S&P upgrades ratings on Mandiri, Danamon

S&P upgrades ratings on Mandiri, Danamon

Standard & Poor's Ratings Services, an international rating
agency, said on Friday it had upgraded the credit rating on Bank
Mandiri and Bank Danamon by one notch.

The long-term local currency counterparty credit ratings on
the two banks were raised from "B" to "B+", with the outlooks on
these rating being stable, S&P said in a press release.

At the same time, it added, the long-term foreign currency and
short-term local and foreign currency counterparty credit ratings
on both banks were affirmed at "B" and "B". The outlook s on the
ratings remained also stable.

"These ratings actions recognize the continuing, if gradual,
improvement in the banks' credit profiles. In particular, there
has been improvement in non-performing assets and profitability.
Profitability, supported by better interest margins, is becoming
much more satisfactory.

"Loans however, continue to make up only a small percentage of
the asset book, indicating that the Indonesian banking sector has
not fully recovered to its pre-1997 crisis financial intermediary
role. Naturally, there will be some added credit risk to the
bank's asset book as the proportion of loan rises," Adrian Chee,
credit analyst at the agency said in the statement.

Mandiri, the country's largest bank, won praised for its
intensified efforts in improving its loan restructuring and
recoveries, as well as for disposing some of its foreclosed
properties and writing off its loss accounts.

The agency also noted that as of the first semester, the
bank's efficiency -- as measured by the ratio of non-interest
expense to average assets -- has improved to 1.6 percent. -- JP