MOODY'S ASSIGNS RATINGS TO BANK INTERNASIONAL INDONESIA
Hong Kong, 06-19-96 -- Moody's Investors Service assigned ratings of Ba2/Not-Prime to Bank International Indonesia (BII) for its long- and short-term deposits, respectively. At the same time, Moody's assigned a Bank Financial Strength Rating (BFSR) of D to the bank. This was the first time that Moody's has rated the obligations of BII.
The sovereign ceilings for Indonesian bonds and long-term deposits are Baa3 and Ba1; the ceiling for all short-term obligations is Not-Prime. Moody's said that the difference between the senior debt and long-term deposit ratings reflects the greater risk that deposits would be rescheduled in a stress scenario.
Moody's noted that BII is among the ten largest private banks in Indonesia and is publicly-listed on the Jakarta Stock Exchange.
Moody's noted that until recently, the Indonesian state banks had dominated most facets of the country's financial markets. However, since Indonesia began the formal deregulation of the banking system in 1988, the role and the importance of the private banks has evolved quickly. As of December, 1995, these banks, as a group, accounted for almost half of the system's assets and loans. Moody's noted that the growth of the private banks over the last five years has far outstripped that of the state banks. Nevertheless, Moody's expects that the state banks will continue to play a vital role in Indonesia's banking system.
Moody's noted that the asset quality and capital levels of the rated private banks appears strong in comparison with that of the state banks, although the rapid loan growth recorded by the banks during the last two years could have a negative impact on asset quality in the future. Furthermore, the growth in lending in the banking system has outstripped growth in deposits. As a result, banks have relied increasingly upon borrowings, mostly short-term, raised in the interbank markets and from foreign sources.
Moody's noted that Indonesia's accounting, legal, and regulatory infrastructures are weak though improving. Since 1991, Bank Indonesia (BI), Indonesia's central bank, has introduced many new regulations to improve the supervision and regulation of the banking system, including raising the regulatory capital adequacy ratio (CAR); reducing single-borrower lending limits; capping lending to affiliates to 10 % of equity base and to non-affiliates, to 20%; and increasing loan loss reserves; among other measures.
Moody's said that disclosure issues are considered significant impediments to the analysis of Indonesian banks. Moody's added, however, that disclosure for the private, publicly-listed banks is considered better than that of the state banks and the private non-listed banks.
Moody's expects the operating environment for the Indonesian private banks to be more challenging over the medium-term as the sector enters into a period of consolidation, rationalization, and specialization.
P.T. Bank Internasional Indonesia (BII) was assigned a long-term deposit rating of Ba2, a rating of Not-Prime for short-term obligations, and a Bank Financial Strength Rating of D. BII is one of the largest private banks in Indonesia with consolidated assets of approximately $6 billion as of December 31, 1995. BII appears to have good financial fundamentals and experienced management. The bank is primarily a corporate lender although it is focusing increasingly on its consumer mortgage and credit card business. The controlling shareholders are members of the Widjaja family, which owns the Sinar Mas group. BII's ratings are constrained by the bank's relative rapid growth, although Moody's noted that the bank has been increasing the level of loan loss reserves. Furthermore, Moody's added, that as of December 31, 1995, the bank is understood to have complied with the Bank Indonesia's statutory legal lending limit guidelines, signified by a reduction in loans to related parties.
Moody's noted that it has assigned ratings to two other companies in the Sinar Mas group: P.T. Indah Kiat, which carries a senior debt rating of Ba2; and P.T. Tjiwi Kimia, which has a senior debt rating of Ba3.
Headquartered in Jakarta, BII had consolidated assets of Rph.13 billion (approximately U.S. $6 billion) as of December 31, 1995.
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