07.09.2015, 12:19
Fitch: Indonesia's Large Banks Have Satisfactory Buffers
OREANDA-NEWS. Fitch Ratings expects the profitability and capitalisation of the 10 major rated banks in Indonesia to provide sufficient loss-absorption buffers against rising challenges, including high interest rates, slowing economic growth, pressure from foreign-currency volatility and a downturn in the commodity market.
Indonesia's three largest banks by assets - Bank Mandiri, Bank Rakyat Indonesia, and Bank Central Asia - are likely to be more resilient to market volatility because of their strong profitability, which is underpinned by their large low-cost deposit franchise. Meanwhile, the profitability of second-tier banks is undermined by higher credit costs and higher pressure on their interest margins.
Fitch believes asset quality will remain a challenge for the banks in 2015 and beyond, underscored by the increases in write-offs, restructuring loans and special-mention loans. However, this potential higher risk on asset quality is adequately buffered by their solid capitalisation with Fitch Core Capital (FCC) and Core Tier-1 capital ratios at 16.4% and 14.8% at end-1H15. In addition, Fitch estimates that most of the top 10 banks would be able to meet the more stringent Basel III capital requirements if the maximum additional capital charge were applied today.
The accompanying special report "Indonesian Banks Report Card: 1H15; Large Banks Have Satisfactory Buffer Despite Current Weak Operating Environment" is available at www.fitchratings.com or by clicking the link in this media release.
Indonesia's three largest banks by assets - Bank Mandiri, Bank Rakyat Indonesia, and Bank Central Asia - are likely to be more resilient to market volatility because of their strong profitability, which is underpinned by their large low-cost deposit franchise. Meanwhile, the profitability of second-tier banks is undermined by higher credit costs and higher pressure on their interest margins.
Fitch believes asset quality will remain a challenge for the banks in 2015 and beyond, underscored by the increases in write-offs, restructuring loans and special-mention loans. However, this potential higher risk on asset quality is adequately buffered by their solid capitalisation with Fitch Core Capital (FCC) and Core Tier-1 capital ratios at 16.4% and 14.8% at end-1H15. In addition, Fitch estimates that most of the top 10 banks would be able to meet the more stringent Basel III capital requirements if the maximum additional capital charge were applied today.
The accompanying special report "Indonesian Banks Report Card: 1H15; Large Banks Have Satisfactory Buffer Despite Current Weak Operating Environment" is available at www.fitchratings.com or by clicking the link in this media release.
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