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