S&P puts some Indonesian banks under review

S&P puts some Indonesian banks under review

HONG KONG (AFP): U.S. ratings agency Standard and Poor's
yesterday put four Indonesian banks under review for a possible
downgrade of their credit rating, citing concerns the country's
banking system was deteriorating.

The four banks put under credit watch with "negative
implications" were PT Bank Negara Indonesia, PT Bank Danamon
Indonesia, PT Bank Internasional Indonesia and PT Bank Umum
Nasional.

A fifth bank, PT Bank Niaga, remained on creditwatch with
negative implications.

"In addition, Standard and Poor's intends to review for
possible downgrade all existing public information ratings on
major Indonesian banks," the New York-based agency said in a news
release.

Bank Negara Indonesia is one the country's seven state-owned
banks.

Bank Danamon is owned partly by business tycoon Soedono Salim,
and Bank Internasional Indonesia is a subsidiary of the Sinar Mas
group.

Bank Umum Nasional counts Muhammad "Bob" Hasan as one of its
main shareholders.

All four banks are listed in the Indonesian stock exchange.

The rating agency also said that it was currently undertaking
a major review of the Indonesian banking sector.

The rapid fall of the rupiah against the dollar in recent
days, following nearly four months of continued exchange rate
depreciation, "has exacerbated the asset quality and
profitability difficulties that the Indonesian banking system is
facing," Standard and Poor's said.

The tight liquidity in the banking sector and the resulting
high interest rates, following government moves to prop up the
rupiah, had also affected the ability of borrowers to service
rupiah-denominated debt.

Standard and Poor's estimated the banking sector's non-
performing loans at double the pre-crisis level of 8 percent by
the end of 1998.

While the major banks themselves may have avoided significant
foreign exchange losses, a substantial portion of their corporate
and commercial clients are likely to be in difficulties and some
are beginning to come into default, Standard and Poor's said.

It added that the fact the property market was currently being
hit hard by the crisis was starting to be reflected in a
deterioration in the banks' asset quality and impact negatively
on their collateral values.

The U.S. dollar has gained more than 100 percent against the
Indonesian rupiah in the currency contagion which erupted after
the Thai baht's float on July 2.

It was trading at 5,800 rupiah to the dollar early yesterday
compared to the 2,450 rupiah in July.