

"BNI's profitability is acceptable but not as strong as the major private banks'," the rating agency said.

In the six months to June 30, 1996, BNI reported an annualized 0.91 percent return on average assets. But asset quality, according to the agency, remains sensitive.

"Although the bank's 6.13 percent non-performing assets-to- total loans ratio is better than the state bank average, it is not as good as the major private sector bank average." it said.

The rating outlook is stable. The outlook reflected S&P's expectation that BNI's market position, large distribution network and large capital will provide the bank with the financial flexibility to adapt in an increasingly competitive market. (hen)