 |
December 7, 2007 |
|
|
|
 |
BANK MANDIRI: Fitch Affirms Long-Term IDR at 'BB-' Fitch Ratings has upgraded the Individual Rating of PT Bank Mandiri (Persero) Tbk (Mandiri) to 'C/D' from 'D', and its National Long-term rating to 'AA+ (idn)' from 'AA (idn)'. The Outlook on the National rating remains Stable. At the same time, all other ratings are affirmed, as follows: -- Long-term foreign and local currency Issuer Default ratings at 'BB-' with a Positive Outlook -- Short-term IDR at 'B' -- Support at '4', and -- Support Floor at 'B+' The upgrade in the Individual Rating reflects its stronger balance sheet position, as reflected by its substantially reduced NPLs and increased provision cover, as well as the restoration of profitability ratios, since Q107, closer to peer levels. The improved credit profile relative to other Fitch- rated Indonesian banks, and its systemic importance as the largest state-owned bank in Indonesia accounting for about 16% of system assets, underpin the upgrade in its National Rating. Meanwhile, the Positive Outlook on its international ratings reflect the Indonesian sovereign ('BB-' (BB minus)/Positive). Thanks to increased loan restructuring and recovery efforts under the new management team and the more favorable operating conditions in Indonesia since H206, NPLs were substantially reduced to IDR14.4 trillion (12.9% of gross loans) at end- September 2007, from IDR26.6tn (26.6%) at end-2005. Provision cover on NPLs was raised to 92% at end-Sep07, as compared with 77% at end-2006 and 45% at end-2005; provision charges increased sharply in 2005-2006 (dampening profitability then), while provisions, which could have been written back, were ploughed back to bolster reserves. Stress testing by the agency assuming harsher write-offs on existing NPLs and special mention loans (which include a large portion of its restructured loans), indicates much reduced capital impairment risk amounting to about 20% of equity (compared with 50%-60% when NPLs peaked in H205 to H106); Fitch notes that actual impairment should be lower due to ongoing earnings accretion (ROE was 15.5% in 9M07). The agency understands the bank is on track to further reduce gross NPLs to 10% or less of loans by end-2007 through a combination of write- offs and loan recoveries/restructuring. Meanwhile, ROA recovered to 1.6% in the first three quarters of 2007 (ROE: 15.5%) compared with 0.9% in 2006 and 0.2% in 2005, which are also closer to the peer average of 2.0% (ROE: 18.5%) based on H107 data. This reflects stronger income growth on the combined impact of reduced NPL drag and lower deposit funding, as well as decreased provision charges as NPLs fell. Tier 1 and Total CAR ratios remained strong at 18.3% and 22.4%, respectively (peer average of 16% and 20% respectively), albeit noting the high proportion of zero-weighted government recap bonds in its balance sheet (33% of total assets). Long term CAR targets are unchanged at 18%-20% (total CAR) to support the bank's organic and non-organic expansion plans. However, given its still high NPL ratio and exposure to restructured loans (accounting for 20% of total loans), Fitch will continue to monitor the progress of its NPL reduction. It should also be noted that the improvements made to the bank's risk management system in the last two years with the help of external consultants (under the new management team) remained largely untested amidst the setting of stronger loan targets for the bank in the medium term. Mandiri's loans slowed to a 10%+ annualized rate in 2005-2006 (due to the focus on NPL resolution) from 20%+ in 2004. Loan composition was 46% corporates, 31% commercial, 11% small/micro loans and 13% consumer at end-September 2007. About Bank Mandiri PT Bank Mandiri -- http://www.bankmandiri.co.id/ -- is Indonesia's largest and best capitalized bank in terms of assets, loans and deposits, and provides comprehensive financial services to more than six million corporate and individual consumers, as well as small and medium-sized enterprises in Indonesia. |
|
|
||
|
Today's Top Stories have been selected from the Troubled Company Reporter - Asia Pacific. To receive the Full TCR-AP please CLICK HERE.
