Fitch Upgrades National Rating of BCA

Fitch Ratings has today upgraded PT Bank Central Asia Tbk's (BCA) National Long-term rating to AAA(idn) from AA+(idn). At the same time, the agency has affirmed the bank's Long-term foreign currency Issuer Default Rating (IDR) at BB, Short-term foreign currency IDR at B, Individual C/D, Support 3 and Support Rating Floor at BB-. The Outlook on both the National Long-term rating and Long-term foreign currency IDR is Stable.
The upgrade in BCA's National rating reflects the bank's track record of consistent strong financial performance, despite the more challenging economic environment.
Fitch notes that BCA capitalisation remained strong and above peer-average, while its profitability is underpinned by an established franchise in transaction banking and deposit-taking in the Indonesian banking market. Although non performing loans (NPLs) are higher due to the weaker macroeconomic conditions, they remained well reserved. A stress test by Fitch further indicates that capital impairment risk from higher credit costs should be minimal, with a strong cushion from its sound underlying profitability.
Fitch observes that the bank's NPLs have increased but from a low base at 1.8% of total loans at end-H109, well below the industry average at 4.7%. This was due to the downgrades of a few corporate accounts and higher commercial NPLs. Yet, provision cover remained strong at 206% of total NPLs at end-H109 due to an emphasis on cash provision. Specific reserves covered around 95% of total NPLs at end-June 2009, while general reserves accounted for 2.1% of total loans in current category, above the regulatory requirement of 1%. This reflects BCA's generally prudent provisioning policy. Total restructured loan remained small at 1.7% of total loans and foreign currency loans at 8.9%.
BCA's profitability remained strong with pre-provision ROA at 4.6% at end-H109 underpinned by a higher NIM and strong fee-based income. The NIM increased to 6.3% in H109 (2008: 5.5%), following higher lending yields and lower cost of funds with low cost demand and savings deposits accounting for 75% of total deposits - the highest in the industry. Capital ratios remained healthy with total CAR at 16.5% (Tier 1: 15.6%) in H109 but should gradually decline over time with loan expansion.
Established in 1957, BCA is the second largest bank in Indonesia, accounting for 10.5% of total system asset in March 2009. It remains majority-owned by the Hartono family through FarIndo Investment (Mauritius) Ltd q.q. (47.15% stake at end-July 2009). Despite being majority-owned by the Hartono family, BCA has been professionally run with minimal changes in the board of directors since 2002.