SINGAPORE (S&P Global Ratings) Nov. 17, 2017--S&P Global Ratings today revised
its outlook on PT Bank Rakyat Indonesia (Persero) Tbk. (BRI) to positive from
stable. At the same time, we affirmed our 'BB+' long-term and 'B' short-term
issuer credit ratings on the Indonesian bank.
"We also affirmed our 'BB+' issue rating on the bank's senior unsecured notes.
We revised the outlook because we expect BRI's asset quality to remain better
than industry average over the next 12-18 months. We expect BRI's credit costs
to gradually decline over the next few quarters as the bank has built
sufficient buffers against stressed loans (nonperforming loans [NPLs] and
performing restructured loans)," a statement of S & P said.
As of Sept. 30, 2017, BRI has a coverage ratio of about 200 per cent against NPLs.
BRI's performance has been superior to its peers' in the current cyclical
downturn in Indonesia. The bank's NPL ratio of 2.2% as of Sept. 30, 2017, was
lower than the industry average of 3.0%. The bank's NPLs have consistently
been below the industry average over the past six years. BRI's stressed loans
at about 7% of gross loans as of Sept. 30, 2017, were also lower than about 9%
for both PT Bank Mandiri (Persero) Tbk. and PT Bank Negara Indonesia (Persero)
Tbk. (BNI).
BRI's sizable exposure to micro loans at 34.5% of the loan portfolio underpins
its above-average asset quality, in our view. The bank's micro loans portfolio
is quite granular with low average ticket size and has good geographical
spread. This mitigates the risk of a sharp rise in delinquency. BRI's strong
understanding of the micro markets, extensive reach in rural areas, and
rigorous monitoring and collection mechanisms have helped it maintain low NPLs
in this segment despite the low incomes of this borrower profile. Micro loans
disbursed under the government's schemes (KUR) are insured for at least 70% of
credit losses, benefiting credit costs. Those not under the government's
scheme, are secured by collateral. Moreover, about 30% of micro loans are to
fixed income earners.
The Indonesian banking system's NPLs have been rising since 2014 due to weak
commodity prices and a sluggish domestic economy. Small and midsize
enterprises (SMEs) were the most affected as they typically have a single
revenue stream, which makes them vulnerable to cyclical downturns.
Although the stressed loans in BRI's SME portfolio (24% of total loans) increased, the
bank's NPLs in this segment appear to have peaked and declined in the second
and third quarters of 2017.
"We believe management's efforts to control slippages in the SME segment and tighten underwriting practices will enable BRI to sustain its above-average asset quality," the statement added.