S&P revises BCA's rating to triple-Cpi

S&P revises BCA's rating to triple-Cpi

HONG KONG (JP): Standard & Poor's revised on Wednesday its counterparty credit rating, based on public information, on Bank Central Asia (BCA) to triple-'Cpi' from 'R'.

The removal of the `R' rating reflects the re-emergence of the bank from regulatory supervision following the recapitalization and subsequent sell-down by the Indonesian government, the rating agency said.

The government's ongoing program to return the bank to the private sector kicked off with an initial public offering that involved the sale of 22.5 percent of the government's holding in the bank in May 2000, and an additional divestment of 36 percent scheduled to take place in the first half of 2001.

Standard & Poor's assigned an `R' rating on BCA in January 1999 reflecting the placement of the bank under the regulatory supervision of the government's Indonesian Bank Restructuring Agency (IBRA).

The triple-`Cpi' rating indicates that, while BCA's asset quality has been supported by the preponderance of government recapitalization bonds that it received as capital infusion, the ratio of these bonds to assets is likely to decline significantly over the medium to long term as the bank seeks to rebuild its loan portfolio.

At the same time, BCA continues to operate in a challenging environment, and suffers from weak operating profitability and an impaired capital generating capacity. BCA may also need to consider enhancing its provisioning as the loan book grows.

A capital injection by the government of Rp 60.87 trillion (US$6.38 billion) in the form of long-term, illiquid bonds in May 1999 returned the bank's equity to positive figures and following the transfer of a substantial portion of nonperforming loans to IBRA, its asset quality improved significantly.

However, BCA's capital position remains vulnerable to potential losses as it faces tight interest margins and suffers from a lack of income generating assets, Standard & Poor's said.