Fitch Affirms Bank Rakyat Indonesia's Ratings

Fitch Affirms Bank Rakyat Indonesia's Ratings
Fitch Ratings-Jakarta/Singapore-10 December 2008: Fitch Ratings has today affirmed PT Bank Rakyat Indonesia (Persero) Tbk's (BRI) Long-term foreign currency Issuer Default Rating (IDR) at 'BB' with a Stable Outlook, Short-term foreign currency IDR at 'B', National Long-term rating at 'AAA(idn)' with a Stable Outlook, Individual Rating at 'C/D', Support Rating at '3' and Support Rating Floor at 'BB-' (BB minus).
BRI's ratings reflect its strong underlying profitability, its well-reserved and above average asset quality, as well as its largely unchallenged position as a leading bank for micro-lending in Indonesia. The ratings also take into account its majority state-ownership (56.8%) and size (10.3% of system assets).
The bank's underlying profitability measured by pre-tax ROA was still strong but moderated to 4.0% in 9M08 as it raised provisions in response to unfavorable economic conditions. Net interest margin (NIM), according to Fitch calculations, remained stable at 9.6% in 9M08 and was among the best in the industry (2007 average: 6.1%), thanks to strong lending yield on its micro-credits and its ample low-cost demand and savings deposits. Loans grew by 33% in 9M08 (industry: 23%) with growth seen across all major segments - micro, consumer and SME loans remained a core focus accounting for at least 82% of total loans. The exposure to foreign currency lending was low at 7.7% of total loans at end-September 2008.
Loan quality remained good as NPLs declined to 2.9% of gross loans at end-September 2008. While the more difficult operating conditions are likely to slow down loan demand and cause loan quality to deteriorate, the impact should be mitigated by its diverse customer base and well-reserved NPLs, as provisions increased to 198% of NPLs at end-September 2008. Capital ratio remained satisfactory although Tier 1 and Total CAR declined to 12.06% and 13.45%, respectively, at end-September 2008.
BRI is Indonesia's oldest bank, established in 1895 with the widest domestic distribution network. It remains majority-owned by the Indonesian government (56.8% at end-September 2008). It is the third-largest bank by assets in Indonesia in Q308.