Fitch upgrades Bank Danamon's National Rating to AA+

Fitch Ratings has today upgraded PT Bank Danamon Indonesia Tbk national long-term rating to AA+(idn) from AA(idn), and affirmed the Long-term foreign currency Issuer Default Rating (IDR) at BB, Short-term foreign currency IDR at B, Individual Rating at C/D, Support Rating at 3 and Support Rating Floor at BB-. The Outlook is Stable.
"The upgrade in Bank Danamon's national rating reflects the bank's relatively healthy financial profile underpinned by strong underlying profitability which has helped absorb the impact of higher credit costs. Its improved core capitalisation should also buffer the bank against any unexpected risk arising from an improving but still uncertain macroeconomic climate," says Tan Lai Peng, Director of Fitch's Financial Institutions Group.
Temasek Holdings, the investment arm of the Singapore government (AAA/Stable), maintains majority interest in the bank through fully-owned Asia Financial (Indonesia). In Fitch's opinion, Temasek's majority ownership and management control of Danamon suggest there is a moderate propensity to support the bank if required. And as the sixth-largest bank in Indonesia (about 4% of system assets), state support is also possible albeit within its fiscal constraints.
Bank Danamon raised approximately IDR4trn through a rights issue in April 2009 which contributed to the increase in consolidated Tier 1 CAR to 21.1% at end-Q209 (at end-2008: 13.8%). This replenished regulatory capital with high quality capital following the redemption of USD300m sub-debt in March 2009; the bank expects its strengthened capital position to help fund organic growth in the next three years.